M/s Live well Constructions Pvt.,Ltd., Visakhapatnam V. THE DCIT, Central Circle, Vijayawada

ITA 328/VIZ/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2020 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G GURUSWAMY
• Assessee Lawyers: C SUBRAHMANYAMAR
• Keywords: Search and seizure; Document seized; Revised return; Documents seized
• Section: 143(3); 142(1); 153A; 132

Judgement Text

ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.328/VIZAG/2012 ( / ASSESSMENT YEAR: 2008-09) LIVEWELL CONSTRUCTIONS PVT. LTD. VIJAYAWADA VS. DCIT , CENTRAL CIRCLE VIJAYAWADA [PAN: AABCL 0257A ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM,AR / RESPONDENT BY : SHRI G. GURUSWAMY, DR / DATE OF HEARING : 23.02.2 016 / DATE OF PRONOUNCEMENT : 18.03.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-1, HYDERABAD DATED 26.6.2012 AND IT PERTAINS TO THE ASSESSMENT YEAR 2008-09. ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY, WHICH IS ENGAGED IN THE BUSINESS O F CONSTRUCTION OF RESIDENTIAL APARTMENTS, HAS FILED ITS RETURN OF INC OME FOR THE ASSESSMENT YEAR 2008-09 ON 29.9.2008 DECLARING A TOTAL INCOME OF RS.26,26,790/-. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOM E TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) WAS CONDUCTED IN THE GROUP CASES OF LIVEWELL GROUP, VIJAYAWADA ON 23.4.2009. DURING TH E COURSE OF SEARCH, A SEIZED DOCUMENT REVEALS THAT THE ASSESSEE HAS SUP PRESSED SALES TURNOVER. WHEN THESE SEIZED DOCUMENTS WERE CONFRONTE D TO THE ASSESSEE, THE MANAGING DIRECTOR OF THE COMPANY ADMI TTED UNDISCLOSED INCOME OF RS.1,30,00,000/-. ACCORDINGLY, FILED A LE TTER DATED 9.5.2008 AND AGREED TO DISCLOSE UNDISCLOSED INCOME OF RS.65 LAKHS IN THE NAME OF M/S. LIVEWELL ESTATES PVT. LTD. AND A SUM OF RS.19, 20,000/- IN THE NAME OF M/S. LIVEWELL CONSTRUCTIONS PVT. LTD. AND A FURT HER SUM OF RS.18,28,000/- WAS OFFERED TO TAX ON ACCOUNT OF OTH ER INCONSISTENCIES TOOK PLACE IN THE PAST, WHICH HAS HAD THE CASCADING EFFECT IN THE CURRENT FINANCIAL YEAR. 3. SUBSEQUENTLY, THE CASE HAS BEEN NOTIFIED TO CENT RAL CIRCLE AND ACCORDINGLY, NOTICE U/S 153C R.W.S. 153A OF THE ACT DATED 25.2.2009 WAS ISSUED TO THE ASSESSEE CALLING FOR THE RETURN OF IN COME FOR THE ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 3 ASSESSMENT YEAR 2008-09. IN RESPONSE TO NOTICE U/S 153C OF THE ACT, THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 27.7 .2009 DECLARING TOTAL INCOME OF RS.26,26,790/-. THE CASE HAS BEEN SELECTE D FOR SCRUTINY AND ACCORDINGLY, NOTICES U/S 143(2) AND 142(1) OF THE A CT ALONG WITH QUESTIONNAIRE WERE ISSUED ON 29.1.2010. IN RESPONS E TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED THE INFORMATION CALLED FOR. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS ADMITTED UNDISCLOSED INCOME OF RS.18,28,000/- TOWARDS OTHER INCONSISTENCIES TOOK PLACE IN THE PAST, HOWEVER NO SUCH INCOME HAS BEEN OFFERED IN THE REVISED RETURN FILED PURSUANT TO NOTICE U/S 153C OF THE ACT. THEREFORE, ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE ADDED TO THE RETURNED INCOME. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE ADDITIONAL INCOME O F RS.18,28,000/- OFFERED TOWARDS OTHER INCONSISTENCIES TOOK PLACE IN THE PAST WAS DISCLOSED IN THE NAME OF SRI T. RAMAKRISHNA (HUF) A ND ACCORDINGLY FILED REVISED RETURN. THE ASSESSEE FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH PROCEEDINGS, THE GROUP AS A WHOLE HAS ADMITT ED UNDISCLOSED INCOME OF RS.1,30,00,000/- AND ACCORDINGLY FILED RE VISED RETURN AS PER THE LETTER FILED, SUBSEQUENT TO THE DATE OF SEARCH. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATIONS FURNISHED BY THE ASSESSEE MADE ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 4 ADDITIONS OF RS.18,28,000/- TO THE RETURNED INCOME. WHILE DOING SO, THE A.O. HELD THAT DURING THE COURSE OF SEARCH, THE ASS ESSEE HAS ADMITTED ADDITIONAL INCOME IN THE HANDS OF THE COMPANY FOR T HE INCONSISTENCIES TOOK PLACE IN THE PAST FOR THE BUSINESS TRANSACTION S. HOWEVER, THE ASSESSEE HAS COME OUT WITH A NEW EXPLANATION AND ST ATED THAT THE INCOME HAS BEEN OFFERED IN THE NAME OF HUF. ON PERU SAL OF REVISED RETURN FILED BY SHRI T. RAMAKRISHNA (HUF), IT WAS N OTICED THAT THE ADDITIONAL INCOME OFFERED IN THE NAME OF HUF CONSIS TS OF INCOME FROM LONG TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCE S, WHEREAS, THE ASSESSEE HAS ADMITTED ADDITIONAL INCOME UNDER THE H EAD INCOME FROM BUSINESS. THEREFORE, THE EXPLANATION OFFERED BY T HE ASSESSEE CANNOT BE ACCEPTED AND ACCORDINGLY MADE ADDITIONS OF RS.18,28 ,000/-. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FRO M THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE, THE A.O. NOTICE D THAT THE ASSESSEE HAS CLAIMED RS.11 LAKHS EXPENDITURE TOWARDS INCOME TAX PAYABLE. THEREFORE, ASKED TO EXPLAIN THE NATURE OF EXPENDITU RE DEBITED IN THE P&L ACCOUNT AND ALSO WHY THE SAME SHOULD NOT BE DISALLO WED U/S 40(A)(II) OF THE ACT. IN REPLY TO THE SHOW CAUSE NOTICE, THE ASS ESSEE HAS SUBMITTED THAT THE AMOUNT REPRESENTS INCOME TAX PAYABLE ON AD DITIONAL INCOME ADMITTED FOR VARIOUS ASSESSMENT YEARS. THE ASSESSEE FURTHER SUBMITTED ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 5 THAT DURING THE COURSE OF SEARCH, IT HAS ADMITTED I NCOME FROM THE PROJECT ON ESTIMATION BASIS. THEREFORE, ONCE THE P ROFIT IS ESTIMATED, NO SEPARATE ADDITIONS CAN BE MADE TOWARDS ANY ITEM DEB ITED IN THE P&L ACCOUNT. THE A.O. AFTER CONSIDERING THE EXPLANATION S SUBMITTED BY THE ASSESSEE, DISALLOWED THE INCOME TAX PAYABLE OF RS.1 1 LAKHS AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. WHILE DOING SO , THE A.O. HELD THAT INCOME TAX PAID OR PAYABLE IS NOT AN ALLOWABLE DEDU CTION U/S 40(A)(II) OF THE ACT. THOUGH, ASSESSEE ADMITTED THE INCOME ON E STIMATION BASIS, THE PROFIT & LOSS ACCOUNT FILED BY THE ASSESSEE SHOWING THE COMPLETE FINANCIAL RESULTS CANNOT BE IGNORED. IN THE SAID PR OFIT & LOSS ACCOUNT, THE ASSESSEE HAS CLEARLY STATED EXPENDITURE INCURRED FO R THE YEAR UNDER CONSIDERATION. ON PERUSAL OF THE P&L ACCOUNT, IT WA S NOTICED THAT THE ASSESSEE HAS CLAIMED RS.11 LAKHS TOWARDS INCOME TAX PAYABLE FOR THE EARLIER ASSESSMENT YEARS. SINCE, THE INCOME TAX IS NOT A ALLOWABLE DEDUCTION UNDER THE ACT, THE SAME IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO. THE CIT(A) AFTER CO NSIDERING THE EXPLANATIONS FURNISHED BY THE ASSESSEE CONFIRMED TH E ADDITIONS MADE BY ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 6 THE A.O. AND DISMISSED THE APPEAL FILED BY THE ASSE SSEE. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS: 1. THE ORDERS PASSED U/S 143(3) R W 153C OF THE IT ACT ARE CONTRARY TO THE FACTS OF THE CASE AND PROVISIONS OF LAW. 2. THE ISSUE OF NOTICE U/S 153C OF THE IT ACT AND COMP LETION OF THE ASSESSMENT THERETO IS LEGALLY NOT TENABLE IN THE AB SENCE OF ANY INCRIMINATING MATERIAL FOR DRAWING ADVERSE INFERENC E AGAINST THE ASSESSEE COMPANY. 3. THE LEARNED COMMISSIONER OF INCOME TAX(A) ERRED IN C ONFIRMING THE ACTIONS OF THE AO WITH REGARDS TO ADDITION OF RS 18 .28 LAKHS WHICH AMOUNT, FACTUALLY AND LEGALLY, HAS NOT BEEN RECEIVE D OR ACCRUED DURING THE ASST YEAR UNDER CONSIDERATION. 4. THE SEPARATE ADDITION MADE BY THE ASSESSING OFFICER OF RS 11 LAKHS AND CONFIRMED BY LEARNED COMMISSIONER OF INCOME TAX(A) I S UNWARRANTED ESPECIALLY WHEN THE INCOME WAS ESTIMATED AND SUCH E STIMATION 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 COMM ISSIONER OF INCOME TAX(A) ARE AGAINST THE FACTS OF THE CASE AND PROVIS IONS OF LAW AND THE SAME NEEDS TO BE DELETED IN THE INTEREST OF JUSTICE . 6. FROM THE GROUND NOS.1 & 2, THE ASSESSEE HAS CHAL LENGED THE VALIDITY OF THE ASSESSMENT PROCEEDING U/S 143(3), R .W.S.153C OF THE ACT. DURING THE COURSE OF HEARING, THE LD. A.R. SUBMITTE D THAT HE DID NOT PRESS GROUND NOS.1 & 2, CHALLENGING THE VALIDITY OF THE ASSESSMENT PROCEEDINGS. THEREFORE, GROUND NOS.1 & 2 ARE DISMIS SED AS NOT PRESSED. ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 7 7. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS ADDITIONS OF RS.18,28,000/- MADE BY THE A.O., TOWARDS ADDITIONAL INCOME DECLARED DURING THE COURSE OF SEARCH. THE LD. A.R. OF THE AS SESSEE SUBMITTED THAT THE CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A. O., WITH REGARD TO THE ADDITIONS OF RS.18,28,000/-, AS THIS AMOUNT FACTUAL LY AND LEGALLY HAS NOT BEEN RECEIVED OR ACCRUED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE A.R. FURTHER SUBMITTED THAT THE DISCLOSURE GIVEN DURING THE COURSE OF SEARCH AND CONSEQUENT LETTER F ILED ON 9.5.2008 SIGNED BY SHRI T. RAMAKRISHNA ON BEHALF OF LIVEWELL GROUP AS A WHOLE, BUT NOT ON BEHALF OF LIVEWELL CONSTRUCTION PVT. LTD ., THEREFORE, THE ADDITIONAL INCOME DISCLOSED IN THE NAME OF T. RAMAK RISHNA (HUF) TOWARDS UNDISCLOSED INCOME RS.18,28,000/- ADMITTED DURING THE SEARCH CANNOT BE ADDED SEPARATELY IN THE HANDS OF THE ASSE SSEE. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS DECLARED TO TAL UNDISCLOSED INCOME ADMITTED DURING THE COURSE OF SEARCH AND FIL ED REVISED RETURN ACCORDINGLY. WHILE FILING THE RETURN IN RESPONSE TO NOTICE U/S 153C OF THE ACT, THE ASSESSEE HAS ADMITTED RS.1,03,00,000/- IN THE NAME OF ASSESSEE COMPANY AND ITS ASSOCIATED COMPANY AND THE REMAINING AMOUNT OF RS.18,28,000/- WAS OFFERED IN THE NAME OF SHRI T. RAMAKRISHNA (HUF). IN THE STATEMENT GIVEN U/S 132(4 ) OF THE ACT, THE ASSESSEE NOWHERE STATED THAT THE ADDITIONAL