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Facts
The assessee claimed deduction under Section 80IA for an industrial park, which was initially allowed but later disallowed when the Central Government withdrew the approval. The assessee challenged this withdrawal, and the Delhi High Court quashed the withdrawal order.
Held
The Tribunal held that since the Delhi High Court had quashed the order withdrawing the approval, the assessee was entitled to the deduction under Section 80IA. The disallowance by the AO was therefore invalid.
Key Issues
Whether the disallowance of deduction under Section 80IA is sustainable when the underlying approval withdrawal order was quashed by the High Court. Whether the penalty levied under Section 271(1)(c) is valid when the primary disallowance is deleted.
Sections Cited
80IA, 143(1), 143(2), 143(3), 271(1)(c), 293C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “F” BENCH: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
, 7814 to 7817/Del/2018 & 3662/Del/2019 [Assessment Year : 2010-11, 2011-12 to 2014-15 & 2015-16] ACIT, vs M/s. Finest Promoters (P.) Ltd., Circle-9(1), 232-B, Okhla Industrial Estate, New Delhi Phase-III, New Delhi-110020. PAN-AAACF1102H APPELLANT RESPONDENT Appellant by Shri Salil Agarwal, Sr.Adv. & Shri Shailesh Gupta, Adv. Respondent by Ms. Harpreet Kaur Hansra, Sr.DR Date of Hearing 17.07.2025 Date of Pronouncement 14.10.2025 ORDER PER MANISH AGARWAL, AM : These are the appeals filed by the assessee and revenue for A.Yrs. 2010- 11 to 2015-16 where the assessee has challenged the disallowance of deduction u/s 80IA claimed by the assessee in AY 2010-11 and the revenue has challenged the action of ld. CIT(A) in allowing the deduction claimed u/s 80IA by the assessee in remaining assessment years. The appeals filed by the assessee and the revenue for various assessment years are tabulated as under: by Remarks 2010-11 2736/Del/2014 Assessee Against order passed u/s 143(3) 2011-12 7814/Del/2018 Revenue - Do - 2012-13 7815/Del/2018 Revenue - Do - 2013-14 7816/Del/2018 Revenue - Do - 2014-15 7817/Del/2018 Revenue - Do - 2015-16 3662/Del/2019 Revenue - Do - 2010-11 4277/Del/2019 Revenue Penalty u/s 271(1)(c) 2. First, we take the assessee’s appeal in for A.Y. 2010-11.
Brief facts of the case are that the assessee has filed its return of income declaring total income of Rs. 23,75,250/- on 14.10.2010 after claiming deduction u/s 80IA of the Act of Rs. 7.15 crores which was processed u/s 143(1). Thereafter, case of the assessee was selected for scrutiny by issue of notice u/s 143(2) of the Act. In response to notices issued from time to time, assessee has filed various replies. The assessee has claimed deduction u/s 80IA of the Act of Rs. 7.15 crores on development, maintain and operate the Industrial Park at Gurgaon in terms of the approval granted by the Ministry of Commerce and Industry, Government of India and Industrial Park Scheme, 2002 and as per clause (iii) of sub-section 4 of 80IA, assessee has claimed the deduction u/s 80IA of the Act. The assessee filed necessary report of the auditor in form 10CCB. Subsequently, the Central Government vide order dated 24.01.2014 has withdrawn the approval granted to the assessee and accordingly, the notification No. 462 dated 09.02.2007 issued by the CBDT was rescinded by alleging that construction done by the assessee was not in accordance with the approval granted and thus, the deduction u/s 80IA claimed by the assessee was disallowed. Page | 2
Against the said order, assessee preferred an appeal before the ld. CIT(A) who confirmed the action of AO and dismissed the appeal filed by the assessee.
