DCIT, CIRCLE-1(1)(1), AHMEDABAD, AHMEDABAD V. CLARTECH ENGINEERS PVT LTD, AHMEDABAD

ITA 1841/AHD/2024

AI Insights

The case involves the Revenue's appeal against the order of the CIT(A), which had partly allowed the appeal of Clartech Engineers Pvt. Ltd., a company engaged in manufacturing machinery and providing installation and maintenance services. The primary issues in the appeal were the deletion of the addition of alleged bogus creditors amounting to Rs.1,82,75,037 and the disallowance of depreciation on a CNC Lathe of Rs.1,28,975. The Assessing Officer had initially made these additions and disallowances, which were contested by the assessee and partly overturned by the CIT(A). The Revenue challenged the CIT(A)'s decision, leading to this appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472261 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: S.N. DIVATIA; SAMAIR VORA
• Keywords: Set aside; Additional evidence; Depreciation; Bogus
• Section: 143(3); 133(6)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “सी“, अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “ C ” BENCH, AHMEDABAD \u0016ी िस\u0017ाथ\u0019 नौिटयाल, \u0011ाियक सद\u001d एवं \u0016ी मकरंद वसंत महादेवकर, लेखा सद\u001d क े सम$। ] ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1841/Ahd/2024 िनधा \u000fरण वष\u000f /Assessment Year : 2017-18 DCIT Circle-1(1)(1) Ahmedabad – 380 015 बनाम/ v/s. Clartech Engineers Pvt.Ltd. Plot No.413, V. Road, Phase-II, GIDC Industrial Estate, Vatva Ahmedabad – 382 445 \u0013थायी लेखा सं./PAN: AADCC 2311 A (अपीलाथ%/ Appellant) (&' यथ%/ Respondent) Assessee by : Shri S.N. Divatia, AR & Shri Samair Vora, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 06/02/2025 घोषणा की तारीख /Date of Pronouncement: 07/02/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal has been preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], dated 26.08.2024, arising from the assessment order passed under section 143(3) of the Income-tax Act, 1961[hereinafter referred to as “the Act”], by the Assistant Commissioner of Income-tax, Circle 1(1)(2), Ahmedabad [hereinafter referred to as “AO”], for the Assessment Year (AY) 2017-18. ITA No.1841/Ahd/2024 DCIT vs. Clartech Engineers Pvt.Ltd. Asst. Year : 2017-18 2 Facts of the case: 2. The assessee is engaged in the business of manufacturing machinery and providing installation and maintenance services. The assessee originally filed its return of income on 02.11.2017, declaring a total income of Rs.54,26,910/-, which was later revised to Rs.46,67,470/- on 09.02.2018. The case was selected for complete scrutiny under CASS, and the AO assessed the total income at Rs.3,57,20,270/-, making various additions, including the disallowance of depreciation on CNC Lathe and the addition of alleged bogus creditors. 3. The assessee preferred an appeal before CIT(A), who partly allowed the appeal of the assessee by restricting the depreciation on CNC Lathe Rs.1,28,975/- and deleting the addition of Rs.1,82,75,037/- on account of bogus creditors. 4. Aggrieved by the order of CIT(A), the Revenue is in appeal before us with following grounds of appeal: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of depreciation on \"CNC Lathe\" of Rs.1,28,975/-, without appreciating the facts of the case? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of bogus creditors of Rs.1, 82,75,037/, when the assessee has not produced confirmation from the parties or any other evidence and thus has failed to prove the genuineness of the creditors? 3. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 4. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored. ITA No.1841/Ahd/2024 DCIT vs. Clartech Engineers Pvt.Ltd. Asst. Year : 2017-18 3 5. During the course of the hearing before us, the Departmental Representative (DR) submitted that the assessee had furnished two separate lists of sundry creditors—one for \"Labour Purchase\" and the other for \"Material Purchase and Labour Purchase\"—and the AO observed that certain creditors appeared in both lists. To substantiate this, the DR referred to the ledger accounts of two specific parties, namely Megamech Engineers and Shree Khodal Engineering, to demonstrate the alleged discrepancy. However, upon a thorough examination of these ledger accounts during hearing, no deficiencies were found, indicating that the AO’s observations were not supported by substantive evidence. Regarding the issue of depreciation on the CNC Lathe machine, the DR merely reiterated the AO's findings without bringing any fresh arguments or additional evidence to support the disallowance. 6. The Authorized Representative (AR) countered these arguments, particularly emphasizing that out of the total addition of Rs.1,82,75,037/- made by the AO under the head of \"Bogus Creditors,\" a substantial amount of Rs.1,67,15,471/- pertained to a single party, Vishwakarma Engineers. The AR pointed out that the AO had already issued a notice under Section 133(6) of the Act to Vishwakarma Engineers and based on the ledger account of the assessee in the books of Vishwakarma Engineers, had made certain additions relating to discrepancies observed. The AR argued that once the AO had identified and dealt with specific discrepancies in the ledger, treating the entire balance as bogus was both illogical and legally untenable. Furthermore, the AR highlighted that the AO, in the remand report, had not commented on the entire amount but had only referred to certain differences, which were already addressed. With respect to the disallowance of ITA No.1841/Ahd/2024 DCIT vs. Clartech Engineers Pvt.Ltd. Asst. Year : 2017-18 4 depreciation, the AR relied on the findings of the CIT(A), who had allowed 50% depreciation after considering that the CNC Lathe machine had been put to use after September 2016. 7. We have heard the rival contentions and perused the material available on record. The appeal filed by the Revenue challenges the order of the CIT(A), for the assessment year 2017-18, wherein the CIT(A) deleted the additions made by the AO under the head bogus creditors of Rs.1,82,75,037/- and disallowance of depreciation on CNC Lathe of Rs.1,28,975/-. 7.1. With respect to the addition of Rs.1,82,75,037/- on account of bogus creditors, the Revenue contended that the assessee had furnished two separate lists of sundry creditors, one for Labour Purchase and the other for Material Purchase and Labour Purchase, and certain creditors appeared in both lists. The Departmental Representative (DR) referred to the ledger accounts of Megamech Engineers and Shree Khodal Engineering, but upon verification, no deficiencies were found. It was further observed that out of the total addition, Rs.1,67,15,471/- pertained to Vishwakarma Engineers, for which the AO had issued a notice under Section 133(6) and made certain additions based on discrepancies observed in the ledger account. The Authorized Representative (AR) argued that since the AO had already identified and adjusted for these discrepancies, treating the entire amount as bogus was neither logical nor legally sustainable. Moreover, the AO’s remand report did not discuss the entire amount, indicating that the remaining portion was implicitly accepted. The CIT(A), after considering these aspects, concluded that the addition was unjustified and deleted the same. ITA No.1841/Ahd/2024 DCIT vs. Clartech Engineers Pvt.Ltd. Asst. Year : 2017-18 5 7.2. We find that the Revenue has not brought any contrary material on record to rebut the CIT(A)’s findings. The discrepancies identified by the AO were already addressed, and the remand report does not dispute the genuineness of the creditors beyond the limited differences acknowledged. Thus, we see no infirmity in the CIT(A)’s decision to delete the addition. 7.3. Regarding the disallowance of depreciation on CNC Lathe of Rs.1,28,975/-, the Revenue contended that the assessee failed to prove that the machine was put to use in the relevant financial year. The AO disallowed depreciation on the grounds that the machine was found defective and replaced in the subsequent year, and therefore, was not used during A.Y. 2017-18. The CIT(A), however, after examining the records and remand report, found that the machine was installed and used for initial plain turning jobs before defects were identified. The replacement at no additional cost further supports the claim that the machine was put to use. Since the machine was put to use after September 2016, the CIT(A) restricted depreciation to 50%, which is in line with the provisions of the Act. 7.4. The Revenue has failed to furnish any fresh evidence contradicting these findings or to demonstrate any error in the approach adopted by the CIT(A). Accordingly, we uphold the CIT(A)’s order on this issue as well. 7.5. In view of the above findings, we find no infirmity in the order of the CIT(A), which is well-reasoned and based on proper appreciation of facts and law. The Revenue has not provided any substantive evidence to warrant interference with the CIT(A)’s findings. ITA No.1841/Ahd/2024 DCIT vs. Clartech Engineers Pvt.Ltd. Asst. Year : 2017-18 6 8. Accordingly, the appeal of the Revenue is dismissed. Order pronounced in the Open Court on 7th February, 2025 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 07/02/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)- 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत \"ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 6.2.2025 2. Date on which the typed draft is placed before the Dictating Member. : 6.2.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 7.2.25 7. Date on which the file goes to the Bench Clerk. : 7.2.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "