M/s Nicco Corporation Limited, Kolkata V. DCIT, Circle-3, Kolkata, Kolkata

ITA 1487/KOL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9852 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 28-08-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 15-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: N O N E
• Keywords: Bad and doubtful debts; Corroborative evidences; Revised return; Set aside
• Section: 43B; 115JB; 143(1)

Judgement Text

1 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( )BEFORE . , /AND . # . $ , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VAR KEY, JM] I.T.A. NO. 1487/KOL/2016 ASSESSMENT YEAR: 2008-09 NICCO CORPORATION LTD. (PAN: AABCN0570G) V VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3, KOLKATA. APPELLANT RESPONDENT FOR THE APPELLANT N O N E FOR THE RESPONDENT DR. P. K. SRIHARI, CIT, DR DATE OF HEARING 28.08.2019 DATE OF PRONOUNCEMENT 25.09.2019 ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) 1, KOLKATA DATED 09.05.2016 FOR AY 2008-09. THE GROUN DS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER: 1. YOUR APPELLANT PRAYS FOR RELIEF AGAINST THE DET ERMINATION MAT ON BOOK PROFIT RS.11,94,76,157 U /S 115JB OF INCOME TAX ACT, 1961. 2. APPELLANT DID NOT PAY TAX ON BOOK PROFIT U/S 115 JB OF I. T. ACT AS THE TOTAL ASSESSED INCOME WAS NIL CITING THE ORDER OF INCOME TAX APPELLATE TR IBUNAL 'D' BENCH ON 18/11/2005 IN THE CASE OF M/S. VISHNU SUGAR MILLS LTD. VS CIT (APPEAL) X A ND THE ORDER OF HON'BLE HIGH COURT AT KOLKATA DATED 20.11.2006 RELIEF AGAINST UNLAWFUL AP PLICATION OF SECTION 115JB, MAY BE APPROVED. 3. THAT ASSESSING OFFICER (AO) WAS ERRED IN LAW BY ADDING A SUM OF RS. 3CRORES BEING THE PROVISION FOR BAD AND DOUBTFUL DEBTS TO ARRIVE AT B OOK PROFIT U/S 115JB OF INCOME TAX ACT, 1961 OF THE COMPANY FOR THE ASSESSMENT YEAR. 4. THAT THE ASSESSING OFFICER WAS ERRED IN LAW IN A DDING BACK A SUM OF RS. 361.24 LACS BEING SALES TAX & COMMERCIAL TAX DEBITED TO PROFIT & LOSS ACCOUNT TO DETERMINE GROSS TOTAL OF THE COMPANY FOR THE SAID ASSESSMENT YEAR. 5) YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , MODIFY OR AMPLIFY AND DELETE ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME O F HEARING OF THE APPEAL. 2 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 2. IN RESPECT OF GROUND NOS. 1 TO 3 BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED THAT ASSESSEE HAD FILED ITS RETURN OF INCOME FOR YEAR UN DER CONSIDERATION ELECTRONICALLY ON 09.01.2009 AND DISCLOSED TOTAL INCOME AT RS. NIL AN D THEREAFTER, REVISED ITS RETURN ON 31.03.2010. HOWEVER, THE AO NOTED THAT SINCE THE A SSESSEE COMPANY HAD FILED THE ORIGINAL RETURN AFTER THE DUE DATE FOR SUBMISSION OF RETURN, ACCORDING TO HIM, THE REVISED RETURN WAS IN VIOLATION OF