Aggrieved by the said order of ld. CIT(A), assessee filed present appeal before has challenged the order of ld. CIT(A) by taking following grounds of appeals: 1. “That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining a disallowance of a sum of Rs. 7, 15, 63, 075/-claimed by the appellant company under section 80. IA of the Act and thereby, wrongly upholding the assessment at an income of Rs. 7, 39, 38, 600/- as against the returned income of Rs. 23, 75, 520/-. 1.1 That the learned Commissioner of Income Tax (Appeals) was wholly unjustified to uphold the disallowance in view of the fact that approval was granted to the appellant company under Industrial Park Scheme, 2002 by Government of India and was also duly notified by CBDT to claim deduction under section 80. IA of the Act and thus, denial of deduction was in contravention to the notification issued by CBDT and was based on wholly extraneous, irrelevant and immaterial considerations which are based on mere subjective opinion and is thus, unsustainable in law. 1.2 That the learned Commissioner of Income Tax (Appeals) further failed to appreciate the basic fact that throughout in the past the appellant company was being held eligible to claim deduction under section 80. IA of the Act and as such, the same should have been allowed in the impugned assessment year as well in absence of any fresh facts coming to the fore. 1.3. That the findings recorded by learned Commissioner of Income Tax (Appeals) regarding failure of appellant company in furnishing the completion certificate and failure to file evidence to show commencement of activities of industrial park, are factually incorrect and is contrary to material available on record and thus, the aforesaid disallowance is wholly unjustified, improper and uncalled for. 1.4 That the finding recorded by learned Commissioner of Income Tax (Appeals) that the appellant company has failed in obtaining approval from the Central Government regarding deviation or variation to the project plan for claiming of deduction under section 80. IA of the Act, is factually incorrect and is contrary to material available on record, as the approval granted by Central Government dated 05.12.2006 considered all the documents, evidences and clarifications as filed and sought by the appellant company and the appellant company had never violated any term and stipulation as accorded by the appropriate authorities. 1.5 That the learned Commissioner of Income Tax (Appeals) has further grossly erred in relying on the judgments wholly inapplicable to the facts of the instant case and also in arriving at findings contrary to material available on record. 1.6 That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in sustaining the aforesaid disallowance, without giving any fair and proper opportunity of being heard to the appellant company, thereby, violating the principles of natural justice.”
Before us, the AR of the assessee drew our attention to the fact that against the order of the Central Government of withdrawal of the approval, a writ petition was filed before the Hon’ble Delhi High Court where the Hon’ble Court in terms of its order dated 12.07.2018 quashed the withdrawal and restored approval granted.
On merits, it is submitted by ld. AR that the deduction was claimed in terms of the audit report filed by the auditor in form 10CCB, wherein the auditor has examined all the aspects with respect to the construction made by the assessee and the sole basis for making disallowance is that the area mentioned in the approval granted and the area constructed is different however, authorities below has failed to appreciate the submissions made in this regard. He further submits that the assessee has claimed deduction u/s 80IA for the first time in AY 2008-09 wherein after making due verification of the facts, claim of the assessee was allowed in terms of the assessment order was passed u/s 143(3) of the Act on 28.08.2013, relevant copy of the order is placed in the paper book at pages 31 to 33. The ld. AR further submits that similarly deduction claimed in u/s 8-IA of the Act was allowed in the order passed u/s 143(3) dated 30.12.2011 for AY 2009-10, copy of the same is placed in paper book at pages 34 and 35. It is thus submitted by ld. AR that when the deduction was allowed in the year when it was claimed for the first time, there is no occasion to the revenue for disallowing the claim in subsequent assessment years and thus the same be allowed as claimed. He prayed accordingly.
On the other hand, ld. Sr. DR supported the orders of the lower authorities and submits that the Hon’ble High Court in para 13 has directed the CBDT to Page | 4 consider all the material and record and passed afresh order and therefore it cannot be said that the claim of the assessee is allowed and accordingly he prayed for the confirmation of the order of the AO.
Heard the parties and perused the material available on record. In the instant case, deduction u/s 80IA of the Act was claimed by the assessee for the first time on the construction, development and maintenance of the industrial park in the year 2008-09 which was allowed to the assessee after making due verification of all the aspects by the AO in the assessment order passed u/s 143(3) of the Act. Thereafter in the year under appeal the same was disallowed for the sole reason that there were difference in the area notified in the approval and the area constructed and finally the Government of India has withdrawn the notification granting the approval for construction of industrial park to the assessee. Once the deduction u/s 80IA is allowed in the first year it has to be allowed in the subsequent year also by following the rule of consistency as has been held by Hon’ble Supreme Court in the case of Radha Swami Satsang Vs. CIT (1992) 193 ITR 321.
