2014 (6) TMI 534 - AT - Income Tax

Appeal allowed against penalty for AY 2005-06, emphasizing distinction between penalty and quantum proceedings.

Rajeev Singh, C/o-M/s Malik & Co., Advocates Versus ITO, Ward-2(2), Meerut

Rajeev Singh, C/o-M/s Malik & Co., Advocates Versus ITO, Ward-2(2), Meerut - TMI Issues:Appeal against penalty imposed under section 271(1)(c) - Resident but not ordinarily resident status - Challenge of penalty upheld by CIT(A) - Request for restoration of issue for bringing relevant evidences on record - Separate nature of penalty and quantum proceedings - Liberty to assessee for new contentions in penalty proceedings.Analysis:The appeal was filed against the penalty imposed under section 271(1)(c) by the CIT(A) for the assessment year 2005-06. The assessee, a resident but not ordinarily resident, contended that the salary earned from services performed outside India should not be taxed in India. The CIT(A) rejected this argument, stating that the grounds raised were vague and the status issue should have been specifically challenged. The CIT(A) also noted that the assessee had accepted the addition without challenging the status issue. Additionally, the CIT(A) highlighted that raising a new contention requiring fresh evidence without proper petition was not permissible under Rule 46A.The assessee appealed to the Tribunal, arguing that relevant evidence regarding residential status had not been brought on record, leading to injustice. The assessee requested either quashing of the penalty or restoration of the issue to bring relevant evidence. The Tribunal, after hearing both parties, emphasized the separate nature of penalty and quantum proceedings. It held that the assessee could raise new contentions in penalty proceedings even if not raised in quantum proceedings. The Tribunal directed the issue to be restored to the CIT(A) for reevaluation, allowing the assessee to present fresh evidence. The CIT(A) was instructed to provide a remand report and decide the issue afresh after considering the new evidence and giving the assessee a fair opportunity to be heard.In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of considering new contentions and evidence in penalty proceedings separate from quantum proceedings. The decision was pronounced in open court on 30th May 2014.