2006 (5) TMI 77 - HC - Income Tax

Summary

Issues involved:
1. Substantial question of law regarding deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The High Court of Punjab and Haryana addressed a substantial question of law raised by the Revenue concerning the deletion of a penalty under section 271(1)(c) of the Income-tax Act, 1961. The case originated from an order of the Income-tax Appellate Tribunal, Amritsar Bench, where the penalty for the assessment year 1988-89 was set aside. The Tribunal found that the assessee had provided a satisfactory explanation for the cash credits in question, which were routed through banking channels and supported by the statement of the individual involved. Despite certain discrepancies in the explanation, the Tribunal concluded that the penalty was not justified. The Revenue contended that since the additions were upheld, the penalty should also stand. However, the High Court clarified that penalty proceedings are independent and upheld the Tribunal's decision to quash the penalty based on the explanation provided by the assessee. The court emphasized that it would not substitute its opinion unless a substantial question of law arose. Consequently, the court dismissed the appeal, affirming the deletion of the penalty under section 271(1)(c) of the Act.