SMT. BHUSHAN BHATIA,NEW DELHI vs. ITO, FARIDABAD

Ground no. 4 raised by the respective assesses in both the appeals is identical, the same is reproduced from ITA 4115/Del/2016 hereunder: “4. That having regard to the facts and circumstances of the case, CIT(A) has erred in law and on facts in imposing penalty without giving an adequate opportunity of being heard and by not observing the principles of natural justice.”

The Ld. AR Sh. Somil Agarwal referring to the order submitted that the CIT(A) has decided ITA 4114/del/2016 on the basis of facts taken from ITA 4115/del/2016. The said assertion was supported by inviting attention to a reference made to this effect by the CIT(A) in ITA 4114/del/2016 para 14. The relevant finding is reproduced hereunder: “14. The facts of the case are absolutely identical to the facts of the case of Smt. Harshi Bhatia (daughter in law of the appellant). In the case of Smt. Harshi Bhatia vide appeal no. 63/2015-16 dated 24.06.2016 I have adjudicated on this issue and the detailed reasons for the same have been enumerated by me in the case of Smt. Harshi Bhatia. The facts being absolutely identical and the arguments of the appellant also being identical I have no hesitation in following my own order and thus for the detailed reasons enumerated in the case of Smt. Harshi Bhatia (supra). I hold that the penalty has been correctly levied by the AO and thus the appeal of the appellant is dismissed.”

Both the parties have been heard. 5. In the facts of Ms. Harshi Bhatia i.e. the assessee in ITA 4115/del/2016 the specific land stated to have been transferred in Dabua colony as per the submissions recorded at page 5 of the impugned order. The assessee was a co-owner of the specific property with Sh. Pradeep Virmani. Since, as per the claim put forth there was construction on the portion of land belonging to the assessee, consequently she was paid 4 lac more for the construction done. The statement of Sh. Pradeep Virmani, it had been alleged, was never confronted to the assessee nor was she made aware of any adverse statement. Accordingly, the penalty imposed u/s 271(1)(c ) by the AO which had been upheld by the CIT(Appeals) in the quantum proceedings, the said issue is pending before the ITAT assailed in the present proceedings. I find on going through the reasoning of the CIT(A) in paras 9 to 16 that the penalty has been sustained on the ground that the addition stood sustained. I find on going through the order that the aforesaid submissions of the assessee extracted in the order have not been addressed. The Ld. CIT(A) has proceeded on the footing that merely because the addition has been sustained the penalty is to be automatically upheld. Whereas the law is well settled that assessment/quantum proceedings and penalty proceedings are separate and distinct. The mere fact that addition had been sustained in the quantum proceedings per se will not attract the levy of penalty. The claims of the assessee in the penalty proceedings have to be separately and specifically addressed keeping the requirement of these provisions. It appears from the record that having extracted the written submissions the Ld. CIT(A) did not deem it appropriate to address the specific issues. Accordingly, the impugned order proceeding on incorrect facts where the submissions also have not been fully addressed, the same is set aside back to the file of the AO with a direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. The direction was so given considering the submissions of the parties where it is noted that though lack of opportunity has been pleaded before the CIT(A), it was a common stand of the parties to restore the issue to the file of the AO instead of the CIT(A) so as to ensure that proper facts are considered. The fact that the correctness of the additions in the quantum proceedings is pending before the ITAT was also a reason for such a request which has been accepted.

Addressing the issue raised in ITA 4114/del/2016, it is seen that the CIT(A) had proceeded on the footing that the facts in the present case were identical to ITA 4115/del/2016. A perusal of page 7 of the impugned order shows that it had been argued before the CIT(A) that the statement of Sh. Pradeep Virmani relied upon was of no relevance as the said property as per the sale deed itself belonged to the assessee alone and only in the property of Smt. Harshi Bhatia, Mr. Virmani was a co-owner. Accordingly, I find on going through the specific finding of the CIT(A) in specific paras 11 to 15 that the conclusions have been arrived at on the basis of incorrect facts which makes the order perverse in the eye of law. In view thereof, accepting the prayer of the parties the issue is also restored back to the file of the Assessing Officer with a direction to pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. Said order was pronounced in the open court at the time of hearing itself.

In the result, the appeals of the assesses are allowed for statistical purposes. Order pronounced in the open court on 24.05. 2018.