It is further seen that based on the withdrawal of the approval by the Central government, the AO has reopened the assessment proceedings for AY 2008-09 and 2009-10 which were challenged before the Hon’ble Jurisdictional High Court in WP(C)No. 3162/2014 vide who its order dated 12.07.2018 has quashed such withdrawal and the relevant observations of the Hon’ble Court as contained in para 11 to 13 are as under:
11. “As far as the other question (i.e. not completing the project before the approved date) is concerned the facts are that the approval was granted (to the petitioner) on 24.07.2006, by the Central Government. The letter stated that the expected date of construction was to be 15.03.2006. In the present case, the indications, in the form of correspondence with the town planning Page | 5 department and other letters discloses that the construction was complete, the occupancy certificate was awaited as of February, 2006. Para 9 of the scheme (of 2002) reads as follows: "9 General conditions-(1) In case the commencing of the Industrial Model Town or Industrial Park or Growth Centre gets delayed by more than 1 year from the date indicated in the application, fresh approval may have to be obtained to get the benefits under the Act. This condition also applies to the existing approvals under the Industrial Park Scheme, which envisages commissioning of the Parks, latest by March 31, 2002. (2) The tax benefits under the Act can be availed only after the number of units indicated in the application, are located in the industrial park." In M/s. Silverland Developers the Bombay High Court had to deal with a similar situation, where the expected date of construction was 15.03.2006. The court, after noticing the contentions of the parties and Para 9 of the scheme, held as follows: "21. We find merit in the contention of the Petitioners that if the position which has been adopted by the Empowered Committee were to be accepted, that would result in virtually defeating the salutary public purpose which underlies Section 80-IA (4) (iii). Notice would have to be taken of the fact that infrastructural projects require a considerable amount of investment and a time lag is involved in the completion of the project. The view of the Empowered Committee is that Para 9 of the Scheme would apply to a delay in a project beyond one year but that the delayed date of completion should not in any event fall beyond 31 March 2006 If this were to be accepted as the correct interpretation, that will denude the benefit of Section 80-1A to project where approvals were granted a few months before 31 March 2006 and the completion date spills over beyond that date. There is no indication either in the statute or in the scheme that Parliament or its delegate intended to deprive the assessee of the benefit of Section 80- IA (4) (in) Para 9 of the Scheme would in fact indicate an intent not to deprive the benefit of Section 80-1A (4) (iii) save and except that if the commencement of the project is delayed beyond one year a fresh approval would have to be obtained to get the benefits under the Act."
12. It is clear therefore, that in the absence of any stipulation as to the minimum requirement of industrial park under the scheme as well as under the Income Tax Act, the unreasoned order of DIPP (ignoring the record and overlooking the material explanation of the petitioner with respect to the area constructed, the super area in fact leased and that there was no suppression of facts anytime) withdrawing the earlier notification cannot survive As regards the other ground, i.e. non-construction beyond the scheme, the court notices that the approval was in fact issued after the date mentioned by the DIPP Following the reasoning in Silverland (supra) of the Bombay High Court, that reason cannot survive
In view of the above reasons, the impugned order and notification, withdrawing the earlier notification (of 2007) is hereby quashed. The second respondent shall consider all the materials on the record and after granting proper opportunity of hearing to the petitioner, and in the light of the above discussion, issue a reasoned order, dealing with all contentions. The fresh order shall be restricted to the question of constructed area and whether there was any material suppression, having regard to the position of the scheme and the Income Tax Act, especially that in the absence of any stipulation in either of them regarding minimum constructed area qualifying for benefit of the scheme. The writ petition is allowed in these terms without order on costs.”
It is further seen that the revenue has not placed any fresh order issued by the government after the order of hon’ble jurisdictional High court and thus the approval granted earlier remined in force. In view of these facts and further considering the order of Hon’ble Jurisdictional High Court quashing the order of withdrawal of approval, in our opinion, the assessee is entitled for the deduction u/s 80-IA which is hereby allowed. All the grounds of appeal taken by assessee are allowed.
