Garden Reach Shipbuilders & Engineers Ltd., Kolkata V. DCIT, Circle - 1, Kolkata, Kolkata

ITA 278/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75113 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-02-2012
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: SANJAY BHATTACHARYA LL B
• Section: 143(3)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' ' ' ' / I.T.A NO. 278/KOL/2012 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR: 2008-09 GARDEN REACH SHIPBUILDERS & ENGINEERS LTD. VS. DEP UTY COMMISSIONER OF INCOME-TAX, (PAN: AAACG9371K) CIRCLE-1, KOLKATA. (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 31.03.2014 DATE OF PRONOUNCEMENT: 31.03.2014 FOR THE APPELLANT: SHRI SANJAY BHATTACHARYA, LL.B, FCA FOR THE RESPONDENT: SHRI RAVI JAIN, CIT, DR / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-I, KOLKATA IN APPEAL NO. 287/CIT(A)-I/CIR-1/10-11 DATED 16.11.2011. ASSESSM ENT WAS FRAMED BY DCIT, CIRCLE-1, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORDER DATED 20.12. 2010. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PROVISIONS FOR LIQUIDATED DAMAGES. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS.1 AND 2: 1. THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS W RONG IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING THE PROVISI ON FOR LIQUIDATED DAMAGES AGGREGATING TO RS.32,93,75,796. 2. THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO.1 ABOVE, THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPR ECIATE THAT THE PROVISION FOR LIQUIDATED DAMAGES HAD BEEN MADE BY THE APPELLANT I N ACCORDANCE WITH THE RELEVANT CONTRACTS ENTERED INTO WITH THE INDIAN NAVY AND THU S HE WAS WRONG IN UPHOLDING THE ASSESSING OFFICERS OBSERVATION THAT THE LIABILITY TOWARDS LIQUIDATED DAMAGES HAD ALLEGEDLY NOT BEEN ON ASCERTAINED BASIS. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS D EBITED A SUM OF RS.33,92,92,235/- TO THE P&L ACCOUNT UNDER THE HEAD LIQUIDATED CHARGES/DAMAG ES. THE AO DURING THE COURSE OF SCRUTINY ASSESSMENT NOTED THAT THERE ARE TWO FIGURE S OF RS.97,40,000/- AND RS.1,76,438/- 2 ITA NO. 278/K/2012 M/SGARDEN REACH SHIPBUILDERS & ENGG. LTD., AY 2008 -09 CHARGED TO P&L ACCOUNT WHICH ARE ACTUALLY LIQUIDATE D DAMAGES PAID BY THE ASSESSEE DURING THE PREVIOUS YEAR. THE BALANCE FIGURE OF RS.32,93,75,7 97/- IS THE PROVISION OF LIQUIDATED DAMAGES CHARGED TO P&L ACCOUNT AND CLAIMED. THE AO EXAMINE D THE DETAILS I.E. CONTRACT EXECUTED FOR INDIAN NAVY FOR CONSTRUCTION AND SUPPLY OF SHIPS AN D IN THE EVENTUALITY OF DELAY THAT MIGHT OCCUR IN SUPPLY OR CONSTRUCTION THE CONTRACTUAL AGR EEMENT PROVIDES SPECIFIC CLAUSES FOR DAMAGES. THE AO NOTED THAT THE ASSESSEE IS REQUIRE D TO PAY LIQUIDATED DAMAGES FOR DELAY IN SUPPLYING THE CONTRACTED SHIPS BUT THE AO FINALLY N OTED THAT THE PROVISIONS FOR LIQUIDATED DAMAGES IS AN UNASCERTAINED LIABILITY AND NOT CRYST ALISED DURING THE PREVIOUS YEAR AND THUS NOT ALLOWABLE IN THE RELEVANT ASSESSMENT YEAR. ACCORDI NGLY, HE MADE DISALLOWANCE. