ANSAL HOUSING LIMITED,DELHI vs. ACIT CIRCLE-1(1), DELHI
Facts
The assessee, Ansal Housing Ltd., filed two appeals against penalty orders for Assessment Years 2004-05 and 2006-07. Penalties under section 271(1)(c) were levied for disallowance of deduction under section 80IB and addition on account of Annual Letting Value (ALV) of properties held as stock-in-trade. While the 80IB additions were eventually deleted by the ITAT in earlier rounds, the ALV addition for AY 2006-07 was sustained by the Delhi High Court, though an SLP is admitted by the Supreme Court.
Held
The Tribunal held that since the substantive additions for disallowance of deduction under section 80IB were deleted by the ITAT, applying the dictum 'sublato fundamento, caditopus', the related penalties must fall. Regarding the ALV addition, the Tribunal found the issue to be debatable, citing a Delhi High Court judgment in a group company's case where the ALV penalty was deleted on similar grounds. Therefore, the penalties for both AYs were directed to be deleted.
Key Issues
Whether penalty under section 271(1)(c) is leviable when the underlying additions for disallowance of deduction under section 80IB have been deleted. Whether penalty under section 271(1)(c) is leviable for addition on account of Annual Letting Value (ALV) when the issue is debatable and an SLP is pending before the Supreme Court.
Sections Cited
271(1)(c), 143(3), 154, 80IB, 80IB(10)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI VIKAS AWASTHY & SHRI NAVEEN CHANDRA
PER NAVEEN CHANDRA:- The above captioned two separate appeals by the assessee are
preferred against the order of the NFAC, Delhi dated 17.01.2024 and
02.02.2024 pertaining to Assessment Years 2004-05 and 2006-07
respectively.
Since underlying facts are common in the captioned appeals,
they were heard together and are disposed of by this common order
for the sake of convenience and brevity
ITA No. 1128/DEL/2024 [A.Y. 2004-05]
The assessee has raised as many as six grounds of appeal in the
A.Y 2004-05. However, the solitary grievance of the assessee is that
the ld. CIT(A) erred in confirming the penalty of Rs. 76,35,900/- u/s
271(1)(c) of the Income tax Act, 1961 [hereinafter referred to as 'The
Act' for short].
The roots for levy of penalty lie in the assessment order framed
u/s 143(3) of the Act. Facts on record show that the assessee filed its
return of income on 01.11.2004 declaring total income of Rs.
1,58,08,470/-.The returned income of the assessee was assessed on
26.12.2016 after making two additions namely :-
(i) Addition in respect of ALV of vacant commercial/self occupied
properties held as stock in trade of Rs.1,56,35,782/- rectified further
to Rs. 1.17 crores u/s 154 of the Act.
(ii) Addition on account of disallowance of deduction of Rs
2,12,84,740/- u/s 80IB of the Act.
The penalty proceedings were separately initiated for tax sought
to be evaded. The penalty was levied at Rs. 76,35,900/- vide order
dated 29.11.2017 on the issue of disallowance of deduction of Rs
2,12,84,740/- u/s 80IB of the Act. No penalty was levied on the issue
of ALV as the same was deleted by the CIT(A) and ITAT.
Aggrieved, the assessee went in appeal before the ld. CIT(A) who
partly allowed the appeal of the assessee.
During the year under consideration, the assessee claimed
deduction u/s 80IB of the Act amounting to Rs. 2,12,84,740/- on
various eligible projects. All the details complying with the conditions
prescribed u/s 80IB were duly submitted during the course of
assessment proceedings. The Assessing Officer disallowed the claim
and the ld. CIT(A) upheld the order of the Assessing Officer in the first
round of proceedings.
Further aggrieved, the assessee went in appeal before the ITAT.
Thereafter, the ITAT vide its order dated 28.03.2017, allowed the
appeal of the assessee for statistical purposes with the direction to the
Assessing Officer to verify the completion certificates of projects for
which deduction u/s 80IB of the Act has been claimed.
While giving effect to the order of the Tribunal, the Assessing
Officer disallowed the claim of deduction u/s 80IB of the Act. When the aggrieved assessee went in appeal for the 2nd time before the ld.
CIT(A) and submitted that the Assessing Officer, without going into the
record, held that completion certificates were neither produced during
the assessment proceedings nor before the appellate proceedings
whereas the completion certificates were lying with the department,
the ld. CIT(A) vide order dated 21.01.2019 decided the ground of
appeal in favour of the assessee holding that the Assessing Officer has
reported that the Completion Certificates have been found to be in
order.
Being aggrieved, the Revenue went in appeal before the
Tribunal.
In the second round of appeal, the Tribunal vide its order dated
31.05.2022 came to a conclusion and held as under:
“5. Heard the parties and perused the material available on record. The case of the Revenue is that the Assessee had failed to produce the completion certificates during the assessment proceedings as well as during the appellate proceedings and as per requirement of provisions of section 80IB(10) of the Act, the housing project involved should have been completed, for which the deduction u/s. 80IB(10) of the Act has been claimed.
Further, the Assessing Officer during the remand proceedings has not made any enquiry regarding the correctness and genuineness of the completion certificates submitted by the assessee and has merely verified the same on "test check basis".
