Duroply Industries Limited (BSE: 516003), a leading name in the plywood and panel industry, has disclosed that the Office of the Assistant Commissioner of Income Tax, Circle 5(1), Kolkata, has passed an order under Section 147 of the Income Tax Act, 1961 for the Assessment Year (AY) 2019-20. The order, communicated to the company on 27th March 2025, has raised serious tax implications for Duroply, as it pertains to an amount treated as unexplained cash credit under Section 68 of the Act.

Nature of the Order and Alleged Violation

The Assistant Commissioner of Income Tax has treated an amount of Rs. 69,40,877 as unexplained cash credit under Section 68 of the Income Tax Act, 1961, for the Assessment Year 2019-20. As a result, the income has been taxed under Section 115BBE, which imposes a higher rate of tax on such unexplained credits.

Tax Liability and Penalty

Following the order, Duroply is now facing:

• Tax Liability: Rs. 54,13,884/-

• Interest Amount: Rs. 38,97,936/-
  The total tax and interest liability arising from this order amount to approximately Rs. 93.11 lakh, creating a significant financial burden on the company.

Issuance of Show Cause Notice for Penalty

Additionally, the company has received a Show Cause Notice dated 28th March 2025 under Section 274 read with Section 271AAC(1) of the Income Tax Act. This notice pertains to the imposition of penalties for the unexplained cash credit identified under Section 68.

Provisions Invoked by the Income Tax Authority

1. Section 147: Authorizes the reopening of assessment if income has escaped assessment.

2. Section 68: Deals with unexplained cash credits found in the books of accounts.

3. Section 115BBE: Imposes a higher tax rate on unexplained income and credits.

4. Section 271AAC(1): Allows the imposition of penalties on unexplained income.

5. Section 274: Provides for the issuance of a show cause notice before imposing a penalty.

Impact on Duroply’s Financials and Operations

The financial impact of this order on Duroply Industries is quantifiable, with a direct liability of approximately Rs. 93.11 lakh. While this may not cause immediate operational disruption, it could affect the company’s cash flow and financial planning in the short term.

Company’s Response: Plan to Appeal

In its disclosure to BSE Limited (BSE), Duroply Industries Limited has stated that the order is appealable and that the company will exercise its right to appeal before the appropriate authority. The company remains confident in its position and intends to take all necessary legal steps to safeguard the interests of its shareholders and stakeholders.

Potential Outcomes of the Appeal

If the appeal is successful:

• The order may be set aside or modified, reducing the tax and interest liability.

• Penalty proceedings under Section 271AAC(1) may be dropped.

If the appeal is unsuccessful:

• The company may be required to pay the full amount along with any additional penalties that may be imposed.

Corporate Governance and Compliance

Duroply Industries Limited has reiterated its commitment to maintaining strict compliance with applicable regulations and has assured stakeholders that all necessary steps will be taken to protect the company's financial interests.

Implications for Shareholders

The appeal process may take some time, and during this period, Duroply’s financials may reflect the contingent liability arising from this order. However, the company remains optimistic about a favorable resolution of the matter.

Regulatory Compliance

This disclosure has been made pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations), which mandates timely disclosure of material developments that could impact the company’s financial position.

Conclusion

The Income Tax Order passed against Duroply Industries Limited for AY 2019-20 highlights a significant challenge for the company. However, with its decision to appeal the order, Duroply is taking proactive measures to ensure compliance with applicable tax laws while protecting shareholder value. As the matter progresses, stakeholders will be kept informed about further developments.

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