Tribunal rules on appeal: Adjustments made, tax disallowance upheld.

The Tribunal partly allowed the appeal by directing the deletion of the addition of Rs. 18,28,000 towards additional income but upheld the disallowance of Rs. 11 lakhs claimed as income tax payable. The order was pronounced on 18.3.2016.

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Issues Involved:
1. Validity of assessment proceedings under section 143(3) read with section 153C of the Income Tax Act.
2. Addition of Rs. 18,28,000 towards additional income declared during the search.
3. Disallowance of Rs. 11 lakhs claimed as income tax payable.

Detailed Analysis:

1. Validity of Assessment Proceedings under Section 143(3) read with Section 153C:
The assessee challenged the validity of the assessment proceedings under section 143(3) read with section 153C of the Act. However, during the course of the hearing, the assessee's representative did not press these grounds. Consequently, these grounds were dismissed as not pressed.

2. Addition of Rs. 18,28,000 Towards Additional Income Declared During the Search:
The primary issue was whether the additional income of Rs. 18,28,000, admitted during the search, should be added to the income of the assessee company. The assessee argued that this amount was admitted to cover inconsistencies in the past and was declared in the name of Shri T. Ramakrishna (HUF), not in the company's name. The Assessing Officer (A.O.) added this amount to the company's income, stating it was related to business transactions and discrepancies in the company's books. However, the Tribunal found that the A.O. based the addition solely on the statement recorded under section 132(4) without any supporting material evidence. The Tribunal noted that the revised return filed by Shri T. Ramakrishna (HUF) included the additional income, and there was no indication in the statement that the income should be offered in the company’s name. The Tribunal, therefore, directed the A.O. to delete the addition of Rs. 18,28,000.

3. Disallowance of Rs. 11 Lakhs Claimed as Income Tax Payable:
The assessee claimed Rs. 11 lakhs as an expenditure towards income tax payable in the profit and loss account. The A.O. disallowed this amount under section 40(a)(ii) of the Act, which prohibits the deduction of income tax paid or payable. The assessee contended that since the income was estimated, no separate additions should be made for any expenditure item in the profit and loss account. However, the Tribunal upheld the A.O.'s decision, stating that income tax is not an allowable deduction under section 40(a)(ii), even if the income is estimated. The Tribunal found no error in the CIT(A)'s confirmation of this disallowance and thus rejected the assessee's ground on this issue.

Conclusion:
The Tribunal partly allowed the appeal, directing the deletion of the Rs. 18,28,000 addition but upheld the disallowance of Rs. 11 lakhs claimed as income tax payable. The order was pronounced in the open court on 18.3.2016.

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