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO ALSO CONFIRMED THE ACTION OF AO IN DISALLOWING LIQUIDATED DAMAGES VIDE PARA 4.11 , 4.12 AND 4.13 AS UNDER: 4.11. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT, ORDER OF THE CIT(A) FOR A.Y. 2003-04 CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING THE PROVISIONS OF LIQUIDATED DAMAGES AND THE ORDER OF T HE HONBLE ITAT FOR A.Y. 91-92 AND A.Y.03-04. THIS YEAR THE A.O. HAS EXAMINED THE ISSU E IN DETAILS AND BROUGHT ON RECORDS THAT TOTAL PROVISION FOR A.Y. 1997-98 & 1998-99 AMO UNTING TO RS.4.90 CRORE (RS.4.14 CRORE + RS.0.76 CRORE) HAS BEEN WRITTEN BACK IN THI S YEAR AND CREDITED TO P/L A/C. THIS WRITTEN BACK OF L/D CONTRADICTS THE STAND OF THE AP PELLANT THAT THE PROVISION FOR L/D IS ASCERTAINED LIABILITIES. ON CAREFUL PERUSAL OF THE SUBMISSION MADE BY THE APPELLANT AND AS REPRODUCED IN PARA 4.4 OF THE ORDER, IT IS EVIDE NT THAT THE PROVISION FOR LIQUDATED DAMAGES REPRESENT THE AMOUNTS THAT ARE RECOVERABLE, AS PER THE MUTUAL AGREEMENT (PARA-4.5), FROM THE APPELLANT BY INDIAN NAVY IN RE LATION TO THE DELAYS OCCURRED IN DELVERING THE SHIPS AS PER THE CONTRACTED DELIVERY DATES. THUS, IT IS ONLY A PROVISION AND THE PROVISIONS ARE MADE FOR THE AMOUNTS THAT ARE RE COVERABLE FROM THE APPELLANT BY THE INDIAN NAVY. FURTHER, THE AMOUNT WOULD BE DECIDED A S PER THE MUTUAL AGREEMENT AS SUBMITTED IN THE PARA 4.5 SUBMITTED BY THE APPELLAN T. THE BILLS ARE RAISED ON THE BASIS OF PROGRESS IN THE CONSTRUCTION OF THE SHIPS AND CERTI FED BY THE CONTRACTEE WHICH HAS BEEN SHOWN AS INCOME OF THE APPELLANT. THUS, THERE MAY B E DELAY IN EXECUTING PORTION OF THE CONTRACT BUT UNLESS THE WHOLE WORK OR THE CONTRACT IS CONCLUDED OR FINISHED AND INDIAN NAVY RAISES AMOUNT TO BE RECOVERED FOR DELAY AND TH AT TOO, AS PER THE MUTUAL AGREEMENT, IT IS NOT POSSIBLE TO ASCERTAIN OR DETERMINE THE AM OUNT OF L/D. FURTHER, THE SCOPE OF WORK OR CONTRACT IS FLEXIBLE WHICH KEEPS ON CHANGIN G AS THE WORK PROGRESSES. THUS, IT IS ALL THE MORE DIFFICULT TO ASCERTAIN DELAY OCCURRED ON THE PART OF THE CONTRACTOR, THAT IS THE APPELLANT. THAT IS THE REASON THE CLAUSE OF MUTUAL AGREEMENT HAS BEEN MENTIONED IN CONTRACT AND AS MADE OUT IN THE SUBMISSION OF THE A PPELLANT. PROVISION FOR L/D FOR A.Y 1997-98 & 98-99 AMOUNTING TO RS.4.9 CRORES THAT HAS BEEN WRITTEN BACK THIS YEAR, FURTHER SUBSTANTIATES THE FINDINGS OF THE A.O. THAT L/D IS NOT AN ASCERTAINED LIABILITIES. IT IS NOT THE CASE THAT THE REVENUE HAS DENIED THE CLA IM OF L/D. ONCE THE L/D IS ASCERTAINED