The Assessing Officer missed the deadline to pass the Order Giving Effect. Years later, a penalty order was still passed.
Can a penalty survive when the underlying assessment itself has failed to survive?
The Bombay High Court said No.
The Commissioner of Income Tax (APPEAL) had changed the basis of taxation and directed the Assessing Officer to give effect to its order.
But the Assessing Officer did not pass the Order Giving Effect within the prescribed time and never passed it even thereafter.
Yet, the penalty proceedings continued, and a penalty order was eventually passed.
The High Court held that the assessment proceedings had abated because the OGE was not passed within the limitation period.
And if the assessment itself could no longer survive, the penalty based on that assessment could not survive either.