TMI Blog2016 (4) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of assessee Disallowance of income tax payable - A.O. was of the opinion that income tax is not a allowable deduction under sec. 40(a)(ii) - Held that:- Admittedly, the assessee has estimated the income from construction project on estimation basis. To arrive at the income from the project, the assessee has prepared a P&L account and as per the financial statement prepared by the assessee, the assessee has claimed income tax payable for ₹ 11 lakhs as expenditure in the P&L account. Though profit is estimated, the assessee has claimed income tax payable of ₹ 11 lakhs, as expenditure in the profit & loss account, which cannot be allowed as a deduction u/s 40(a)(ii) of the Act. Therefore, we are of the opinion that the A.O. has rightly made additions of ₹ 11 lakhs towards income tax payable. The CIT(A) has rightly confirmed the additions made by the A.O. We do not see any error or infirmity in the order passed by the CIT(A). - Decided against assessee - ITA No. 328/Vizag/2012 - - - Dated:- 18-3-2016 - V. Durga Rao, JM And G. Manjunatha, AM For the Appellant : Shri C Subrahmanyam, AR For the Respondent : Shri G Guruswamy, DR ORDER Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. In response to show cause notice, the assessee submitted that the additional income of ₹ 18,28,000/- offered towards other inconsistencies took place in the past was disclosed in the name of Sri T. Ramakrishna (HUF) and accordingly filed revised return. The assessee further submitted that during the course of search proceedings, the group as a whole has admitted undisclosed income of ₹ 1,30,00,000/- and accordingly filed revised return as per the letter filed, subsequent to the date of search. The assessing officer after considering the explanations furnished by the assessee made additions of ₹ 18,28,000/- to the returned income. While doing so, the A.O. held that during the course of search, the assessee has admitted additional income in the hands of the company for the inconsistencies took place in the past for the business transactions. However, the assessee has come out with a new explanation and stated that the income has been offered in the name of HUF. On perusal of revised return filed by Shri T. Ramakrishna (HUF), it was noticed that the additional income offered in the name of HUF consists of income from long term capital gain and income from othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case and provisions of law. 2. The issue of notice u/s 153C of the IT Act and completion of the assessment thereto is legally not tenable in the absence of any incriminating material for drawing adverse inference against the assessee company. 3. The learned Commissioner of Income Tax(A) erred in confirming the actions of the AO with regards to addition of ₹ 18.28 lakhs which amount, factually and legally, has not been received or accrued during the asst year under consideration. 4. The separate addition made by the assessing officer of ₹ 11 lakhs and confirmed by learned Commissioner of Income Tax(A) is unwarranted especially when the income was estimated and such estimation was accepted by the lower authorities. 5. For these and other reasons that are to be urged at the time of hearing of the case, the appellant prays that the additions made by the assessing officer and sustained by the learned Commissioner of Income Tax(A) are against the facts of the case and provisions of law and the same needs to be deleted in the interest of justice. 6. From the ground nos.1 2, the assessee has challenged the validity of the assessment proceeding u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that a search was conducted u/s 132 of the Act in the group cases of the assessee company. During the course of search, the Managing Director of the company Shri T. Ramakrishna has deposed a statement u/s 132(4) of the Act and admitted additional income of ₹ 1,30,00,000/- and accordingly, filed letter dated 9.5.208. As per the said letter, the assessee has admitted undisclosed income of ₹ 1,30,00,000/- and agreed to disclose the income for the assessment year 2005-06 to 2007-08. As per the disclosure made during the course of search, the assessee admitted an additional income of ₹ 1,03,00,000/- for the assessment year 2008-09. During the course of assessment proceedings, the A.O. noticed that the assessee has admitted undisclosed income of ₹ 18,28,000/-, however, no such income was admitted in the revised return filed in response to notice u/s 153C of the Act, therefore, made additions to the total income. The A.O. was of the opinion that the undisclosed income admitted during the course of search, was on account of discrepancies in the books of accounts of the company and also it pertains to the business transactions. But, assessee claimed to have admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of A.O. that the addition is supported by any seized materials. Though the CIT(A) stated that the assessee has disclosed income in respect of only 10 flats, out of 13 flats constructed in the project, the assessee stated that the income pertains to remaining 3 flats was offered in the subsequent year, as the possession of those 3 flats were handed over in next year. It was the contention of the assessee that there was no seized material in the possession of the assessing officer to suggest that there was undisclosed income. As stated by the AO, the addition is solely based on statement recorded u/s 132(4) of the Act. The assessee relied upon the circular issued by the CBDT vide circular no.286/98/13 dated 18.12.2014. The CBDT vide above circular instructed its all officers that no undisclosed income should be taken under coercion or undue influence. Any admission of undisclosed income should be based on evidences gathered during the course of search or survey. 10. In the present case on hand, on perusal of the facts, we find that the additional income admitted by the assessee during the course of search is not supported by any material evidences gathered during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that income tax is not a allowable deduction under sec. 40(a)(ii) of the Act. The contention of the assessee is that when income is estimated, separate addition cannot be made for any item of expenditure debited in the profit loss account. Admittedly, the assessee has estimated the income from construction project on estimation basis. To arrive at the income from the project, the assessee has prepared a P L account and as per the financial statement prepared by the assessee, the assessee has claimed income tax payable for ₹ 11 lakhs as expenditure in the P L account. Though profit is estimated, the assessee has claimed income tax payable of ₹ 11 lakhs, as expenditure in the profit loss account, which cannot be allowed as a deduction u/s 40(a)(ii) of the Act. Therefore, we are of the opinion that the A.O. has rightly made additions of ₹ 11 lakhs towards income tax payable. The CIT(A) has rightly confirmed the additions made by the A.O. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to uphold the order of the CIT(A) and reject the ground raised by the assessee. 13. In the result, the appeal filed by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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