AFTER THE CONTRACT IS OVER AS PER MUTUAL AGREEMENT ON ACCOUNT OF DELAY ON THE PART OF THE APPELLANT, THE CLAIM OF APPELLANT IS ALLOWED AND IS BEING ALLOWED ALSO. HENCE THE ONLY ISSUE IS ALLOWABILITY OF THE CLAIM OF PROVISION FOR L/D THAT IS YET TO BE ASCERTAINED AND CLAIMED BY THE CONTRACTEE. SINCE, CLAIM OF PROVISIO N FOR L/D IS NOT AN ASCERTAINED LIABILITIES, THE A.O. HAS NOT ALLOWED THE CLAIM OF L/D. 4.12 THE VERY FACT THAT THE PROVISION FOR L/D FOR T HE A.Y. 1997-98 & 98-99 HAS BEEN WRITTEN BACK AFTER A GAP OF AS MANY AS 10 YEARS FUR THER SUBSTANTIATED THE DECISION OF THE A.O. THAT THE PROVISION FOR L/D IS NOT A ASCERTAINE D LIABILITIES. 3 ITA NO. 278/K/2012 M/SGARDEN REACH SHIPBUILDERS & ENGG. LTD., AY 2008 -09 4.13 THE A.O. HAS EXAMINED THE ISSUE IN DETAILS AND BROUGHT OUT MATERIAL EVIDENCE ON RECORD AND COME TO A CONCLUSION THAT THE CLAIM OF P ROVISION OF L/D IS INCONSISTENT, BASED ON A VARIABLE CLAUSE OF CONTRACTUAL AGREEMENT AND O N INCORRECT ESTIMATION CONTRARY TO THE CONTRACTUAL AGREEMENT. THE LIABILITY IS NOT ASC ERTAINED ON ANY EXTENSIVE DEGREE OF CALCULATION BASED ON PAST EVENTS TO A REASONABLE CE RTAINTY WHICH RESULTED IN DEFERMENT OF ONE YEARS LIABILITY TO ANOTHER YEAR. ALSO, THERE IS NO PROOF THAT REVERSAL ENTRY IS EVER MADE ON ACCOUNT OF RECOVERY FROM SUBCONTRACTOR ON A CCRUAL BASIS. THE CLAIM CANNOT BE REGARDED AS ASCERTAINED LIABILITY WHEN IT IS NOT SU PPORTED BY ANY REALISTIC ESTIMATE TO A REASONABLE CERTAINTIES AND THEREFORE, NOT CRYSTALLI ZED DURING THE PREVIOUS YEAR. THUS, THE APPELLANT FAILS TO GET THE RELIEF ON THIS ISSUE. TH E ACTION OF THE A.O. IS UPHELD. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BEFORE US FILED COPY OF TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 2003-04 WHEREIN EXACTLY ON SIMILAR FACTS TRIBUNAL HAS ALLOWED THE PROVISIONS FOR LIQUIDATED DAMAGES. LD. COUNSEL FOR THE ASSESS EE FURTHER EXPLAINED BEFORE US THE PROCEDURE VIS--VIS THE CONTRACT WITH INDIAN NAVY THAT GRSES LIABILITY TOWARDS LIQUIDATED DAMAGES ARISES AS STIPULATED IN THE RELEVANT CONTRACTS AS S OON AS ANY INCOME IS BOOKED IN RESPECT OF THE CONCERNED SHIP, IMMEDIATELY ON THE EXPIRY OF THE ST IPULATED DATE OF DELIVERY. HE ARGUED THAT ON ONE HAND THE INCOMES ARE BOOKED FROM YEAR TO YEAR O N THE BASIS OF THE WORKS COMPLETED AND CERTIFIED AND SIMULTANEOUSLY ON THE OTHER HAND THE CONTRACTUAL LIABILITY TOWARDS LIQUIDATED DAMAGES IN RELATION TO SALES BOOKED IS PROVIDED BY GRSE. HE ARGUED THAT WHEN CERTAIN INCOME IS BEING CONSIDERED ON THE BASIS OF THE WORK COMPLETED ANY CONTRACTUAL LIABLITY IN RELATION TO THE AMOUNT OF INCOME BOOKED, HAS TO BE PROVIDED IN ACCORDANCE WITH THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND SINCE GRSE HAS B EEN MAINTAINING ITS ACCOUNTS ON