5.1 We have perused the orders passed by the authorities below and given our thoughtful consideration to the conclusion drawn by the ld. Commissioner while allowing deduction to the assessee and find that during the course of appellate proceedings before the ld. Commissioner, the Assessing Officer vide its remand report dated 04.01.2019 had reported as under:
"In connection with the above, your goodself has directed the undersigned to examine the documents filed by the assessee vide letter dated 13.11.2018. The assessee company has been given an opportunity of being heard vide letter dated 22.11.2018. In response to the same, Assessee's AR appeared and the issues involved have been discussed. The completion
certificates in respect of the following projects have been verified on test- check basis and the same has been found to be in order":
5.2 The ld. CIT(A) while considering the remand report filed by the AO, wherein the completion certificates of the projects of the Assessee have been verified on test-check basis and found to be in order, allowed the deduction u/s. 80IB(10) of the Act for the assessment year under consideration and therefore the main contention of the Revenue Department is that the completion certificates have not been produced during the assessment proceedings as well as appellate proceedings, is devoid of merits.
We may clarify that the Assessing Officer has to assess and determine the claim of the assessee as per the directions of the higher authority but by using his own wisdom, which in the instant case has been correctly done by verifying the completion certificates on 'test check basis' and found the same in order. Hence, on the aforesaid consideration and analyzations, we are inclined not to interfere with the order under challenge, as the same does not suffer from any perversity and impropriety and/or illegality. Consequently, the appeal filed by the Revenue is liable to be dismissed.”
In view of the above discussion, we find that the substantive
additions on account of disallowance u/s 80IB have been deleted in the
case of assessee itself by the ITAT vide its order dated 31.05.2022.
Considering the facts of the case in totality, we take recourse in the
legal dictum of ‘sublato fundamento, caditopus’, meaning thereby,
that in case the foundation is removed, the super structure falls. Since
the foundation [assessment] has been removed, the super structure
i.e. penalty must fall. Once the basis of a proceeding is gone, all
consequential acts, actions, and orders would fall to the ground
automatically. We, therefore hold that the decision of the CIT(A),
confirming the penalty on account of disallowance of deduction u/s
80IB, is unsustainable and direct the Assessing Officer to delete the
penalty of Rs. 76,35,900/- u/s 271(1)(c) of the Act for AY 2004-05.The
grounds no 1 of the assessee is allowed. As the penalty is deleted, we
are not rendering any opinion on the other grounds taken.
ITA No. 1157/DEL/2024 [A.Y. 2006-07]
The assessee has raised as many as six grounds of appeal in A.Y
2006-07. However, the solitary grievance of the assessee is that the
ld. CIT(A) erred in confirming the penalty of Rs. 50,75,558/- u/s
271(1)(c) of the Income tax Act, 1961 [hereinafter referred to as 'The
Act' for short].
The roots for levy of penalty lie in the assessment order framed
u/s 143(3) of the Act. Facts on record show that the assessee filed its
return of income on 30.11.2006 declaring total income of Rs.
19,48,56,596/-. The return was revised on 29.01.2007 at Rs
22,99,39,561/- The returned income of the assessee was assessed on
31.12.2008 after making two additions namely :-
(i) Addition in respect of ALV of vacant commercial/self occupied
properties held as stock in trade of Rs.57,89,199/-.
(ii) Addition on account of disallowance of deduction of Rs
97,00,719/- u/s 80IB of the Act.
The penalty proceedings were separately initiated for tax sought
to be evaded. The penalty was levied at Rs. 50,75,558/- vide order
dated 30.11.2017 on both the issues of disallowance of deduction of Rs
97,00,719/- u/s 80IB of the Act and the issue of ALV of Rs.57,89,199/-.
Aggrieved, the assessee went in appeal before the ld. CIT(A) who
dismissed the appeal of the assessee.
The background of the levy of penalty is as under. During the
year under consideration, the assessee claimed deduction u/s 80IB of
the Act amounting to Rs. 3,86,76,955/- on various eligible projects.
All the details complying with the conditions prescribed u/s 80IB were
duly submitted during the course of assessment proceedings. The
Assessing Officer disallowed the claim to the extent of Rs 97,00,719/-
u/s 80IB of the Act and the ld. CIT(A) upheld the order of the Assessing
Officer in the first round of proceedings.
Further aggrieved, the assessee went in appeal before the ITAT.
Thereafter, the ITAT vide its order dated 28.03.2017, allowed the
appeal of the assessee for statistical purposes on the issue of 80IB
deduction with the direction to the Assessing Officer to verify the
completion certificates of projects for which deduction u/s 80IB of the
Act has been claimed. On the issue of ALV, the issue was set aside to
the AO for fresh examination. On the Revenue’s appeal before the
Hon’ble Delhi High Court, the issue of ALV was decided against the
assessee.
