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

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI AMARJIT SINGH, AM आयकर अपील सं/ I.T.A. No.1843/Mum/2023 (निर्धारण वर्ा / Assessment Years: 2005-06) DCIT, Circle-14(1)(1) बिधम/ M/s. North Karnataka Room No. 432, 4th Floor, Expressway Ltd. (Earlier Vs. Aayakar Bhavan, M. K. known as Roadstar Road, Mumbai-400020. Investment Managers Ltd.) Plot No. C-22, G-Block, The II & FS Financial Centre, Bandra Kurla Complex, Bandra (East), Mumbai-400051. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AABCN3062F (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee by: Shri Bhupal Rapelli Revenue by: Shri S. Srinivasu (DR) सुनवाई की तारीख / Date of Hearing: 03/08/2023 घोषणा की तारीख /Date of Pronouncement: 24/08/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: 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”). 2. 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.”

3 A.Y. 2005-06 M/s. North Karnataka Expressway Limited 4. And thereafter, the AO held that the assessee to be at fault for furnishing of inaccurate particulars of income and levied penalty @ 100% of the income tax sought to be evaded to the tune of Rs.7,56,52,474/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A)/NFAC who was pleased to delete the same by taking note that the assessee’s quantum appeal for AY. 2005-06 had been decided by the Tribunal in assessee’s favour, and the disallowance made by the AO in respect of depreciation on toll roads as well as interest on late payment of TDS had been adjudicated in its favour. Therefore, the Ld. CIT(A) has deleted the penalty. Aggrieved, the revenue is before us. 5. We have heard both the parties and perused the records. The Ld. CIT(A) has taken note of the fact that Tribunal in the assessee’s quantum appeal for AY. 2005-06 has held in favour of the assessee and that the disallowance made by the AO on the two items (supra) has been deleted and the Ld. DR could not controvert this fact. In such a scenario, since the quantum appeal has been answered in favour of the assessee by this Tribunal by order dated 24.05.2021 in the case of North Karnataka Expressway Ltd. Vs. ACIT (ITA. No.4372 & 4373/Mum/2012 for AY. 2005-6 & AY. 2006-07), we do not find any error in the action of the Ld. CIT(A) deleting the penalty because the case of assessee is squarely covered by the legal Maxim “Sublato Fundamento credit opus” meaning in case foundation is removed, the super-structure falls squarely applies to the case in hand. The Hon’ble Supreme Court while applying this maxim in the case of Badarinath

4 A.Y. 2005-06 M/s. North Karnataka Expressway Limited Vs. Tamilnadu [AIR 2000 (SC) 3243 SC] held that once the basis of proceeding is gone, all consequential order and acts would fall on the ground automatically which is applicable to judicial and quasi-judicial proceedings. Therefore, since the foundation of penalty in this case, i.e. the quantum addition of Rs.7,56,52,474/- made by the AO has been removed, the penalty levied because of this addition has to necessarily go; and the Ld. CIT(A) has rightly deleted the penalty, which is confirmed and revenue appeal is dismissed.