SHRI VALLEY REFRACTORIES LIMITED. ,KOLKATA vs. DCIT, CIR-9, KOLKATA. , KOLKATA

Now the only issue before me is that as to whether the assesse can raise the question of validity of assessment in an appeal against the levy of penalty. The ld. D.R. relied on the decision of the Hon’ble Jammu & Kashmir High Court in the case of CIT vs. Hotel Highland Park reported in [2000] 246 ITR 130 (J&K) wherein the Hon'ble Court has held that “penalty proceedings and assessment proceedings are two separate proceedings. The scope and ambit of the appeal is restricted, to the order of penalty. The validity of an assessment order which has attained finality, cannot be challenged in such an appeal. The appellate authority cannot entertain any challenge to the validity of the assessment order in an appeal against the order of penalty”. 16. However, there are decisions on the same point in the case of Jai Dayal Pyare Lal -vs.- CIT, reported in 1972 UPTC 596 (All.) wherein it was held that “it is open to the assessee to set up/raise question of validity of assessment in the appeal against levy of penalty. Since question of validity of assessment made in the matter was raised, which was a pure question of law and not involving any investigation into the facts as the same were on record”. Similarly, Hon’ble Rajasthan High Court in the case of Deep Chand Kothari vs. CIT [1988] 171 ITR 381 (Raj.) held that “an order passed by an authority without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon”. Further, the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Limited -vs.- CIT (1998) 229 ITR 383 (SC), wherein it was held that “it is open to the assessee to set up/raise the question of validity of assessment in the appeal against the levy of penalty. Since the question of validity of assessment made in the matter is raised, which is a pure question of law and not involving any investigation in to the facts as the same are on record”. 17. The recent judgment of the Hon'ble Supreme Court in the case of Kiran Singh vs. Chaman Paswan reported in AIR 1954 SC 340 at page 342, wherein it was categorically held as under: “It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidly could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction whether it is pecuniary or territorial, or whether it is in respect of the subject matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties”. 2

In view of the above decisions, I am of the firm view that even in the penalty proceedings, the assessee can challenge the validity of the assessment proceedings, though the assessee has not challenged the validity of the assessment proceedings before the appellate authorities, but he is entitled to set up new defence even in the penalty proceedings as per the ratio laid down by various Hon’ble High Courts and Supreme Court as discussed above. Moreover, the decision, which was relied by the ld. Judicial Member is not in existence and there is no such decision rendered by the Hon’ble High Court of Allahabad. In my view, he has wrongly cited and relied on the decision of the Hon’ble Allahabad High Court in the case of Sumit Kr. Goel -vs.- CIT. There is no such decision rendered by the Hon’ble Allahabad High Court and citation is also not available. Therefore, I am of the firm view that the assessee is entitled to challenge the validity of the assessment proceedings in collateral /penalty proceedings also. I concur with the view of the ld. Accountant Member treating the penalty proceedings emanated from the assessment order is invalid and non-est in the eyes of law and all the subsequent proceedings including the penalty order passed under section 271(1)(c) of the Act dated 19.09.2014 be invalid and non-est in the eyes of law. The decision of the Hon’ble Jammu & Kashmir High Court is in favour of the Revenue but subsequent judgments of the Hon’ble Allahabad and Rajasthan High Court, which are referred supra, are in favour of the assessee and also the Hon’ble Accountant Member also referred to the citations in favour of the assessee. Accordingly, the points of difference referred for my decision is decided in concurrence with the ld. Accountant Member. The appeal filed along with this order be placed before the Division Bench for passing an order of deciding the appeal in accordance with the majority view.” In such circumstances, respectfully following the decision of the Hon’ble Third Member, the assessment order having been held to be quashed, the penalty order levied stands quashed.