While giving effect to the order of the Tribunal in the 1st round, 19.
the Assessing Officer disallowed the claim of deduction u/s 80IB of the Act. The aggrieved assessee went in appeal for the 2nd time before the
ld. CIT(A) and submitted that the Assessing Officer, without going into
the record, held that completion certificates were neither produced
during the assessment proceedings nor before the appellate proceedings. The assessee’s submission that the completion
certificates were lying with the department was not accepted and the ld. CIT(A) vide order dated 29.03.2019 decided the ground of appeal
against the assessee holding that the ITAT has allowed the appeal of the Revenue without any direction.
Being aggrieved, the assessee went in appeal before the
Tribunal.
In the second round of appeal, the Tribunal vide its order dated
27.06.2022 came to a conclusion and held as under:
“7.2 As the facts and circumstances of the instant case is exactly similar as involved in assessee’s own case for AY 2004- 05 and even 2005-06 as well, therefore, we are inclined to allow the appeal of the assessee. Consequently, the claim of the
assessee qua the deduction claimed u/s 80IB(10) of the Act is allowed”
In view of the above discussion, we find that the substantive
additions on the issue of deduction u/s 80IB(10) have been deleted in
the case of assessee itself by the ITAT vide its order dated 27.06.2022.
Considering the facts of the case in totality, with regard to the issue of
disallowance on account of section 80IB, we take recourse in the legal
dictum of ‘sublato fundamento, caditopus’, meaning thereby, that in
case the foundation is removed, the super structure falls. Since the
foundation[assessment] has been removed, the super structure i.e.
penalty must fall. We, therefore hold that the decision of the CIT(A) is
unsustainable on the issue of penalty on disallowance of deduction u/s
80IB. We are fortified in our view by the decision of the Hon’ble
Supreme Court in the case of KC Builders V ACIT (2004) 265 ITR 562(SC)
for the proposition that no penalty for concealment can be made
where the additions made by the AO are deleted.
The only point of contention remains is the penalty levied on
account of the addition of 57,89,199/- on account of ALV, sustained by
the Hon’ble Delhi High Court. On this issue the ld AR of the assessee
vehemently argued that the addition made on account of ALV is purely
a legal issue. The ld AR submitted that the Hon’ble Delhi High Court
has upheld the addition on account of notional ALV for
flats/commercial space held by the assessee as stock-in-trade. The
assessee, however, has filed an SLP before the Hon’ble Supreme Court
which has been admitted by the Court. It was argued that since the
SLP has been admitted, the addition on account of ALV becomes a
debatable issue. It is further pointed out that in earlier years which are
covered by the Hon’ble Delhi High Court, the Department has dropped
the penalty proceedings initiated against the assessee from assessment
year 1989-90 to 1997-98 (except for AY 1994-95). The ld AR of the
assessee relied on the following cases:
1) Reliance Petro-Products 210-TOIL-21-SC-IT
2)PCIT v Samtel (2018) 96 taxmann.com162(Del)
3) CIT v UP State Bridge Corporation (2018)97 taxmann.com279 (SC)
4) KC Builders V ACIT (2004) 265 ITR 562(SC)
5) CIT v Dharampal Premchand Ltd (2011)11 taxmann.com 437 (Del)
Per contra the DR heavily relied on the decision of the Delhi High
Court in the assessee’s own case confirming the addition on account of
ALV.
We have heard the rival submissions and have perused the
relevant material on record. We find that in the assessee’s own case
for AY 2004-05, no penalty was levied on the issue of ALV as the same
was deleted by the CIT(A) and ITAT. We also find that the Hon’ble
Delhi High Court in one of the group company cases of PCIT v
Ansal Properties & Infrastructure Ltd [2023] 157 taxmann.com 584
(Delhi) has deleted the penalty on account ALV holding that the issue
was debatable at the relevant point in time as under:
“23. We are also aligned to the view that the issue involved was debatable at the relevant point in time, which took a different turn only when this court delivered its judgment in Ansal Housing Finance & Leasing Co. Ltd.
Thus, having regard to the foregoing reasons, no interference is called for with the impugned order.
The appeal is, accordingly, dismissed, as no substantial question of law arises for our consideration”.
We are of the considered opinion that facts of the instant case on
the issue of ALV is exactly similar to the case decided by the Hon’ble
Delhi High Court as above, and therefore the decision in the case of
Ansal Properties & Infrastructure Ltd (supra)squarely applies to the
facts of the instant case. We, therefore, hold that the issue of ALV is a
debatable issue where its taxability contains two possible views.
Since the assessee has taken a plausible view, the same cannot
be considered as filing of inaccurate particulars of income or
concealment of particulars of income. In conclusion, we are of
considered view that the decision of the CIT(A) confirming the penalty
is unsustainable on both the issue of penalty on disallowance of
deduction u/s 80IB as well as on the issue of addition on account of the
ALV, and direct the Assessing Officer to delete the penalty of Rs.
50,75,558/- u/s 271(1)(c) of the Act. The grounds no 1 of the assessee
is allowed. As the penalty is deleted, we are not rendering any opinion
on the other grounds taken.
In the result, the appeals of the Assessee in ITA Nos.
1128/DEL/2024 and 1157/DEL/2024 are allowed.
The order is pronounced in the open court on 19.08.2024.
Sd/- Sd/-
[SHRI VIKAS AWASTHY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 19th AUGUST, 2024.
VL/