INCOME OF RS.18,28,000/- ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 8 WILL BE OFFERED IN THE NAME OF COMPANY. THE ASSESSE E ADMITTED THE ADDITIONAL INCOME WITHOUT ANY SEIZED MATERIAL, SO A S TO COVER UP ANY OTHER DISCREPANCIES TOOK PLACE IN THE PAST IN THE C ASE OF GROUP CONCERNS. THEREFORE, THE A.O. WAS NOT CORRECT IN COMING TO TH E CONCLUSION THAT THE ADDITIONAL INCOME DISCLOSED DURING THE COURSE OF SE ARCH WAS ON ACCOUNT OF DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF THE CO MPANY AND ALSO RELATES TO THE BUSINESS ACTIVITIES OF THE COMPANY. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE ORDER OF THE CIT(A) . 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE IS THAT A SEARCH WAS CON DUCTED U/S 132 OF THE ACT IN THE GROUP CASES OF THE ASSESSEE COMPANY. DU RING 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 ADMIT TED ADDITIONAL INCOME OF RS.1,30,00,000/- AND ACCORDINGLY, FILED L ETTER DATED 9.5.208. AS PER THE SAID LETTER, THE ASSESSEE HAS ADMITTED U NDISCLOSED INCOME OF RS.1,30,00,000/- AND AGREED TO DISCLOSE THE INCOME FOR THE ASSESSMENT YEAR 2005-06 TO 2007-08. AS PER THE DISCLOSURE MAD E DURING THE COURSE OF SEARCH, THE ASSESSEE ADMITTED AN ADDITIONAL INCO ME OF RS.1,03,00,000/- FOR THE ASSESSMENT YEAR 2008-09. DURING THE COURSE OF ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 9 ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE HAS ADMITTED UNDISCLOSED INCOME OF RS.18,28,000/-, HOWE VER, 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 T OTAL INCOME. THE A.O. WAS OF THE OPINION THAT THE UNDISCLOSED INCOME ADMI TTED DURING THE COURSE OF SEARCH, WAS ON ACCOUNT OF DISCREPANCIES I N THE BOOKS OF ACCOUNTS OF THE COMPANY AND ALSO IT PERTAINS TO THE BUSINESS TRANSACTIONS. BUT, ASSESSEE CLAIMED TO HAVE ADMITTE D THE UNDISCLOSED INCOME IN THE NAME OF SHRI T. RAMAKRISHNA (HUF), WH ICH CANNOT BE ACCEPTED. IT WAS THE CONTENTION OF THE ASSESSEE THA T THE UNDISCLOSED INCOME OFFERED DURING THE COURSE OF SEARCH IS NOT O N ACCOUNT OF DISCREPANCIES IN THE BOOKS OF ACCOUNTS OF THE COMPA NY, HOWEVER, THE ADDITIONAL INCOME OFFERED TO COVER UP ANY INCONSIST ENCIES TOOK PLACE IN THE PAST WHICH HAS HAD THE CASCADING EFFECT. THE AS SESSEE FURTHER SUBMITTED THAT NOWHERE IT HAS BEEN STATED THAT THE INCOME WILL BE OFFERED IN THE NAME OF COMPANY. THEREFORE, THE INC OME OFFERED IN THE CASE OF T RAMAKRISHNA (HUF) SHOULD BE ACCEPTED. 9. WE HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSES SEE AND ALSO CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW. ON PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE A.O., WE FIND THAT T HE A.O. HAS MADE ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 10 ADDITIONS SOLELY ON THE BASIS OF THE STATEMENT RECO RDED U/S 132(4) OF THE ACT DURING THE COURSE OF SEARCH. ON PERUSAL OF THE STATEMENT RECORDED U/S 132(4) OF THE ACT, WE FIND THAT THE ASSESSEE HA S ADMITTED UNDISCLOSED INCOME OF RS.1,30,00,000/- AND GIVEN DE TAILS OF SUCH INCOME AND ALSO SPECIFIED THE NAMES OF FIRMS AND COMPANIES IN WHOSE HANDS THE INCOME WILL BE OFFERED, EXCEPT FOR THE IMPUGNED ADDITION OF RS. 