SEC.139(5) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND, THEREFORE, HE REJECTED THE REVISED RETURN. TH EREAFTER, THE CASE WAS PROCESSED U/S. 143(1) OF THE ACT AND LATER THE RETURN WAS SELECTED FOR SC RUTINY UNDER CASS. THE AO NOTES THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G ELECTRIC CABLES, CONDUCTORS AND WIRES, GALVANIZED STEEL TAPES AND ALSO RENDERING ENGINEERI NG SERVICES AND CARRYING OUT TURNKEY PROJECTS. THE AO NOTES THAT THE NET BOOK PROFIT OF THE ASSESSEE COMPANY WAS TO THE TUNE OF RS.11,94,76,157/-. HOWEVER, THE ASSESSEE COMPANY C LAIMED ZERO TAX ON SUCH BOOK PROFIT BY FURNISHING A NOTE AT THE END OF THE COMPUTATION. IN THAT NOTE THE AO NOTES THAT THE ASSESSEE COMPANY STATED THAT AS PER THE CASE LAW OF THIS TRI BUNAL D BENCH IN THE CASE OF BISHNU SUGAR MILLS LTD. THE ASSESSEE COMPANY IS NOT LIABLE TO PAY TAX ON BOOK PROFIT U/S. 115JB OF THE ACT. IT WAS ALSO NOTED IN THE SAID NOTE THAT TH E ASSESSEE COMPANY IS RELYING ON THE ORDER OF THE HONBLE CALCUTTA HIGH COURT IN THE SAME CASE FOR AY 2002-03. ACCORDING TO AO, THE NOTE AFFIXED WITH THE COMPUTATION BY THE ASSE SSEE AND THE TREATMENT OF TAX ON BOOK PROFIT BY THE ASSESSEE IS CONTRARY TO THE PROVISION OF SEC. 115JB OF THE ACT AND IN THE ASSESSMENT ORDER THE AO REPRODUCED SEC. 115JB(1) OF THE ACT AND THEREAFTER THE AO NOTED AFTER VERIFICATION OF THE P&L ACCOUNT THAT THE ASSE SSEE HAD CLAIMED PROVISION OF DOUBTFUL DEBT TO THE TUNE OF RS.3 CR. THOUGH NOTICES WERE I SSUED TO THE ASSESSEE THE AO NOTES THAT ASSESSEE FAILED TO GIVE ANY EXPLANATION, THEREFORE, TAKING INTO CONSIDERATION THAT THE ASSESSEE HAD ADDED BACK ONLY RS.49,66,895/- DISALLOWED THE REST OF THE AMOUNT OF RS.2,50,33,105/- (RS. 3,00,00,000 RS.49,68,895). AGAINST THE AFOR ESAID ACTION OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DISMISS THE SAME BY OBSERVING AS UNDER: THE AO AFTER ISSUE A SHOW CAUSE AS TO WHY PROVISI ON FOR DOUBTFUL DEBTS SHOULD NOT BE ADDED BACK TO THE INCOME UNDER SECTION 115JB. THE APPELLANT IN ITS REPLY STATED THAT THE AMOUNT OF RS. 3 CRORES HAS DEBITED ACTUALLY BECOME DURING THE RELEVANT PERIOD AND WAS WRITTEN OFF ENTIRE AMOUNT TO HIM IRRECOVERABLE AND THEREFORE THE AMOUNT WAS ALLOWABLE. HOWEVER, THE AO HELD THAT THE APPELLANTS CLAIM OF RS. 3 CRORE FOR DOUBTFUL DEBTS DID NOT 3 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 QUALIFY FOR IN VIEW OF THE EXPLANATION 1 TO SECTION 115JB. THE APPELLANT'S AR STATED THAT RS.3 CRORES WAS CHARGED AS BAD DEBTS AND DEBITED IN THE P&L A/C AND AS THE AMOUNT WRITTEN OFF BY CHARGING THE AMOUNT BY REDUCING THE AMOUNTS FROM THE PARTIES ACCOUNTS THEREFORE THE AMOUNT WAS ALLOWABLE AND COULD NOT BE ADDED BACK TO THE BOOK PROFIT U/S.115JB. AS NO SUCH AMOUNT WAS IN THE PROVISIONS. THE AO ADDED BACK AMO UNT OF RS. 3CRORES AS PROVISION FOR BAD DEBTS HOLDING THE SAME