2021 (5) TMI 723 - AT - Income Tax

Disallowance u/s. 35(1)(ii) - HELD THAT - This issue covered in favour of the assessee against revenue by the decision of SANTOSH SURESH KUMAR AGARWAL 2018 (9) TMI 1827 - ITAT KOLKATA wherein the Tribunal followed the decisions of the Coordinate Bench of this Tribunal in the case of Rajda Polymers 2017 (11) TMI 1631 - ITAT KOLKATA allowed the claim of the assessee. Disallowance of loss - assessee purchased and sold jute -HELD THAT - The relevant bills and vouchers are filed before the Assessing Officer by the assessee to prove the genuineness of the transactions. There was no investigation or verification above by the Assessing Officer. No evidence was gathered to demonstrate that the claim of the assessee was wrong. The disallowance was made merely on conjectures and surmises. The Ld. CIT(A) has also not considered the evidences in the record and in one line, rejected the contention of the assessee. This is not in accordance with law. Thus we delete this disallowance. Thus we allow these two grounds of the assessee. Addition made on account of deemed interest income - HELD THAT - We find that notional income cannot be brought tax under the scheme of the Income Tax Act as held by the Hon'ble Gauhati High Court in the case of Highways Construction Co. Pvt. Ltd. 1992 (11) TMI 86 - GAUHATI HIGH COURT - Respectfully following the proposition of law laid down in those cases, we delete this addition of notional income and allow this ground of the assessee.

Summary

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 ?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.