18,28,000/-. DURING THE COURSE OF SEARCH, IN THE ST ATEMENT U/S 132(4), THE ASSESSEE HAS STATED THAT DURING THE FINANCIAL Y EAR RELEVANT TO ASSESSMENT YEAR 2008-09, A SUM OF RS.18,28,000/- S HALL BE OFFERED TO TAX ON ACCOUNT OF OTHER INCONSISTENCIES TOOK PLACE IN THE PAST WHICH HAS HAD THE CASCADING EFFECT IN THE CURRENT FINANCIAL Y EAR. WE HAVE EXAMINED THE STATEMENT RECORDED UNDER SEC. 132(4) A ND FIND THAT NOWHERE IT HAS BEEN STATED THAT THE IMPUGNED ADDITI ON WILL BE OFFERED IN THE HANDS OF THE COMPANY. ON FURTHER VERIFICATION O F THE DETAILS SUBMITTED BY THE ASSESSEE, WE FIND THAT THE ASSESSE E HAS FILED REVISED RETURN U/S 153C OF THE ACT FOR SHRI T. RAMAKRISHNA (HUF) AND ADMITTED ADDITIONAL INCOME OF RS.18,28,000/-. ON PERUSAL OF SUCH REVISED RETURN, WE FIND THAT THE ASSESSEE HAS DECLARED SHORT TERM C APITAL GAIN OF RS.16,36,870/- AND INCOME FROM OTHER SOURCES OF RS. 1,91,130/- AND ALSO APPENDED A NOTE IN THE RETURN OF INCOME FILED STATI NG THAT AS PER THE DECLARATION GIVEN ON 9.5.2008 AT THE TIME OF SEARCH , THE INCOME WAS ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 11 OFFERED IN THE HANDS OF THE HUF. WE FIND FORCE IN TH E ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT IT WAS NOT THE CASE OF A.O. THAT THE ADDITION IS SUPPORTED BY ANY SEIZED MATERIALS. THOUGH THE CI T(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 THA T THE INCOME PERTAINS TO REMAINING 3 FLATS WAS OFFERED IN THE SUBSEQUENT YEAR, AS THE POSSESSION OF THOSE 3 FLATS WERE HANDED OVER IN NEX T 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 ADDITI ON IS SOLELY BASED ON STATEMENT RECORDED U/S 132(4) OF THE ACT. THE ASSE SSEE RELIED UPON THE CIRCULAR ISSUED BY THE CBDT VIDE CIRCULAR NO.286/98 /13 DATED 18.12.2014. THE CBDT VIDE ABOVE CIRCULAR INSTRUCTE D ITS ALL OFFICERS THAT NO UNDISCLOSED INCOME SHOULD BE TAKEN UNDER COERCIO N OR UNDUE INFLUENCE. ANY ADMISSION OF UNDISCLOSED INCOME SHOU LD BE BASED ON EVIDENCES GATHERED DURING THE COURSE OF SEARCH OR S URVEY. 10. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS, WE FIND THAT THE ADDITIONAL INCOME ADMITTED BY THE ASSESSEE DURI NG THE COURSE OF SEARCH IS NOT SUPPORTED BY ANY MATERIAL EVIDENCES G ATHERED DURING THE COURSE OF SEARCH. THOUGH ASSESSEE ADMITTED ADDITION AL INCOME OF ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 12 RS.18,28,000/- BY STATING THAT THE INCOME IS OFFERE D TO COVER UP INCONSISTENCIES IN THE PAST, THE ASSESSEE HAS DECLA RED THE SAID INCOME IN THE HANDS OF THE T RAMAKRISHNA(HUF) BY DECLARING SH ORT TERM CAPITAL GAINS AND INCOME FROM OTHER SOURCES. THEREFORE, WE ARE OF THE OPINION THAT THE A.O. WAS NOT CORRECT IN MAKING SEPARATE AD DITIONS OF RS.18,28,000/-, WHEN ASSESSEE HAS ADMITTED THE INCO ME IN THE HANDS OF SHRI T. RAMAKRISHNA(HUF). THE CIT(A) FAILED TO APPR ECIATE THE FACT THAT THE UNDISCLOSED INCOME OFFERED DURING SEARCH, WAS A DMITTED IN THE HANDS OF T RAMAKRISHNA (HUF). THE CIT(A), WITHOUT APPRECIATING THE PROPER FACTS, CONFIRMED THE ADDITIONS MADE BY THE A O. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITIONS. 11. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF INCOME TAX PAYABLE OF RS.11 LAKHS. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.11 LAKHS UNDER THE HEAD INCOME TAX PAYABLE. SINC E, INCOME TAX IS NOT A ALLOWABLE DEDUCTION, THE A.O. DISALLOWED THE SAME U/S 40(A)(II) OF THE ACT. THE A.O. WAS OF THE OPINION THAT INCOME TAX IS NOT ALLOWABLE AS A DEDUCTION AS PER SECTION 40(A)(II) OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE INCOME FROM THE PROJECT WAS O FFERED ON ESTIMATION ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 13 BASIS, THEREFORE, NO SEPARATE ADDITIONS CAN BE MADE TO ANY ITEM OF EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT, W HEN INCOME IS ESTIMATED. THE ASSESSEE FURTHER SUBMITTED THAT DURI NG THE COURSE OF SEARCH PROCEEDINGS, THE MANAGING DIRECTOR OF THE CO MPANY HAS ADMITTED INCOME OF RS.19,20,000/- FROM CONSTRUCTION PROJECT AND ACCORDINGLY, FILED THE RETURN. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSEE HAS EXPLAINED THE BASIS AND ALSO THE WORKI NGS FOR ARRIVING AT THE INCOME OF RS.19,20,000/-. THE A.O. HAS MADE SEP ARATE ADDITIONS TOWARDS INCOME TAX PAYABLE BASED ON THE PROFIT & LO SS ACCOUNT FILED BY THE ASSESSEE OVER AND ABOVE THE INCOME DISCLOSED DU RING SEARCH WHICH IS NOT CORRECT. ON THE OTHER HAND, THE LD. D.R. SUP PORTED THE ORDER OF CIT(A). 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORDS AND ALSO GONE THROUGH THE ORDERS OF AUTH ORITIES BELOW. THE A.O. DISALLOWED INCOME TAX AND ADDED TO THE TOTAL I NCOME. THE A.O. WAS OF THE OPINION THAT INCOME TAX IS NOT A ALLOWABLE D EDUCTION UNDER SEC. 40(A)(II) OF THE ACT. THE CONTENTION OF THE ASSESSE E IS THAT WHEN INCOME IS ESTIMATED, SEPARATE ADDITION CANNOT BE MADE FOR ANY ITEM OF EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT. A DMITTEDLY, THE ASSESSEE HAS ESTIMATED THE INCOME FROM CONSTRUCTION PROJECT ON ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 14 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 TA X PAYABLE FOR RS.11 LAKHS AS EXPENDITURE IN THE P&L ACCOUNT. THOUGH PRO FIT IS ESTIMATED, THE ASSESSEE HAS CLAIMED INCOME TAX PAYABLE OF RS. 11 L AKHS, AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT, WHICH CANNOT BE ALLOW ED AS A DEDUCTION U/S 40(A)(II) OF THE ACT. THEREFORE, WE ARE OF THE OPIN ION THAT THE A.O. HAS RIGHTLY MADE ADDITIONS OF RS.11 LAKHS TOWARDS INCOM E 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 T HE CIT(A). HENCE, WE INCLINED TO UPHOLD THE ORDER OF THE CIT(A) AND REJE CT THE GROUND RAISED BY THE ASSESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 TH MAR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 18.03.2016 VG/SPS ITA NO.328/VIZAG/2012 LIVEWELL CONSTRUCTIONS PVT. LTD., VIJAYWADA 15 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT LIVEWELL CONSTRUCTIONS PVT. LTD. , C/O SRI C. SUBRAHMANYAM, CA 102, LAKSHMI APARTMENTS, FACOR LAY OUT, WALTAIR UPLANDS, VISAKHAPATNAM 2. / THE RESPONDENT DCIT CENTRAL CIRCLE, VIJAYAWADA 3. + / THE CIT (CENTRAL), HYDERABAD 4. + / THE PRINCIPAL CIT (CENTRAL), VIJAYAWADA 5. + ( ) / THE CIT (A), VIJAYAWADA 6. # . , . , # / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM