DCIT Vs Aarti International Limited (ITAT Chandigarh)
The appeal before ITAT Chandigarh involves the Revenue challenging the order of the CIT(A)-5, Ludhiana, dated 27/12/2024, for Assessment Year 2018-19 concerning Aarti International Limited. The Revenue raised multiple grounds contesting the deletion of various additions made by the Assessing Officer (AO) in the scrutiny assessment following a survey under section 133A on 14/03/2018. The AO had disallowed depreciation and additional depreciation of Rs. 12,15,02,719/- for machinery at the Machiwara unit, citing that the unit was under construction and assets were not put to use before 31/03/2018. He also added Rs. 2,47,75,785/- for unexplained excess stock of 1,373 bales of cotton found during the survey and Rs. 23,08,56,610/- for low gross profit (GP) ratio by rejecting the books of account under section 145(3), estimating GP based on the average of the last three years. The AO further disallowed expenses under section 14A amounting to Rs. 72,02,609/- related to investment of borrowed funds in tax-free income sources.
Before the CIT(A), the assessee provided detailed documentation proving that machinery at the Machiwara unit was in use during the relevant financial year. CIT(A) noted that production processes did not require continuous electricity, and electricity supplied by the board was sufficient for intermittent operation. Documentary evidence on electricity consumption supported the claim, establishing that plant and machinery were indeed put to use during the year, entitling the assessee to depreciation and additional depreciation. Accordingly, the addition of Rs. 12,15,02,719/- was deleted.
