Disallowance Invalid as Negative Capital Stemmed from Non-Cash Adjustment

R.K. Industries Unit II LLP Vs ACIT (ITAT Ahmedabad)

AO Looked Only at Debits, Ignored Credits—Tribunal Restores Commercial Reality;  Partners’ Drawings ≠ Borrowed Fund Diversion When Own Funds Exceed Needs; Non-Cash Loss Cannot Shrink Capital: ITAT Deletes Rs.2.88 Cr 36(1)(iii) Disallowance

Assessee, engaged in ship recycling, declared income of Rs.7.69 crore. AO completed assessment u/s 143(3) making a major disallowance of Rs.2,88,13,592 u/s 36(1)(iii) alleging diversion of overdraft funds for partners’ personal

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