Factual verification of bonus deductions and duplicated interest income is required before tax disallowances or additions can stand.

Employee bonus disallowance under section 36(1)(ii) requires examination of the tax auditor's clarification and whether the payment was otherwise payable as profits or dividend; where the audit reporting is claimed to be erroneous and payment is claimed within the section 43B framework, the matter requires fresh factual consideration. The issue is restored to the Assessing Officer. Interest income alleged to have been reported twice and previously assessed in the transferor entity's hands must be verified from departmental records before sustaining an addition. That issue is also restored for re-examination. The core principle is that verifiable material supporting a tax claim cannot be conclusively rejected without inquiry.

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Issues: (i) Whether the disallowance of employee bonus under section 36(1)(ii) could be sustained without examining the tax auditor's clarification regarding an alleged reporting error. (ii) Whether the addition of interest income, claimed to have been disclosed twice and previously assessed in the hands of another entity, could be sustained without verification.

Issue (i): Whether the disallowance of employee bonus under section 36(1)(ii) could be sustained without examining the tax auditor's clarification regarding an alleged reporting error.

Analysis: Section 36(1)(ii) of the Income-tax Act, 1961 restricts deduction of bonus or commission where the amount would otherwise have been payable as profits or dividend. The assessee relied on a tax auditor's clarification that the relevant reporting in the audit report was a typographical mistake and that the bonus was actually paid before the due date under section 139(1), attracting the deduction framework under section 43B. The rejection of the clarification as a cover-up, without enquiry into whether the bonus was in fact payable as profits or dividend, was not justified.

Conclusion: The bonus-disallowance issue is restored to the Assessing Officer for fresh consideration.

Issue (ii): Whether the addition of interest income, claimed to have been disclosed twice and previously assessed in the hands of another entity, could be sustained without verification.

Analysis: The assessee claimed that interest income earned before the transfer of the microfinance business had already been disclosed by the transferor entity and was inadvertently reported again in the assessee's return. The relevant facts were capable of verification from the Department's records, but the claim was rejected without such verification. The addition therefore required examination to determine whether the income had been assessed twice.

Conclusion: The interest-income addition issue is restored to the Assessing Officer for re-examination and verification.

Final Conclusion: Both substantive issues require factual verification by the Assessing Officer, who must pass a fresh order in accordance with law after due compliance by the assessee.

Ratio Decidendi: A tax claim supported by material requiring factual verification cannot be rejected conclusively without examining that material; the matter must be remanded for fresh consideration where the relevant facts are verifiable from the record.

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