Stay of penalty order and suspension of prosecution where admitted appeal raises a substantial question of law.

Where an appeal against a penalty order under the Income-tax Act had already been admitted and a substantial question of law was framed, the Bombay HC granted interim stay of the penalty order. The Court noted that the assessee had paid the entire penalty and, in those circumstances, directed that prosecution should not be launched pursuant to the penalty order while the appeal remained pending. The result was interim protection for the assessee, with enforcement consequences kept in abeyance until adjudication of the admitted appeal.

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Issues: Whether operation of the penalty order under Section 271(1)(c) of the Income-tax Act, 1961 should be stayed pending adjudication of the admitted appeal, and whether prosecution could proceed meanwhile.

Analysis: The appeal against the penalty order was already admitted and a substantial question of law had been framed. The assessee had paid the entire penalty. In these circumstances, the Court granted stay of the penalty order and held that, at that stage, prosecution would not be launched pursuant to the penalty order.

Conclusion: The assessee obtained interim protection by way of stay of the penalty order, with prosecution kept in abeyance during pendency of the appeal.

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