Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ITAT) 9886

INCOME TAX APPELLATE TRIBUNAL (KOLKATA BENCH)
Rajesh Kumar, AM, Pradip Kumar Choubey, JM
Sanathan Textiles Ltd. – Appellant
Versus
DCIT, Circle 10(2) – Respondent
ITA No.2062/KOL/2025

Advocates:
For the Appellants/Petitioners: Anil Kochar
For the Respondents: S.B. Chakraborthy

Disallowance of tax deductions based on broad estimations and surmises is unsustainable when prime facie evidence of asset installation exists and is treated as valid for other depreciation claims. Clarificatory provisions regarding equipment installation timing apply retrospectively to honor the legislative intent of promoting capital investment.

Headnote:(A) Income Tax Act, 1961 - Section 32 - Section 32AC - Addition of assets - Claim for depreciation - Assessee claimed investment deduction on asset additions and additional depreciation - Authorities disallowed claims solely on estimations and lack of granular documentation, while ignoring availability of asset installation data used for normal depreciation - Held: Disallowance based on presumptions and surmises without verifying underlying genuineness of transactions is unsustainable.

(B) Interpretation of Statutes - Proviso to Section 32AC of Income Tax Act - Assets acquired prior to relevant cutoff but installed after such date qualify for deduction - Clarificatory and curative provisions are retrospective in operation.

(C) Appellate Procedure - Power of Judicial review - Order passed by lower appellate authority must not be cryptic or perverse - It must reflect proper appreciation of evidence and facts on record.

Facts of the case:
The taxpayer, a manufacturing entity, claimed additional depreciation and investment allowance under the relevant sections of the Act for the assessment year. The lower authorities disallowed these claims, partly due to alleged lack of evidence regarding formal installation dates for specific assets and partly on a generalized estimation basis regarding cost of goods sold. The taxpayer contended that all conditions were met and lower authorities failed to properly analyze the factual matrix and provided evidences.

Findings of Court:
The Tribunal found that the disallowance was based on mere estimations and general surmises. It was noted that normal depreciation had already been allowed by the assessing officer on the same assets, which contradicted the basis for denying additional depreciation. Regarding investment deduction, assets acquired prior to the cutoff date but installed during the eligible period satisfy the statutory requirements for the claim.

Issues: The main issues were whether disallowance based on general estimations is valid, and whether investment deduction is available for assets acquired before the specific cutoff date but installed within the eligible period.

Ratio Decidendi: A disallowance cannot be sustained if it relies on presumptions without examining primary evidence, especially when consistent with other findings like the grant of normal depreciation. Legislative provisions concerning asset installation criteria are clarificatory and must be given a purposive interpretation to include assets acquired before a cutoff but installed within the statutory framework.

Result: Appeal of the assessee allowed.

O R D E R

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 18.08.2025 for the AY 2014-15.

The assessee has raised following grounds of appeal:-

“1. For that the Orders passed by the lower authorities are arbitrary, erroneous, without proper reasons, invalid and bad-in-law, to the extent to which they are prejudicial to the interests of the appellant.

2. For that the Ld. CIT(A), NFAC erred in dismissing the appeal of the appellant without properly considering the factual matrix of the case of the appellant.

3. For that the Ld. CIT(A), NFAC ought to have properly considered all the facts related to the additions/disallowances made by A.O. and ought not to have summarily rejected the contentions raised by the appellant in respect of issues involved in appeal.

4. For that the Ld. CIT (A), NFAC erred in not providing reasonable opportunity to the appellant to explain the factual position of the case.

5. For that the Ld. CIT (A), NFAC erred in confirming the action of the A.O. in making disallowance of Employee's PF contribution of Rs.6,02,147/-relying upon the decision of the Supreme Court in Checkmate Services Pvt. Ltd. vs. CIT (2022).

6. For that the Ld. CIT (A), NFAC ought to have followed the judicial pronouncement in the case of CIT vs. Alom Extrusions Ltd. prevalent at the time of the assessment framed by the A.O.

7. For that the Ld. CIT (A), NFAC erred in confirming the action of the A.O. towards making disallowance of 1/12th of the expenditure incurred towards cost of material sold on alleged grounds.

S. For that the Ld. CIT (A), NFAC ought to have appreciated the fact that the Assessing Officer had not provided reasonable and sufficient opportunity to the appellant to make submission in respect of the queries raised along with the evidences.

9. For that the Ld. CIT (A), NFAC erred in holding that the disallowance lipfited to 1/12th of cost of material is reasonable solely on relying upon the observations made by the A.O.

10. For that the Ld. CIT (A), NFAC erred in holding that the disallowance of Rs.63,19.96,690/- in respect of the claim made by the appellant towards deduction u/s 32AC of the Income Tax Act, 1961 was justified.

11. For that the appellant being eligible towards claim made in respect of deduction u/s 32AC of the Act since all the conditions were fulfilled the action of the CIT (A) in rejecting the same was wrong and contrary to facts on record.

12. For that the appellant's claim towards additional depreciation of Rs.42.75 Crores denied by the A.O. and confirmed by the CIT (A) was wrong and contrary to facts on record.

13. For that the Ld. CIT (A), NFAC erred in not properly appreciating the facts as well as in not properly dwelling upon the details and evidences submitted towards the claim made in respect of additional depreciation.

14. For that the Order passed by the Ld. CIT (A), NFAC was a cryptic one and perverse in nature.

15. For that the Ld. CIT (A), NFAC ought to have called for the details and/or submissions from the appellant or in the alternative to have called for a Remand Report from the A.O. keeping in view the magnitude of the details and evidences which as per the A.O. and/or the CIT (A) were not submitted by the appellant.

16. For that the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above Grounds.”

The issue raised in ground nos. 1 to 4, are general in nature and need not be adjudicated.

The issue raised in ground nos. 5 and 6 is against the order of ld. CIT (A) confirming the addition of ₹6,02,147/- as made by the ld. AO on account of delayed payment of employees’ provident fund contribution.

After hearing the rival contentions and perusing the materials available on record, we find that the assessee has deposited employees EPF contribution on 22.01.2014, whereas actual date of payment was 21.0

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2026 Supreme(Online)(ITAT) 9886

INCOME TAX APPELLATE TRIBUNAL (KOLKATA BENCH)Rajesh Kumar, AM, Pradip Kumar Choubey, JMSanathan Textiles Ltd. – AppellantVersusDCIT, Circle 10(2) – RespondentITA No.2062/KOL/2025

INCOME TAX APPELLATE TRIBUNAL (KOLKATA BENCH)
Rajesh Kumar, AM, Pradip Kumar Choubey, JM
Sanathan Textiles Ltd. – Appellant
Versus
DCIT, Circle 10(2) – Respondent
ITA No.2062/KOL/2025