MERCANTILE BASIS, IF NO PROVISION WOULD HAVE BEEN M ADE FOR LIQUIDATED DAMAGES THAT WOULD CERTAINLY BE PAYABLE AS AND WHEN ANY INCOME IS BOOK ED, IT WOULD HAVE GONE AGAINST THE PRINCIPLES OF MERCANTLE ACCOUNTING. HE FURTHER SUB MITTED THAT N VIEW OF INCOME BOOKED IN THE ACCOUNTS AS A PART OF THE TURNOVER OF THE YEAR, THE LIABILITY TOWARDS THE LIQUIDATED DAMAGES AS PER THE RELEVANT CONTRACT SHOULD BE CONSIDERED AS A N ASCERTAINED LIABLLITY. HE ALSO DREW OUR ATTENTION TO THE APPELLATE ORDERS PASSED BY THE ITA T, KOLKATA HOLDNG THAT PROVISION MADE FOR LIQUIDATED DAMAGES BY GRSE COULD NOT BE CONSIDERED AS ANY UNASCERTAINED LIABILITY. EVEN THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO RELEVA NT CLAUSE OF CONTRACTUAL AGREEMENT AND THE RELEVANT CLAUSE READS AS UNDER: TIME SHALL BE DEEMED TO BE ESSENCE OF THE CONTRACT FOR COMPLETION OF THE WORK BY THE BUILDER. SUBJECT TO PROVISIONS HEREINAFTER MENTIONE D IN ARTICLES 3 AND 15 FOR ANY DELAY IN THE COMPLETION PERIOD OF THE SAID WORK THE BUILDER SHALL BE LIABLE TO PAY THE GOVERNMENT AS AGREED LIQUIDATED DAMAGES AND NOT AS PENALTY, A SUM EQUVALENT TO 1/2% OF THE PRICE 4 ITA NO. 278/K/2012 M/SGARDEN REACH SHIPBUILDERS & ENGG. LTD., AY 2008 -09 LIKELY TO BE PAID FOR EACH MONTH AND/OR PART THEREO F, ON PRO-RATA BASIS, BY WHICH COMPLETION OF THE SAD VESSEL HAS BEEN DELAYED IN E XCESS OF THREE MONTHS FOR THE FIRST VESSEL AND TWO MONTHS FOR THE SUBSEQUENT VESSELS BE YOND THE CONTRACTUAL DELIVERY DATE AS EXTENDED UNDER THE PROVISIONS OF THIS AGREEMENT, SU BJECT TO CEILING OF 2-1/2% OF THE PRICE LIKELY TO BE PAID. IF THE DELAY IN DELIVERY OF THE VESSEL EXCEEDS 5 MONTHS, THE GOVERNMENT AND THE BUILDER SHALL MUTUALLY AGREE UPON THE ACTI ON TO BE TAKEN IN THE CIRCUMSTANCES. 6. WE FIND THAT EXACTLY ON SIMILAR CIRCUMSTANCES TH E TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04 HAS ALLOWED THE CLAIM OF ASSESSEE AND TH E RELEVANT PORTION OF THE TRIBUNALS ORDER READS AS UNDER: 6. HEARD THE RIVAL PARTIES, PERUSED THE MATERIAL A VALABLE ON RECORD, PAPER BOOK AND THE ORDERS OF THE AUTHORITIES BELOW. SO FAR AS THE LD U P TO THE DATE OF DELIVERY IS CONCERNED, THE SAME HAS TO BE ALLOWED IN VIEW OF THE JUDGEMENT OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1991-92. SO FAR AS THE LD CLAIMED BY THE ASSESSEE AFTER DELIVERY OF SHIP IS CONCERNED, WE FIND FORCE IN THE ARGUMENT OF LD. AUTHORSED REPRESENTATIVE OF THE ASSESSEE THAT SUCH CLAIM HAS RIGHTLY BEEN MADE AS PER ARTICLE 14.1 OF AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE CONTRACTE E WHICH READS AS UNDER: CONSEQUENCE OF DELAY IN DELIVERY TIME SHALL BE DEEMED TO BE ESSENCE OF THE CONTRACT FOR COMPLETON OF THE WORK BY THE BUILDER. SUBJECT TO PROVISIONS HEREINAFLER MENT IONED IN ARTICLES 3 AND L5 FOR ANY