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For the A. Y. 1997-98, in respect of addition made by the Assessing Officer, the High Court had admitted the appeal filed by the assessee and substantial questions of law were framed. Penalty u/s. 271(1)(c) of the Income-tax Act, 1961 imposed by the Assessing Officer was cancelled by the Tribunal on the ground that the quantum appeal has been admitted by the High Court.
On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:
“i) The imposition of penalty was found not to be justified and the appeal was allowed. As a proof that the penalty was debatable and arguable issue, the Tribunal referred to the order on the assessee’s appeal in quantum proceedings and the substantial questions of law which had been framed therein.
ii) Thus, there was no case made out for imposition of penalty and the penalty was rightly set aside.”
