DCIT-14(1)(1), MUMBAI vs. M/S. NORTH KARNATAKA EXPRESSWAY LTD (EARLIER KNOWN AS ROADSTAR INVESTMENTS MANAGERS LTD., MUMBAI

This is an appeal preferred by the revenue against the order of the Ld. CIT(A)/NFAC, Delhi dated 22.03.2023 for AY. 2005-06 wherein the Ld. CIT(A) was pleased to delete the penalty levied by the AO u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter “the Act”).

The main grievance of the revenue is against the action of the Ld. CIT(A) deleting the penalty of Rs.7,56,52,474/-. 3. Brief facts as noted by the AO for levying penalty u/s 271(1)(c) of the Act is as under: - “In the instant case, order u/s 143(3) r.w.s. 263 of the LT. Act, 1961 (herein after called the Act) was passed on 23.12.2010, assessing the total income at Ks. 44,12,50,980/-, as against returned loss of Rs. 22,28,15,736/- under normal provisions and 2 A.Y. 2005-06 M/s. North Karnataka Expressway Limited at an income of Rs. 10,13,70,151/- under 115JB of the Act after making disallowances of (i) depreciation on toll roads (ii) interest on late payment of TDS. (a) Disallowance of depreciation on toll roads: The assessee was asked to explain why the depreciation of Rs.59,92,08,840/- claimed on toll roads should not be disallowed as the roads are not owned by the assessee. The assessee has failed to establish that there is a capital asset which is owned by it. The CIT(A)-21, Mumbai vide its order No. CIT(A)-21/IT/208/2010-11 dated 11/04/2012 has, after an elaborate discussion in the appellate order, confirmed the addition of the AO. However, the Ld. CIT(A) has held that the amortization of Rs. 37,46,78,202/- for each year should be allowed to assessee. Hence the difference amount of Rs. 22,45,30,638/- is treated as concealed income. (b) Disallowance of interest on late payment of TDS: During the assessment proceedings, the assessee was asked as to explain as why the penal interest amounting to Rs. 2,24,187/- should not be disallowed. The assessee has submitted that it has correctly claimed the said expenditure as there is no provision under the Act where such interest is not allowable as deduction. Since the said expenditure is incurred for violation of provisions of law and rule of the Act, the same is not allowable to the assessee and the CIT(A) has also confirmed the addition made by the AO. Hence the amount of Rs. 2,24,187/- is treated as concealed income. 2. Penalty proceedings were initiated by issue of notice u/s.274 r.w.s. 271(1)(c) for furnishing inaccurate particulars of income. In response to the said notice the assessee company did not file any reply.”