DELAY IN THE COMPLETION PERIOD OF THE SAID WORK THE BUILDER SHALL BE LABLE TO PAY THE GOVERNMENT, AS AGREED LIQUIDATED DAMAGES AN D NOT AS PENALTY, A SUM EQUIVALENT TO 1/2% OF THE PRICE LIKELY TO BE PAID F OR EACH MONTH AND/OR PART THEREOF ON PRO-RATA BASIS, BY WHICH COMPLETION OF T HE SAID VESSEL HAS BEEN DELAYED IN EXCESS OF THREE MONTHS FOR THE FIRST VES SEL AND TWO MONTHS FOR THE SUBSEQUENT VESSELS BEYOND THE CONTRACTUAL DELIVERY DATE AS EXTENDED UNDER THE PROVISIONS OF THIS AGREEMENT, SUBJECT TO A CEILING OF 2-1/2% OF THE PRICE LIKELY TO BE PAID. IF THE DELAY IN DELIVERY OF THE VESSEL EXC EEDS 5 MONTHS, THE GOVERNMENT AND THE BUILDER SHALL MUTUALLY AGREE UPON THE ACTIO N TO BE TAKEN IN THE CIRCUMSTANCES. 7. A PLAIN READING OF ABOVE CLAUSE OF AGREEMENT CLE ARLY ESTABLISHES THE GENUINENESS OF THE CLAIM OF THE ASSESSEE EVEN OTHERWISE THE REVENU E HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE THAT THE ASSESSEE HAS TAKEN THE B ENEFIT OF SUCH LIQUIDATED DAMAGES IN ANY OTHER YEAR AND, THEREFORE, IN OUR CONSIDERED OP INION, THE ACTION OF ASSESSING OFFICER IN DISALLOWING THE CLAIM OF THE ASSESSEE WAS NOT CO RRECT AND THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING SUCH ACTION OF ASSESSING OF FICER. WE, THEREFORE, DELETE THE ADDTION AND ALLOW GROUND NO. 1 RAISED BY THE ASSESSEE. ON QUERY FROM THE BENCH, THE LD. CIT, DR STATED THA T THE MATTER IS ADMITTED BY HONBLE CALCUTTA HIGH COURT AND PENDING ADJUDICATION. ON QU ERY FROM THE BENCH, HE COULD NOT POINT OUT ANY FACTUAL DIFFERENCE IN THE FACTS RATHER HE STATE D THAT THE TRIBUNAL CAN TAKE DECISION AND AGREED THAT THE FACTS ARE SAME. IN VIEW OF THE ABOVE FACT S AND CIRCUMSTANCES, WE FEEL THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND FACT S ALSO STATES SO. RELYING ON THE TRIBUNALS DECISION IN EARLIER YEAR IN ASSESSEES OWN CASE, WE ALLOW THE CLAIM OF THE ASSESSEE. 5 ITA NO. 278/K/2012 M/SGARDEN REACH SHIPBUILDERS & ENGG. LTD., AY 2008 -09 7. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO LIQUIDATED DAMAGES PAID TO SUB CONTRACTORS. FOR THIS, ASSESSEE HAS RAISED FOLLOWI NG GROUND NOS. 3 AND 4: 3. THAT THE CIT(A) WAS WRONG IN CONFIRMING THE ACT ION OF THE ASSESSING OFFICER IN DISALLOWING RS.19,28,000/- IN RELATION TO THE LIQID ATED DAMAGES. 4. THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO.3 ABOVE, THE CIT(A) FAILED TO APPRECIATE AS TO HOW THE RECOVERY OF LIQU IDATED DAMAGES FROM SUB-CONTRACTORS HAD BEEN ADJUSTED BY THE INDIAN NAVY WHILE MAKING T HE FINAL PAYMENTS TO THE APPELLANT AND THUS HE WAS WRONG IN UPHOLDING THE ASSESSING OF FICERS OBSERVATION THAT THERE HAD ALLEGEDLY NOT BEEN ANY EXPLANATION AS REGARDS THE R ECOVERY OF LIQUIDATED DAMAGES FROM THE SUB-CONTRACTORS. 