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08-04-2019, NATIONAL PROJECTS CONSTRUCTION, Section 139, HIGH COURT OF DELHI

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1 week 1 day ago #9145 by amit
Section - 139
Order Date - 08-04-2019
Favouring - Revenue
Court - HIGH COURT OF DELHI
Appellant - NATIONAL PROJECTS CONSTRUCTION CORPORATION LIMITED (NPCC)
Respondent - DCIT
Justice - S. RAVINDRA BHAT & PRATEEK JALAN
Citation - 419Taxpundit180
Appeal No. - W.P.(C) 592/2019 & C.M. APPL.2622/2019
Asstt. Year - 2016-17

Order

PER : S. RAVINDRA BHAT

1. In the present writ petition, the validity of an order under Section 142(2A) of the Income Tax Act (hereafter referred to as “Act”) issued by the Assessing Officer (hereafter referred to as “AO”) on behalf of the respondent (hereafter referred to as “Revenue”) has been challenged. The petitioner, a Public Sector Undertaking (PSU) and hereafter called “NPCC”, urges various grounds, including non-application of mind and unfairness by the AO.

2. The NPCC filed its return for Assessment Year (AY) 2016-17 on 16.10.2016 declaring a total income of `18,02,20,380/-. Later, it revised its return on 29.03.2018 to reflect the correct TDS credit available based upon the AS-22 receipts. The return was selected for scrutiny and the notice wasissued on 07.09.2018 by the Revenue. The NPCC was asked to produce the documents it relied upon in respect of its returns. It submitted – on 20.09.2018 computation of income and audit financials in respect of return of income. Another notice calling for information was issued by the Revenue on 29.09.2018. The NPCC uploaded the information and documents, in the Revenue’s web-portal – in response to this notice (of 29.09.2018) on 21.11.2018. A week later, i.e. on 28.11.2018, the Revenue called for particulars with respect to the following four items:

“a. Furnish in the prescribed manner details of Party wise work done along with PAN details and ledger of the parties.

b. Provide details of other expenses along with bills and vouchers of the expenses and its applicability towards the business to the tune of Rs.100.75 crore.

c. Provide partywise details of the long term advances shown at note no. 10 and 11 of the balance sheet.

d. And, provide justification and details of huge increase in cash and cash equivalent along with evidences.”

3. The NPCC contends that when it was in the process of collecting relevant information from the concerned zonal officer, another notice was issued on 04.12.2018 electronically by the Revenue outlining the ten key points and calling for information which included evidence regarding adverse comments given by the auditor; party-wise details of the liabilities showing in the balance sheet under the head trade-payables, security deposits, advances from project authorities, interest accrued and due on advances from project authorities along with respective ledger accounts of parties and their confirmation; copy of sales tax/VAT returns for the year with details of the sales tax payment; project-wise details of entire works undertaken during the year with separate profit and loss accounts of each projects; write-ups of the modus operandi of business and comments on method of accounting of receipts and expenses. The petitioner submits that it could furnish the information on 11.12.2018. According to NPCC, the queries were satisfactorily replied.

4. On 18.12.2018, a Show Cause Notice (SCN) was issued by the Revenue proposing a special audit, under Section 142 (2A), stating as follows:

“a. The NPCCC had not replied to the adverse comments of the auditors satisfactorily and thus the issues and apprehensions raised by the auditors remained unsatisfied.

b. Submissions of ledger confirmation of parties with their copy of ITR, audit report, B/S, P/L pertaining to liabilities shown in the balance sheet under the head trade-payable, security deposit advances from project authorities along with respective ledger account of parties and their confirmation remained unattended/un-addressed.

c. The NPCC had not provided project wise details of entire work undertaken during the year.

d. That despite of huge turnover in the last five years, the Net profit figure is going down.

e. Further it was also alleged that details of the liabilities as on 31.03.2016 were also not produced.”

5. The notice also stated as follows:

“In view of the abovementioned facts it is clear that the assessee has not disclosed its true nature of transactions with various zonal offices who have subcontracted the construction also pointed out by the auditor of the assessee. It is important to mentioned here that the documentary evidences relating the
income and expenditure are not produced by the assessee nor any bills or voucher were produced by it. Therefore, in view of the discrepancies pointed out by the statutory auditor of the assessee company itself in his audit report viz-a-viz noticed from the part details submitted by your AR during the assessment proceedings during the year under consideration, and in view of complexities involved in your books of accounts, nature of transactions and complexities involved in the business affairs, you are required to show cause as why your accounts should not be get audited by an accountant nominated by the Department as per provisions of section 142(2A) of the Income Tax Act, 1961 and why such accountant not be asked to furnish the report such audit in the prescribed for duly signed and verified by him, in the interest of revenue. Your reply in the matter must be reached to the undersigned on or before 21.02.2018 failing which, it shall be construed that you have no objection to the proposed audit of your books of accounts by an accountant so nominated by the Department as per the provisions of the section 142(2A) of the Income Tax Act, 1961.”

6. A reply to the SCN was given by the NPCC on 21.12.2018. The reply stated that adverse comments of the auditor were general and it did not impact the profitability of the assessee and moreover it relied upon the report of the CAG on financial statements and audit report of the auditors for AY 2015-16 expressing satisfaction. With respect to the adverse comments, specifically the assessee relied upon a chart. With respect to the query regarding the head trade-payables, security deposits and advances from

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