Tribunal overturns tax authorities' decisions, rules in favor of assessee on deduction and income issues.

The Tribunal allowed the appeal, overturning the disallowances and additions made by the authorities regarding deduction under section 35(1)(ii), disallowance of loss, and addition of deemed interest income. The Tribunal found the decisions against the assessee to be unjustified and not supported by concrete evidence, thereby ruling in favor of the assessee.

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Issues:
1. Disallowance of deduction under section 35(1)(ii)
2. Disallowance of loss
3. Addition of deemed interest income

Analysis:

1. Disallowance of deduction under section 35(1)(ii):
The appeal challenged the disallowance of a deduction under section 35(1)(ii) by the Learned Commissioner of Income Tax (Appeals) (CIT(A)). The appellant contended that the disallowance was unjustified and erred. The Tribunal referred to a previous decision in the case of Santosh Suresh Kumar Agarwal where the claim of the assessee was allowed. Consistent with this precedent, the Tribunal allowed the grounds of the assessee, thereby overturning the disallowance.

2. Disallowance of loss:
The appeal also contested the disallowance of a loss amounting to Rs. 2,11,986. The Tribunal noted that the Assessing Officer did not conduct any investigation or verification regarding the genuineness of the transactions related to the jute trade. The disallowance was deemed to be based on conjectures and surmises without concrete evidence against the assessee. The Tribunal found the rejection of the assessee's contentions without proper consideration of evidence to be against the law. Consequently, the Tribunal deleted this disallowance and allowed the grounds raised by the assessee.

3. Addition of deemed interest income:
The final issue pertained to the addition of deemed interest income. The Tribunal held that notional income cannot be taxed under the Income Tax Act, citing a precedent from the Hon'ble Gauhati High Court. Relying on this legal principle, the Tribunal decided to delete the addition of notional income. As a result, the Tribunal allowed this ground raised by the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the disallowances and additions made by the authorities. The judgment was pronounced on 21st April 2021.

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