Reassessment sanction beyond limitation must come from the prescribed higher authority; related penalty falls with the quashed quantum.

Reassessment initiated beyond the relevant three-year period required sanction from the higher authority prescribed by the statutory scheme; approval by the Principal Commissioner did not satisfy that precondition, so the reopening lacked valid jurisdiction and the reassessment was quashed. The penalty based solely on the quantum addition could not stand once the underlying assessment was set aside, because no independent basis remained for its continuance. The result was that both the reassessment and the consequential penalty were deleted in favour of the assessee.

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Issues: (i) Whether the reassessment notice issued beyond three years from the end of the relevant assessment year was valid when approval had been obtained from the Principal Commissioner instead of the Principal Chief Commissioner under the applicable statutory scheme; (ii) whether the penalty imposed consequent to the quantum addition could survive after the quantum assessment was quashed.

Issue (i): Whether the reassessment notice issued beyond three years from the end of the relevant assessment year was valid when approval had been obtained from the Principal Commissioner instead of the Principal Chief Commissioner under the applicable statutory scheme.

Analysis: The notice was issued after the outer time period considered in the Supreme Court illustration relied upon by the Tribunal. On that footing, the approval requirement shifted to the higher specified authority. Since the sanction had been granted by the Principal Commissioner, the statutory precondition for valid assumption of jurisdiction was not satisfied. The Tribunal, therefore, treated the reopening as lacking lawful jurisdiction and held the consequential assessment to be unsustainable.

Conclusion: The reassessment notice and the resulting assessment were held invalid and were quashed in favour of the assessee.

Issue (ii): Whether the penalty imposed consequent to the quantum addition could survive after the quantum assessment was quashed.

Analysis: The penalty arose solely from the quantum addition. Once the foundation assessment was set aside, no independent basis remained for sustaining the penalty.

Conclusion: The penalty was held not sustainable and was directed to be deleted in favour of the assessee.

Final Conclusion: The jurisdictional defect in reopening rendered the assessment unsustainable, and the associated penalty also fell with the quashing of the quantum.

Ratio Decidendi: Where reassessment is initiated beyond the relevant statutory period, sanction must be obtained from the authority prescribed for that stage of limitation, and a penalty dependent entirely on a quashed quantum addition cannot survive.

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