AS UNASCERTAINED LIABILI TY, BY APPLYING PROVISION OF EXPLANATION 1 TO SECTION 115JB. ON THIS ISSUE, THERE WAS RETROS PECTIVE AMENDMENTS BY FINANCE ACT, 2002 BY INSERTION OF CLAUSE (C) IN EXPLANATION 1 TO SEC. 115JB, WHEREBY THE SAID EXPLANATION 1 PROVIDES FOR ADJUSTMENTS TO THE BOOK PROFIT, I.E. T HE NET AS SHOWN IN THE P&L A/C, AS INCREASED BY 'THE AMOUNT OR AMOUNTS SET-ASIDE FOR P ROVISIONS MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES.' FROM PERUSAL OF SCHEDULE 20 TO AUDITED PROFIT & LOS S A/C OF THE APPELLANT, ITS FOUND THAT DURING RELEVANT ASSESSMENT YEAR THE ASSESSEE COMPAN Y HAD MADE PROVISION FOR AN AMOUNT OF RS. 3 CRS. WAS DEBITED BY THE APPELLANT COMPANY AS 'PROVISION FOR DOUBTFUL DEBTS. IT IS PERTINENT TO REFER TO THE DECISION OF THE HON'BLE S UPREME COURT IN THE CASE OF CIT VS. HCL COMNET SYSTEMS & SERVICES (2008) 305 ITR 409(SC). T HE HON'BLE APEX COURT HAD AS PER THE HEAD-NOTE, HELD 'WHETHER CLAUSE (C) OF SAID EXPLANA TION IS ATTRACTED ONLY IF AMOUNT IS SET ASIDE AS PROVISION; PROVISION IS MADE FOR MEETING A LIABLITY; AND THE PROVISION IS FOR AN UNASCERTAINED LIABILITY-HELD YES.' IN THE INSTANT C ASE ADMITTEDLY THE PROVISION FOR BAD DEBTS AMOUNTING TO RS.3 CRORES WAS DEBITED TO THE PROFIT & LOSS ACCOUNT AND WAS CHARGED TO THE NET PROFIT. HOWEVER, IT IS FOUND THAT THE APPELLANT HAS NOT PRODUCED ANY SUPPORTING EVIDENCE EITHER BEFORE THE AO OR IN APPELLATE PROCEEDINGS TO SUBSTANTIATE TO SUBSTANTIATE ITS CLAIM THAT THE 'PROVISION FOR DOUBTFUL DEBTS' AMOUNTING TO RS 300.00 LACS WAS ACTUALLY ASCERTAINABLE AND ALSO WRITTEN OFF IN THE BOOKS OF ACCOUNTS. IN V IEW OF THE ABOVE DISCUSSION ,IT IS HELD THAT CONSIDERING THE FACTS OF THE CASE, ITS FOUND THAT P ROVISIONS OF CLAUSE(C) ARE ATTRACTED TO THE APPELLANT'S CASE. THEREFORE, IT IS FOUND THAT THERE WAS NO INFIRMITY IN THE CIT(A) ACTION IN ADDING BACK THE IMPUGNED AMOUNT OF RS.3 CRORES TO T HE BOOK PROFITS U/S115JB.THE ADDITION OF RS. 3 CRORE CONFIRMED BY CIT(A) IS THEREFORE CON FIRMED .THIS GROUND IS NOT ALLOWED. AGGRIEVED, ASSESSEE IS BEFORE US. 3. WE HAVE HEARD THE SUBMISSIONS OF LD. DR. WE NOT E THAT NONE APPEARED FOR THE ASSESSEE ON THE PLEA THAT THE COMPANY IS UNDER LIQ UIDATION BEFORE THE NATIONAL COMPANY LAW TRIBUNAL UNDER THE PROVISIONS OF INDUSTRY & BAN KRUPTCY ACT, 2016. HOWEVER, TAKING NOTE THAT THIS APPEAL IS PENDING FOR A LONG TIME, W E ARE INCLINE TO HEAR THE LD. DR AND WE PROCEED TO ADJUDICATE THIS ISSUE. HOWEVER, IN THE ABSENCE OF LD.AR WE THOUGHT IT FIT TO INCORPORATE THE STATEMENT OF FACTS RELEVANT TO THIS ISSUE AS FILED BY ASSESSEE, WHICH IS AS UNDER :- STATEMENT OF FACTS GROUND NO. 1 SECTION 115J8 ENJOINS, INTER ALIA, EXCLUSION TO THE AMOUNT OR AMOUNTS SET ASIDE TO PROVISIONS MADE FOR MEETINGS OF LIABILITIE S, OTHER THAN ASCERTAINED LIABILITIES, FOR DETERMINATION OF BOOK PROFIT TAXAB LE IN RELEVANT SECTION. 