Invalid reassessment notice defeats penalty proceedings where jurisdictional approval under section 151 was not properly obtained.

Penalty under section 271E was held unsustainable where the reassessment proceedings themselves were invalid for want of proper approval under section 151. As the reassessment was initiated beyond three years from the end of the assessment year, approval from the competent higher authority was required, but the notice under section 148 had been issued with approval from the wrong authority. The ITAT held that this jurisdictional defect could be examined even in collateral penalty proceedings. Because the reassessment order was based on a non est notice, the penalty proceedings founded on that order could not survive, and the penalty was quashed.

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Issues: Whether the penalty under section 271E could survive when the reassessment notice under section 148 and the reassessment order were held to be invalid for want of approval from the competent authority under section 151.

Analysis: The reassessment was initiated beyond three years from the end of the relevant assessment year, so approval under section 151(1)(ii) was required. The notice under section 148 had been issued with approval of the Principal Commissioner instead of the Principal Chief Commissioner. The Tribunal held that a jurisdictional defect in the primary reassessment proceedings can be examined even in collateral proceedings against penalty. Since the reassessment order was founded on an invalid notice, it was treated as non est in law, and the penalty proceedings based on that order could not survive.

Conclusion: The penalty under section 271E was quashed and the assessee succeeded.

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