8. BRIEFLY STATED FACTS ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS COMPUTED THE ALLOWABLE LIQUIDATED DAMAGES ON SUB CO NTRACTORS, WHICH ARE AS UNDER: ALLOWABLE DEDUCTION ACTUAL LD: 3008 YARD 70990000 LESS LD RECOVERED FROM SUB-CONTRACTORS 1926000 69062000 LESS ALLOWED IN ASSESSMENT FOR AY 2000-01 ON PROVI SIONAL BASIS 12250000 56812000 LESS EARLIER PROVISIONS DISALLOWED IN ASSESSMENTS, BUT WRITTEN BACK IN THIS AY 2008-09. HENCE ALLOWABLE A.Y. 1997 -98 41400000 49000000 AY 1998-99 7600000 BALANCE 7812000 ADD ACTUAL LD FOR ENGG. YARD 176438 TOTAL LD ALLOWABLE OTHER THAN PROVISION 7988438 TOTAL LD DEBITED TO THE PROFIT & LOSS ACCOUNT YARD N O. 3008 9740000 ENGG. YARD 176438 9916438 LD OTHER THAN PROVISION IS DISALLOWED BEING THE DI FFERENTIAL AMOUNT 1928000 THE AO BASED HIS CALCULATION ON THE LETTER ISSUED B Y INDIAN NAVY DATED 27.04.2007 THAT THE COST OF CONSTRUCTION OF THIRD FLEET TANKER BY THE ASSESS EE WAS REVISED BY HONBLE PRESIDENT OF INDIA FROM RS.65 CR. TO RS.283.981 CR. AND THE RELEVANT P ARA 2 OF THE LETTER READS AS UNDER: 2. FURTHER SANCTION OF THE PRESIDENT IS ACCORDED F OR THE FOLLOWING: (A) LEVY OF LIQUIDATED DAMAGE AMOUNTING TO RS.7.099 CRO RE, (B) RECOVERY OF THE LIQUIDATED DAMAGE AMOUNTING TO RS.9 1.28 LAKH LEVIED BY CRSE ON SUB- CONTRACTORS. (C) EX POST FACTO APPROVAL OF 180.2516 CRORE SINCE AN A MOUNT OF 245.2516 CRORES HAS BEEN PAID TO GRSE AS AGAINST CCS APPROVED AMOUNT OF 65.0 0 CRORES FOR THE SHIP. ACCORDINGLY, THE AO MADE DISALLOWANCE OF RS.19,28,0 00/- ON LIQUIDATED DAMAGES OTHER THAN PROVISIONS BEING THE DIFFERENTIAL AMOUNT. AGGRIEVE D, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO WITHOUT SPEAKING ANYTHING ON THE DETAILS DISAL LOWED THE CLAIM OF ASSESSEE. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 6 ITA NO. 278/K/2012 M/SGARDEN REACH SHIPBUILDERS & ENGG. LTD., AY 2008 -09 9. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE HAS FILED THE DETAILS AS REGARDS TO LI QUIDATED DAMAGES AND STATED THAT WHENEVER THERE OCCURRED ANY DELAY IN SUPPLYING ANYTHING BY A NY SUB-CONTRACTOR TO THE ASSESSEE IN RELATION TO THE YARD NO.3008, A SPECIFIED SUM WAS RECOVERED FROM THE CONCERNED SUB-CONTRACTOR TOWARDS LIQUIDATED DAMAGES AND SUCH RECOVERED SUM W AS KEPT AS RETAINED DEPOSIT IN THE ACCOUNTS OF THE ASSESSEE. WHEN INDIAN NAVY FINALLY SETTLED THE BILLS FOR THE ASSESSEE IN RELATION TO YARD NO.3008, ON THE BASIS OF INFORMATION FURNIS HED BY ASSESSEE, THE RETAINED DEPOSITS TOWARDS LIQUIDATED DAMAGES RECEIVED FROM THE SUB-CO NTRACTORS, WERE REDUCED BY INDIAN NAVY FROM THE PAYMENTS MADE TO THE ASSESSEE. HOWEVER, TH E ASSESSEE CONSIDERED THE NET PAYMENT RECEIVED FROM INDIAN NAVY AS WELL AS THE DEDUCTED R ETAINED DEPOSITS TOWARDS LIQUIDATED DAMAGES OF THE SUB-CONTRACTORS, IN RELATION TO YARD NO.3008, AS AGGREGATE