4 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 COMPANY HAS MADE PROVISIONS OF RS. 300 LACS IN ITS PROFIT AND LOSS ACCOUNTS. PARA 8 (XIV) OF SCHEDULE 23 BEING NOTES ON ACCOUNTS FORMING PART OF AUDITED FINANCIAL STATEMENTS OF THE ASSESSE E INDICATE RS. 323 LACS TO HAVE BECOME BAD OUT OF PROVISION MADE WHICH HAS BEE N CHARGED OFF OF THE PROFIT & LOSS ACCOUNT. THIS CLEARLY INDICATES THAT THE ENTIRE PROVISION RELATES TO ASCERTAINED LIABILITIES ONLY AND AS SUCH ELIGIBLE FOR ADMISSION FOR COMPUTATION OF BOOK PROFIT. DETAILED LIST OF DEBTS CONSIDERED DOUBTFUL, BEING C HARGED OFF, IS ENCLOSED IN ANNEXURE - 'A'. 4. WE NOTE THAT AS PER SCHEDULE 20 OF AUDITED P&L ACCOUNT OF THE ASSESSEE, THE ASSESSEE HAS MADE PROVISION FOR AN AMOUNT OF RS. 3 CR. WHICH WAS DEBITED UNDER THE HEAD PROVISION FOR DOUBTFUL DEBTS. SINCE PROVISION FOR BAD DEBTS IS A PROVISION FOR DIMINUTION IN VALUE OF ASSETS, CLAUSE (I) OF EXPLANATION 1 TO SECTION 115J B STANDS ATTRACTED. THE SAID CLAUSE HAS BEEN INSERTED BY THE FINANCE NO. 2 ACT OF 2009 W.R. E.F 1.4.2001. THEREFORE, WE UPHOLD THE DECISION OF LD. CIT(A), HOWEVER, ON THIS CLAUSE (I ) OF EXPLANATION 1 OF SECTION 115JB OF THE ACT. THE ADDITION OF RS. 3 CRORE CONFIRMED BY C IT(A) IS THEREFORE CONFIRMED. 5. GROUND NO. 4 IS AGAINST THE ACTION OF THE LD. CI T(A) IN CONFIRMING THE ACTION OF THE AO IN ADDING BACK A SUM OF RS.361.24 LACS BEING SA LES TAX AND COMMERCIAL TAX DEBITED TO THE P&L ACCOUNT TO DETERMINE THE GROSS TOTAL OF THE COMPANY FOR THE SAID ASSESSMENT YEAR. BRIEF FACTS OF THE CASE AS NOTED BY THE AO ARE THAT THE ASSESSEE HAS SHOWN SALES AS NOT OF SALES TAX/VAT BUT GROSS OF EXCISE DUTY WHICH IS VER Y CLEAR FROM SCHEDULE-23(F) OF BALANCE SHEET. THE AO NOTED THAT THE ASSESSEE HAS SHOWN SA LES OF FINISHED GOODS INCLUDING INCOME FROM OTHER WORKS AND CONSULTANCY FEES OF RS.47699.3 8 LACS WHICH IS SEEN FROM SCHEDULE 14 OF THE P&L ACCOUNT. ACCORDING TO AO, AS PER THE AC COUNTING POLICIES AND NOTES TO ACCOUNTS SALE IS NET OF SALES TAX/VAT BUT IN SCHEDULE 18 THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.361.24 LACS AGAINST SALES TAX AND COMMERCIAL TAX UNDER THE HEAD PROJECT ENGINEERING EXPENSES WHICH IS ACCORDING TO AO AGAINST THE ACCO UNTING POLICY AND THEREFORE ACCORDING TO HIM, THE AMOUNT OF RS.361.24 LACS SHOULD HAVE BE EN ADDED TO THE SALES FIGURE FOR CLAIMING THE DEDUCTION ON THIS ACCOUNT. BUT ACCORD ING TO AO, THE ASSESSEE HAS FAILED TO DO SO. THE ASSESSEES REPLY ON THIS ISSUE WAS NOT FOU ND ACCEPTABLE TO THE AO SINCE THE OTHER 5 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 WORK AND CONSULTANCY FEE IS INCLUDED IN THE SALES FIGURE OF RS.47699.38 LACS. THEREFORE, THE AMOUNT OF RS.361.24 LACS WAS ADDED BACK TO THE TOTAL INCOME OF