High Court quashes section 271(1)(c) penalty imposed on assessment order already set aside; Department may act again after fresh adjudication

5-Second Takeaway

The High Court quashed the section 271(1)(c) penalty because the assessment order on which it was founded had already been set aside, leaving no surviving penalty liability. It also noted that the Department may initiate appropriate proceedings again after the challenge to the assessment is finally decided.

Krishna Priya Enterprises challenged a penalty order passed under section 271(1)(c) for assessment year 2016-17. The penalty was founded entirely on an assessment order dated 11 March 2024.

The court noted that the assessment order had already been quashed in earlier writ proceedings. On that footing, it held that the penalty proceedings initiated and finalized on the basis of the quashed assessment could not stand, because no liability survived once the assessment itself was set aside.

The fact that the Supreme Court had remanded the assessment challenge for fresh adjudication did not alter that result. The court held that the penalty order dated 18 September 2024 was unsustainable in the meantime.

The writ petition was allowed, and the court reserved the Department’s right to take appropriate action after final resolution of the challenge to the assessment order.