When Assessment Fails Penalty Falls

The Bombay High Court has held that penalty proceedings under Section 271(1)(c) of the Income-tax Act cannot survive where the underlying assessment proceedings have abated due to the Assessing Officer's failure to pass an Order Giving Effect (OGE) to the appellate order within the statutory limitation prescribed under Section 153. 

The Court observed that once the assessment stands abated and the return of income is deemed to have been accepted, the very foundation for levy of penalty disappears. 

Consequently, the penalty order and the consequential demand notice were quashed.