ASSESSEE. AGGRIEVED BY THE AFORESAID ACTION OF THE AO, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE LD. CIT(A) WHO HAS DISMISSED THE GROUND OF APPEAL BY HOLDING A S UNDER: THE AO FOUND THAT SALES TAX AND COMMERCIAL TAX AMO UNTING TO RS.361.24 LACS DEBITED TO P&L ACCOUNT WERE SHOWN AS PER SCHEDULE 23 OF THE BA LANCE SHEET. THE AO OBSERVED THAT RS.361.24 LACS WAS DEBITED UNDER THE PROJECT ENGINE ERING EXPENSES BUT WAS NOT INCLUDED IN SALES FIGURE AND WAS ADDED BACK TO THE TOTAL INCOME . THE APPELLANTS A.R. STATED IN THAT THE AMOUNT OF SALES TAX /COMMERCIAL TAX TO THE EXTENT O F RS.361.24 LACS DOES NOT RELATES TO SALES BUT INCOME FROM CONSULTANCY FEE WHICH DOES NOT CONT RAVENE WHICH IS PARA TO SCHEDULE 23 OF THE STATEMENT, THE AO'S FINDING AND THE WRITTEN SUB MISSION WAS CONSIDERED IT IS OBSERVED THAT THE APPELLANT WAS ABLE TO JUSTIFY THE REASONS FOR NON INCLUSION OF SALES TAX / COMMERCIAL TAX AMOUNTING TO RS.361.24 LACS IN THE SALES FIGURE EITHER IN THE ASSESSMENT OR REGULAR BASIS. IN VIEW THERE OF IT IS FOUND THERE IS NO INF IRMITY IN THE FINDING OF THE A.O. THIS GROUND IS NOT ALLOWED. AGGRIEVED BY THE AFORESAID ACTION OF LD.CIT(A), THE ASSESSEE HAS PREFERRED THIS GROUND BEFORE US. 6. WE HAVE HEARD THE SUBMISSION OF THE LD. DR AND H AVE CAREFULLY GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE FROM A PERUSAL OF THE ASSESSMENT ORDER THAT THE LD. AR OF THE ASSESSEE DURING THE ASSESSMENT PROCEE DING BEFORE THE AO HAD CONTENDED THAT SALES TAX/COMMERCIAL TAX TO THE EXTENT OF RS.361.24 LACS WAS DEBITED TO P&L ACCOUNT AND IT DOES NOT RELATE TO THE SALES BUT IT IS THE INCOM E FROM OTHER WORKS AND CONSULTANCY FEES. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT ACCOUNT ING POLICIES DO NOT ENJOIN ACCOUNTING OF INCOME FROM OTHER WORKS AND CONSULTANCY FEES AT N ET OF SALES TAX AND COMMERCIAL TAX. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT INCOME FRO M OTHER WORKS AND CONSULTANCY FEES HAS BEEN INDICATED GROSS OF SALES TAX AND COMMERCIA L TAX WHICH ACTION OF THE ASSESSEE WAS IN NO WAY CONTRAVENE ACCOUNTING POLICIES OF THE COMPAN Y REFERRED TO UNDER PARA (F)(I) OF SCHEDULE 23 OF FINANCIAL STATEMENT. THEREFORE IT W AS CONTENDED BY THE ASSESSEE THAT CONSIDERING THE AFORESAID FACTS, QUESTION OF DISALL OWANCE OF SALES TAX AND COMMERCIAL TAX DOES NOT ARISE. HOWEVER, ACCORDING TO LD. CIT(A), THE AO FOUND THAT SALES TAX AND COMMERCIAL TAX AMOUNTING TO RS.361.24 LACS DEBITED TO THE P&L ACCOUNT WERE SHOWN AS PER SCHEDULE 23 OF THE BALANCE SHEET. THE LD. CIT(A) T OOK NOTE THAT THE AO HAD OBSERVED THAT RS.361.24 LACS WAS DEBITED UNDER THE HEAD PROJECT ENGINEERING EXPENSES BUT WAS NOT 6 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 INCLUDED IN THE SALES FIGURE AND WAS ADDED BACK TO THE TOTAL INCOME. ACCORDING TO