12. Appeal of the assessee in for A.Y. 2010-11 is hereby, allowed. to 7817/Del/2018 and 3662/Del/2019 (Revenue’s Appeals). [AYs 2011-12 to 2015-16]
13. Now coming to the revenue’s appeals for A.Yrs. 2011-12 to 2015-16, we find that in these assessment years, deduction claimed u/s 80IA was allowed by ld. CIT(A) by observing that the Hon’ble Delhi High Court vide its order dated 12.07.2018 has quashed the notification issued for withdrawal of deduction which has been made sole basis for disallowing the deduction u/s 80IA of the Act in these assessment years. The relevant observations of ld. CIT(A) are as under:-
5.1. “As stated above that the appellant was notified by the Central Govt. for the purpose of Sec. 801A(4)(iii), vide notification no. 5.0. 462 dated 09.02.2007, issued by the Central Board of Direct Taxes, Ministry of Finance. However, subsequently, Central Govt. (Ministry of Commerce and Industry) vide order dated 24.01.2014 had withdrawn the approval granted to the undertaking (the appellant) under the industrial park scheme, 2002. Consequently, the Central Govt. rescinded the notification no. S.O. 462 dated 09.02.2007 w.e.f. 09.02.2007. 5.2. As stated above that in the assessment order, AO has disallowed appellant's claim of deduction u/s 80IA, amounting to Rs. 8,99,17,612/-and the only basis for disallowing the claim of deduction to the appellant has been that the Central Govt. (Ministry of Commerce and Industry) vide order dated 24.01.2014 had withdrawn the approval granted to the undertaking (the appellant) under the industrial park scheme, 2002, vide notification no. S.O. 462 dated 09.02.2007. 5.3. The issue has now been decided by Hon'ble High Court, in their order dated 12.07.2018, while deciding the writ petition filed by the appellant before Hon'ble High Court, as discussed above. 5.4. In the written submissions, appellant's AR has highlighted the relevant part of Hon'ble High Court's order dated 12.07.2018, in which Hon'ble High Court has rejected the withdrawal of notification by the Central Govt. Hon'ble High Court has ruled as follows in para 11 to 13 of the order. "11. As far as the other question (ie, not completing the project before the approved date) is concerned the facts are that the approval was granted (to the petitioner) on 24.07.2006, by the Central Government. The letter stated that the expected date of construction was to be 15.03.2006. In the present case, the Indications, in the form of correspondence with the town planning department and other letters discloses that the construction was complete; the occupancy certificate was awaited as of February, 2006.
It is clear therefore, that in the absence of any stipulation as to the minimum requirement of industrial park under the scheme as well under the Income Tax Act, the unreasoned order of DIPP (ignoring the record and overlooking the material explanation of the petitioner with respect to the area constructed, the super area in fact leased and that there was no suppression of facts anytime) withdrawing the earlier notification cannot survive. As regards the other ground le. non-constructed beyond the scheme, the court notices that the approval was in fact issued after the date mentioned by the DIPP, Following the reasoning in Siverland (supra) of the Bombay High Court, that reason cannot survive.
13. In view of the above reasons, the impugned order and notification, withdrawing the earlier notification (of2007) is hereby quashed. I have gone through the order of Hon'ble High Court referred above. It is seen that the ground taken by the appellant before Hon'ble High Court for withdrawal of notification have been rejected and the notification issued for withdrawal of deduction have been quashed. 5.5. On merits of the addition, it has already been discussed above that the only basis for disallowing the claim of deduction to the appellant has been that the Central Govt. (Ministry of Commerce and Industry) vide order dated 24.01.2014 has withdrawn the approval granted to the appellant under the industrial park scheme, Page | 8
2002, vide notification no 5.O. 462 dated 09.02.2007. In this regard, appellant's AR has also submitted in the statement of facts that the disallowance made by AO was influenced by disclosures made in notes on accounts without appreciating that exactly same disclosure before shareholders was consistently given since financial year 2008- 09. It was also submitted that it is also a matter of fact that at the time of granting the report in form no. 10CCB by the auditor, upon substantial merits of the facts inevitably auditor found that appellant was eligible for deduction under section 80-IA of the Act, and therefore the same was dealt and opined accordingly by the auditor in report in form no. 10CCB. AR further submitted that the disallowance was made notwithstanding the fact that: (i) Constraints leading to adverse inferences brought on record were being consistently observed by earlier assessing officers for earlier years as well as by CBDT and accordingly it was held that the appellant has complied with all conditions under section 801A(4) of the Act and was eligible for deduction by the earlier assessing authority and by the appropriate authority while notifying as the assessee in official gazette. (ii) There is no change in the facts and disclosures which are being consistently made since earlier years. (iii) Since the appropriate authority at the time of notifying appellant was satisfied that the prerequisite have been fulfilled, the jurisdiction to withdraw deduction was vested in such authority as per section 293C of Income Tax Act and as specifically provided vide clauses to notification. Thus the act of Ld. A.O. is prima facie without jurisdiction and apparently contrary to provisions of the Act. AR also contended that the disallowances were made contrary to principle set out by courts that once assessee is held entitled to deduction in first initial year and conditions precedent thereto has been examined, the deduction cannot be denied in subsequent year. The above-stated facts submitted by the appellant's AR in the statement of facts filed has been placed in this order, however no adjudication is made on these facts. No such documents have been submitted before me which can enable me to examine/verify the various claims made by the appellant's AR in the submissions provided in statement of facts as discussed above. In the present case of the appellant, it is seen that in the assessment order, the only basis provided by the AO, for disallowing the claim of deduction u/s 801A to the appellant, has been that the Central Govt. (Ministry of Commerce and Industry) vide order dated 24.01.2014 has withdrawn the approval granted to the appellant under the industrial park scheme, 2002, vide notification no. S.O. 462 dated 09.02.2007 and no other findings on merits have been provided in the assessment order, such as whether the appellant fulfils all the other conditions for making him eligible to claim deduction u/s 80IA, and since the order of Hon'ble High Court has already quashed the notification issued for withdrawal of deduction, the basis on which AO has made disallowance of deduction u/s 80IA no longer exists. 5.6. In view of above, following the ruling granted by Hon'ble High Court, Delhi in their order dated 12.07.2018, the disallowances made by AO by disallowing the deduction u/s 80IA amounting to Rs. 8,99,17,612/- are deleted. The grounds of appeals are accordingly allowed.” Page | 9
14. As we have already allowed the appeal of the assessee for AY 2010-11 by following the order of Hon’ble Delhi High Court wherein the hon’ble court has quashed the withdrawal of approval and therefore we find no infirmity in the order of ld. CIT(A) in allowing the deduction u/s 80IA to the assessee for all these years who followed the aforesaid orders of hon’ble high court. Therefore, the order of ld. CIT(A) allowing the deduction u/s 80IA of the Act to the assessee is hereby upheld.
Accordingly, appeals filed by the revenue for AY 2011-12 to 2015-16 in to 7817/Del/2018 and 3662/Del/2019 respectively, are dismissed. for AY 2010-11 (Revenue’s appeal)
Now coming to the revenue’s appeal for AY 2010-11 in regarding deletion of penalty levied u/s 271(1)(c) of the Act. It is seen that the penalty at Rs. 2,43,97,690/- was levied u/s 271(1)(c) of the Act by AO on the amount of concealed income on account of disallowance of deduction u/s 80IA claimed at Rs. 7,15,63,075/-. The ld. CIT(A) has deleted the penalty as the Hon’ble Delhi Court has decided the writ petition filed by the assessee in its favour wherein the withdrawal of approval granted was quashed and accordingly, the assessee is entitled for deduction u/s 80IA of the Act.
Further, while deciding the assessee’s appeal for AY 2010-11 in we have already allowed the deduction u/s 80IA of the Act to the assessee to the assessee, thus there is remained no income for which any inaccurate particulars were filed or any income was concealed and, therefore, we find no infirmity in the order of CIT(A) deleting the penalty levied u/s 80IA of the Act which is hereby upheld.
Appeal of the revenue for A.Y. 2010-11 in is hereby dismissed.
In final result, appeal of the assessee in for AY 2010-11 is allowed and revenue’s appeals in to 7817/Del/2018 for AY 2011-12 to 2014-15 and 3662/Del/2019 for AY 2015-16 respectively, are dismissed. Further the revenue’s appeal in ITA No. 4277/Del/2019 for AY 2010-11 is dismissed.