PAYMENT RECEIVED AGAINST THE ASSESSEES BILLS IN RESPECT OF YARD NO. 3008 AND BY THIS WAY THE RETAINED DEPOSIT GOT ADJUSTED. HENCE, THERE COULD NOT BE ANY SCOPE F OR SHOWING THE RECOVERY OF LIQUIDATED DAMAGES FROM THE SUB-CONTRACTORS IN RESPECT OF THE YARD NO.3008 AS ANY SEPARATE INCOME OF THE ASSESSEE. AS ALREADY STATED HEREINABOVE, SUCH R ECOVERY OF LIQUIDATED DAMAGES FROM THE SUB-CONTRACTORS WERE ACCOUNTED FOR AS PAYMENTS RECE IVED FROM INDIAN NAVY TOWARDS THE ASSESSEES BILL RELATING TO YARD NO.3008. ACCORDING LY, THE ASSESSING OFFICERS ASSUMED CONSIDERING RS 19.28 LAKH AS INCOME OF THE ASSESSEE . AS THE FACTS ARE CLEAR BUT SINCE THE CIT(A) HAS NOT ADJUDICATED THE ISSUE, WE FEEL THAT THE ISS UE NEEDS RECONSIDERATION AT THE LEVEL OF THE AO AFRESH. WE ORDER ACCORDINGLY, THIS GROUND OF THE AS SESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. AS REGARDS TO NEXT ISSUE IN THIS APPEAL OF ASSE SSEE RAISED BY WAY OF GROUND NO.5 IN RESPECT OF ADDITION OF CLOSING STOCK. AT THE OUTSE T, LD. COUNSEL FOR THE ASSESSEE CLEARLY STATED THAT HE HAS INSTRUCTION FROM THE ASSESSEE NOT TO PR ESS THIS ISSUE. HENCE, HE HAS ASKED FOR WITHDRAWAL OF THE SAME. AS THE ASSESSEES COUNSEL HAS NOT PRESSED THIS ISSUE AND LD.CITDR HAS NOT OBJECTED TO WITHDRAWAL OF THE ISSUE, THE SA ME IS DISMISSED AS WITHDRAWN. 11. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO ADDITION MADE TO CLOSING STOCK BE GIVEN CONSEQUENTIAL EFFECT TO THE OPENING STOCK OF SUBSEQUENT ASSESSMENT YEAR. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.6: 6. THAT WITHOUT PREJUDICE TO THE CONTENTION RAISED IN GROUND NO. 5 ABOVE, THE CIT(A) WAS WRONG IN NOT DIRECTING THE ASSESSING OFFICER TO INC REASE THE OPENING STOCK FOR THE SUBSEQUENT ASSESSMENT YEAR 2009-10 BY RS.1,18,69,00 0 BEING THE ADDITION MADE IN THE CLOSING STOCK FOR THE ASSESSMENT YEAR 2009-10, AS C ONFIRMED BY HIM. 7 ITA NO. 278/K/2012 M/SGARDEN REACH SHIPBUILDERS & ENGG. LTD., AY 2008 -09 12. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. FROM THE ABOVE VERY GROUND IT IS CLEAR THAT THE AO HAS INCREASED THE OPENING STOCK BY AN AMOUNT OF RS.1,18,69,000/- I.E. YEAR ENDING 31.3.20 08. CONSEQUENTLY, THE OPENING STOCK AS ON 1.4.2009 SHOULD HAVE BEEN INCREASED BY THIS AMOUNT BECAUSE THE AO HAS MADE ADDITION. THIS PLEA OF ASSESSEE IS QUITE REASONABLE AND WE DIRECT THE AO ACCORDINGLY. 13. IN THE RESULT, APPEAL OF ASSESSEE PARTLY ALLOWE D FOR STATISTICAL PURPOSES. 14. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST MARCH, 2014 ,- #./ 0 JD.(SR.P.S.) 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT GARDEN REACH SHIPBUILDERS & ENGINEERS L TD., 43/46, GARDEN REACH ROAD, KOLKATA-700 024. 2 *+() / RESPONDENT DCIT, CIRCLE-1, KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #