Section 275 of Income Tax bars Penalty Orders during pending appeals: Karnataka High Court stays Penalty Orders and Demand Notice

The Karnataka High Court has ruled that the Income Tax Department cannot impose penalty orders while an appeal on an assessment order is pending, citing Section 275 of the Income Tax Act. This section creates a clear legal bar against such actions during pending appeals. The petitioner, Anjanadri Fuel Station, challenged the issuance of penalty orders despite filing an appeal against the original assessment. The court upheld the petitioner's arguments, emphasizing a prior ruling in B.S. Uday Shetty vs. Assistant Commissioner of Income Tax which also stated that penalty orders should be paused until the conclusion of appeals. The court's decision underscores that any penalty proceedings initiated in such circumstances are legally impermissible, offering important relief to taxpayers involved in appeals.