2006 (3) TMI 747 - AT - Income Tax

Summary

Issues Involved:
1. Admission of additional grounds of appeal by the Revenue.
2. Deletion of addition of Rs. 3,27,476 by the CIT(A).
3. Deletion of penalty of Rs. 1,10,529 under Section 271(1)(c) of the Act.
4. Deletion of penalty of Rs. 10,000 under Section 271(1)(b) of the Act.
5. Deletion of penalty of Rs. 5,000 under Section 271F of the Act.

Issue-wise Detailed Analysis:

1. Admission of Additional Grounds of Appeal by the Revenue:
The Revenue filed an application to admit two additional grounds of appeal:
- The CIT(A) allowed relief to the assessee by entertaining additional evidence without giving the AO an opportunity to be heard as required under Rule 46A(3) of the IT Rules, 1962.
- The CIT(A) condoned the delay in filing the appeals without passing any speaking order.

The Tribunal admitted the first additional ground as it was purely legal and the relevant facts were on record. However, the second ground was not admitted as it required factual investigation and did not arise from the orders of the CIT(A).

2. Deletion of Addition of Rs. 3,27,476 by the CIT(A):
The AO assessed the income based on information from the Bank of India, which indicated interest payments to the assessee. The assessee did not comply with notices under Section 142(1), leading to an assessment under Section 144. The CIT(A) deleted the addition based on fresh evidence from the bank, which reversed the interest credit entries.

The Tribunal noted that the CIT(A) admitted fresh evidence without recording reasons or allowing the AO to examine the evidence, violating Rule 46A. The Tribunal set aside the CIT(A)'s order and restored the appeal for fresh adjudication, emphasizing compliance with Rule 46A and providing adequate opportunity to both parties.

3. Deletion of Penalty of Rs. 1,10,529 under Section 271(1)(c) of the Act:
The AO imposed a penalty for non-disclosure of interest income. The CIT(A) canceled the penalty as the addition was deleted. The Tribunal restored this appeal to the CIT(A) for fresh adjudication along with the quantum appeal, ensuring proper opportunity for both parties.

4. Deletion of Penalty of Rs. 10,000 under Section 271(1)(b) of the Act:
The AO imposed a penalty for non-compliance with notices. The CIT(A) canceled the penalty, citing the assessee's NRI status and absence to plead the case. The Tribunal restored this appeal to the CIT(A) for fresh adjudication along with other linked appeals.

5. Deletion of Penalty of Rs. 5,000 under Section 271F of the Act:
The AO imposed a penalty for failure to file a return in response to notice under Section 142(1). The CIT(A) canceled the penalty for similar reasons as above. The Tribunal restored this appeal to the CIT(A) for fresh adjudication along with other linked appeals.

Conclusion:
The Tribunal dismissed the COs filed by the assessee as they were merely supportive of the CIT(A)'s orders and not maintainable. The appeals filed by the Revenue were allowed for statistical purposes, with directions for fresh adjudication by the CIT(A) in compliance with Rule 46A and ensuring proper opportunity for both parties.