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TMI Blog2025 (4) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Assessment Year 2014-15. 2. The revenue has raised the following substantial questions of law for consideration : "a) WHETHER the Learned Income Tax Appellate Tribunal (ITAT) was justified in law in quashing the order passed u/s 271(1)(c) upon holding the penalty proceedings as void ab-initio and bad in law ? b) WHETHER the Learned Income Tax Appellate Tribunal (ITAT) was justified in law in not discussing the merits of the case ? c) WHETHER the Learned Income Tax Appellate Tribunal (ITAT) was justified in law in not considering the provision of section 171 (4) read with section 171(8) of the Income Tax Act, 1961 whereby the assessee would be liable for penalty despite dissolution of the HUF ?" 3. We have heard Mr. Prithu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue is tax neutral. Penalty proceedings were initiated, as noted above, on the alleged ground that the assessee furnished inaccurate particulars of income by claiming the said amount as deduction. In this regard, a show-cause notice dated 23.11.2016 was issued to which the assessee submitted their reply dated 5.12.2016 contending as follows :- "Your assessee had computed capital gain/loss on sale of shares which were held as Investment and Trading in the books as on 31.03.2013 and any further purchase/sale of shares during the F.Y. 2013-14. The Capital Gain has been computed on the assets that were held by the HUF and/or acquired by HUF on its own. No gain/loss has been computed on the assets distributed to its members upon partition. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and therefore, the entire proceedings are ab initio void. The assessee also placed reliance on various decisions, namely, the decision of the Hon'ble Supreme Court in CIT vs. Maruti Suzuki India Limited, 416 ITR 613, wherein the Supreme Court held that the notice and/or the consequent order issued in the name of the non-existent person renders the entire proceedings and all consequent actions to be a nullity in the eye of law. Reliance was also placed on the decision of the High Court of Patna in CIT vs. Sanichar Sah Bhim Sah, 27 ITR 307, wherein it was held that when the assessee HUF will be completely partitioned, which was acknowledged by the Assessing Officer in the assessment order passed for the relevant year and after completion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e imposed on the HUF which is no longer in existence. After taking note of the facts as well as the decision relied on by the assesee, the learned Tribunal came to the conclusion that the assessee HUF was dissolved on 26.3.2014 and the notice for carrying out the penalty proceedings as well as the penalty order has been issued in the name of a non-existent entity. This fact having not been controverted by the revenue, the learned Tribunal applied the decision of the Hon'ble Supreme Court in Maruti Suzuki India Limited (supra) and held that the entire penalty proceedings are ab initio void. One more aspect which was noted by the learned Tribunal is that the assessee did not challenge the addition made in the assessment order as it was tax ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, it will be too late for the revenue to now turn back and say that they will not recognize the partition of the HUF in full form. As already noted, the reason for which notice was issued for initiating penalty proceedings, is different from the conclusion which was arrived at by the Assessing Officer while passing the penalty order dated 30.6.2017. This is also yet another incurable defect which is called for interference of the penalty order. At this juncture, we need to point out that the law is well settled that the penalty proceedings are separate and independent from the assessment proceedings. Even assuming an addition has been made in the assessment proceedings, that will not automatically warrant levy of penalty. There is a mand ..... X X X X Extracts X X X X X X X X Extracts X X X X
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