LD. CIT(A), THOUGH THE LD. AR OF THE ASSESSEE HAD SUBMI TTED THAT THE AMOUNT OF SALES TAX/COMMERCIAL TAX TO THE EXTENT OF RS.361.24 LACS DOES NOT RELATE TO THE SALES BUT INCOME FROM CONSULTANCY FEE DOES NOT CONTRAVENE PARA (F)(I ) SCHEDULE 23 OF FINANCIAL STATEMENT, THE LD. CIT(A) CONFIRMED THE ACTION OF THE AO ON THE RE ASON THAT ASSESSEE FAILED TO JUSTIFY THE REASON FOR NON-INCLUSION OF SALES TAX/COMMERCIAL TA X AMOUNTING TO RS.361.24 LACS IN THE SALE FIGURE EITHER IN THE ASSESSMENT OR REGULAR BASIS. HOWEVER, IN THE ABSENCE OF ANY ASSISTANCE FROM THE LD.AR OF THE ASSESSEE, WE NOTE THAT THE AS SESSEE HAS FILED STATEMENT OF FACTS, WHICH AS UNDER:- STATEMENT OF FACTS OF ASSESSEE GROUND NO. 2 A) IN SCHEDULE - 14 OF FINANCIAL STATEMENTS S'!!E O F FINISHED GOODS INCLUDING INCOME FROM OTHER WORK AND CONSULTANCY FEES HAS BE EN SHOWN AT RS. 47,699.381ACS. B) THIS CLEARLY INDICATES THAT ENTIRE FIGURE DOES N OT RELATE TO SALE ONLY. PARA B(IX) OF SCHEDULE 24 OF FINANCIAL STATEMENTS PROVID ES BREAKUP OF THE AMOUNT OF RS, 47,699.381ACS REFERRED TO IN 'A' ABOV E AS HEREUNDER. MANUFACTURING ACTIVITIES CABLES CONDUCTORS, WIRES & WIRES RODS FABRICATION RECEIPTS OTHER RECEIPTS 30816.49 158.14 - 767.38 31,742.01 TURNKEY PROJECTS 14,442.75 CONSULTANCY & SERVICES - TRADING ACTIVITIES CABLES BELZONA OTHERS 1,514.62 - - SUB-TOTAL 1,514.62 GRAND-TOTAL 47,699.38 FROM ABOVE IT MAY BE OBSERVED THAT RS. 47,6 99.38 LACS INCLUDES RS. 14,442.75 LACS TOWARDS INCOME FROM TURNKEY PROJECT S. C) UNLIKE ACCOUNTING OF SALE IS GUIDED BY AS-9, ACC OUNTING OF INCOME FROM TURNKEY PROJECTS IS GUIDED BY AS-7 (REVISED). ICAI IN ITS GUIDELINE LAYS 7 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 DOWN SALES TO BE INDICATED IN PROFIT AND LOSS ACCO UNT NET OFF SALES TAX. RELEVANT PROVISION DOES NOT APPLY TO INCOME FROM T URNKEY PROJECTS. PARA 11, AS-7 ENJOINS CONSTRUCTION CONTRACTS TO BE MEASU RED AT THE CONSIDERATION RECEIVED OR RECEIVABLE WHICH IMPLIES TOTAL OF BILL AMOUNT. NATURALLY ANY SALES TAX OR COMMERCIAL TAX LIABILIT Y INCURRED / COLLECTED FOR PAYMENT WOULD AMOUNT TO COST OF EXECUTION OF CONTR ACT WITHIN THE MEANING OF PARA 15(C) OF AS-7 AND AS SUCH CHARGEABLE TO PR OFIT AND LOSS ACCOUNT. CONSIDERING THIS RS. 361.24 LACS TOWARDS LIABILITY INCURRED TOWARDS PAYMENT OF SALES TAX AND COMMERCIAL TAX DURING THE COURSE OF EXECUTION OF TURNKEY PROJECTS HAS TO BE DEBITED TO PROFIT AND LO SS ACCOUNT AS PER AS-7. D) PARA A (F) OF SCHEDULE 23 OF SIGNIFICANT ACCOUNT ING POLICIES MENTIONS SALES TO HAVE BEEN ACCOUNTED FOR AT NET OFF SALES T AX / VAT BUT GROSS OF EXCISE DUTY. IT DOES NOT STIPULATE SO FOR INCOME FR OM SERVICES/PROJECTS, TO WHICH CATEGORY, INCOME FROM TURNKEY PROJECTS BELONG S TO. E) IT IS TRADITIONAL PRACTICE OF THE COMPANY TO ACC OUNT FOR INCOME FROM TURNKEY PROJECT GROSS OF SALES TAX / VAT WHICH IS I N AGREEMENT WITH AS-7. NATURAL ACCOUNTING COROLLARY TO THIS IS TO DEBIT SA LES TAX AND COMMERCIAL TAX LIABILITY INCURRED DURING EXECUTION OF TURNKEY PROJECTS TO PROFIT AND LOSS ACCOUNT. IT IS WRONG TO CONTEND THAT INCOME FROM TU RNKEY PROJECT ACCOUNTED FOR IN TERMS OF GROSS BILLING DID NOT INC LUDE RELEVANT SALES TAX AND COMMERCIAL TAX AMOUNTING TO RS. 361.24. F) CONSIDERING AFORESAID FACTS IT IS CRYSTAL CLEAR THAT THE COMPANY'S INCOME FROM TURNKEY PROJECTS AMOUNTED TO RS. 14,442.75 LAC S IN TERMS OF GROSS OF SALES TAX AND COMMERCIAL TAX WHICH INCLUDED RS. 361 .241ACS COLLECTED TOWARDS SALES TAX AND COMMERCIAL TAX. IF RS. 361.24 LACS IS NOT TO BE DEBITED IN PROFIT & LOSS ACCOUNT THE INCOME FROM TURNKEY PROJECTS NEEDS TO BE CREDITED IN PROFI T AND LOSS ACCOUNT BY RS. 14,081.51IACS CRS. 14,442.75 - 361.24) ONLY INSTEA D OF RS. 14,442.75 LACS AS CREDITED IN PROFIT & LOSS ACCOUNT. ULTIMATE IMP ACT ON PROFIT AND LOSS WOULD REMAIN SAME . G) WE ARE SURE THAT CREDITING OF INCOME FROM TURNKE Y PROJECTS GROSS OF SALES & COMMERCIAL TAX AND CHARGING OF SALES TAX A ND COMMERCIAL TAX IN DEBIT SIDE OF PROFIT & LOSS ACCOUNT IN NO WAY VITI ATES THE CORRECTNESS OF ACCOUNTING, RESULTING IN UNDERSTATEMENT OF PROFIT. H) BESIDES CORRESPONDING TAX AUDIT REPORT REVEALS S UBSEQUENT PAYMENT OF SALES TAX AND COMMERCIAL TAX IN APPROPRIATE PARA M EANT FOR PARTICULARS OF DISCLOSURE U/S 43B O~ INCOME TAX ACT, 1961.( EMPHASIS GIVEN BY US ) 8 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09 7. WE FIND MERIT IN THE LEGAL CONTENTION RAISED BY THE ASSESSEE ABOVE, THEREFORE THE AO IS DIRECTED TO VERIFY AS TO WHETHER THE INCOME FRO M CONSULTANCY FEE ETC CREDITED TO THE P & L ACCOUNT IS INCLUSIVE OF TAXES OR NOT. IF IT IS FO UND THAT THE INCOME SO CREDITED, INCLUDED THE TAXES OF RS.361.24 LAKHS AND THE SAME HAS BEEN PAID TO THE CREDIT OF THE GOVT. BEFORE THE RETURN FILING DUE DATE, THEN THE ADDITION SHALL ST AND DELETED. THEREFORE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMAND THIS MATTER BACK AO FOR DENOVO ADJUDICATION AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE/LIQUIDATOR ( SHRI VINOD KOTHARI) OR THE SUCCESSOR ENTITY AS PER LAW. 8. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 25TH SEPT EMBER, 2019 SD/- SD/- J. SUDHAKAR REDDY A. T. VARKEY ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25TH SEPTEMBER, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1)APPELLANT M/S. NICCO CORPORATION LTD., NICCO H OUSE, 2, HARE STREET, KOLKATA-700 001. 2) RESPONDENT DCIT, CIRCLE-3, KOLKATA. 3) CIT(A)-1, KOLKATA. (SENT THROUGH E-MAIL) 4)CIT , KOLKATA 5)DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL )\ / TRUE COPY, BY ORDER, ASSI STANT REGISTRAR 9 ITA NO. 1487/KOL/2016 NICCO CORPORATION LTD., AY 2008-09