A,C.I.T. CENTRAL CIR.- 2(1), NAGPUR vs. SHRI AFROZHAN W. PATHAN, CHIMUR

VEBE No.15S/Nag/2u16 Assessment yeai ;2007-08 # group. Shri Mitesh Bhangdiva has two sons namely Shri Kirtikumar M, Bhangdiya and Shri Srikant M, Bhangdiva and one daughter Neha. The business of the Bhangdiya group is being looked after by Shri Mitesh Bhangdiya and his two sons. The other key persons associated with the group are Shri Sanjay Rameshchandra Heda, husband Of Mitesh Bhangdiya'$ sister; Smt: Pradnya , resident of Amravati and Srt: Manisha 0, Maniyar , widowed sister of Shri Mitesh Bhangdiya who lives with Bhangdiya Family. The main business concerns of the group covered under the search action are as under: 1 Ms M.G, Bhangdiya (AERPB 2503 E) (Prop; converted into a company AsPE.K50} CenstroPertureVGB} Pvt, (AAHCM 0383 T) Ltd. from 01/04/2011 2 Mahendra Construction, Prop; Shri Sanjay Heda (MC) (AADPH 7109J} 3 Ms Mahendra Construction M.G. Bhangdiya (AANFMS6S8B) (JV) 4 Ms Kirtikumar M Bhangdiva (Prop. KMB); converted into a company M/s MRS Acme Buildcon Pvt. Ltd. (AAHCMO38ZR) from 01.04.2011, (AGYPB16SIG) 5 Ms RM; Bhangdiva Mahendra Construction (JV) (AARFR1820C) 6 Ms Shrikant M Bhangdiya (Prop: SMB) (ATCPB1337J) 7_ Mitcon Infraproject Pvt; Ltd; (MIPL) (AAGCM1868H) 8 MITZ Infraproject Pvt: Ltd. (AAGCM3OATA) 9 Sakshi Gruh Nirman Pvt Lta. (SGNPL) (AAOCS7974G) 10 Balaji Stone Crusher 8 Infraventure Pvt, (AADCB5273C) Ltd, ApPEL 1 The Bhangdiya Group has also entered into joint ventures with various other civil contractors: Same of them are a5 under: 1 Ms. M.G. Bhangdiya Hitbhav Engg (AAOFM474SL) (JV) Ms, M.G Bhangdiya & S.s; Patil & Co: (JV) (ABIFS3645L) Ms; Darshan Construction (JV) (AAHFDO6SAN) Ms. M.R. Dhoble & RM. Bhangdiya (JV) (AAPFM0622B) 2 3 4 Z4h I.T A Nu1SS/Na6/2016 Assessmeut ycar .2007-08 The nature of the business of the Bhangdiya group primarily is executing civil contracts. The group works mainly for Government departments like Ms Vidarbha Irrigation Development Corporation and has been engaged in executing various contracts pertaining to the irrigation projects in the state of Maharashtra. During the course Qf search operations incriminating documents were found and seized from the residential premises of Shri Mitesh Bhangdiya, Item no_ 1 to 65 Qf Annexure-B seized from his residence are the diaries containing ledgers, daily cash books and bank books maintained by the Bhangdiya group. A statement of Shri Mitesh Bhangdiya was recorded on oath on 20.07.2011_ In his sworn statement recorded during the course of search action; Shri Mitesh Bhangdiva was confronted with the entrles borne out from the seized diaries marked a5 B- 1 to B-65 and to explain the contents of these diaries: Shri Mitesh Bhangdiva in his statement recorded has submitted that the entries in the diaries and the ledger pertain to the business receipts and business expenditure. The Assessing Officer in the assessment order has recorded 3 finding that as per the item no. 1 to 65 of annexure-B; it is apparent that the amounts withdrawn from the bank accounts of the subcontractors were credited to the daily cash balance of Bhangdlya group which was confirmed by Shri Mitesh G. Bhangdiya in his statement dated 14/09/2011. The Assessing Officer has reproduced the statement 0f Shri Mitesh Bhangdiya recorded on 14/09/2011 in para 6 of the assessment order. The Assessing Officer in the assessment order has also recorded a finding that the seized documents being B-1 to B-65 contain entries of all expenses incurred by the Bhangdiya group in cash from F.Y. 2006-07 onwards and expenses incurred through the bank accounts from F.Y, 2009-10 onwards, Thus; the Assessing Officer found that the actual expenses incurred do not match with those shown to have been incurred in the books, The Assessing Officer thus concluded that the books of account of Shri M.G. Bhangdiya 3 745 L"'A. No.15S/Nag/2016 Assessmieat year :2007-08 maintained for Ircome-tax purpose do not reflect the true business affairs and are not at all reliable The Assessing Officer has also referred to the statement of Shri Afrozkhan W. Pathan, the assessee, recorded during the course Of sunvey. Based o the statement of Shri Afrozkhan W. Pathan; the Assessing Officer has concluded that the bank accounts of the assessee were being handled by Shri M.G. Bhangdiya group: The Assessing Officer has given J summary of all the bank accounts maintained by the assessee in the tabular form to show that the cheques deposited by the Bhangdiya group in the bank accounts of the assessee were subsequently withdrawn in cash which were found credited to daily cash book seized. On this basis the Assessing Officer made the protective addition in the hands of the assessee holding that there were no expenses incurred and no contract work was executed by the assessee who, according to the Assessing Officer, Is merely a name lender to the Bhangdiya group. The assessee Fare in appeal before the CIT(A) challenging the notice Issued u/s 153C as vell as the addition for cash withdrawals from bank on protective basis, The CIT(A) deleted the said addition; 3,1 At the outset; learned A. R, made an application before uS under Rule 27 of the LTA.T. Rules challenging the validity of the notice issued u/s 153C of the Act as there was no incriminating material belonging to the assessee found in the course Qf search; It was stated that the assessment in the case of the assessee was framed us 153C read with section 14303) of the Act, The assessee before the CIT(A) raised ground No. 1 and challenged the valldity of the notice issued U/s 153C of the Act. The CIT(A) has dismissed the ground challenging the validity 0f the notice issued Wjs 153C ad decided the appeal of the assessee on merit due to which protective addition made in the hands of the assessee stand deleted, Under these facts, the assessee did not file any appeal Or the Cross Objections taking the ground as regards to the validity of the notice us 396 ;T'AA, Nu.155/Na4/2016 Assessment Year :2007-08 153C of the Act It was contended that there i5 no incriminating material found and seized belonging to the assessee in the course of the search at the premises of Shri M,G Bhangdipa. It was submitted that in the case of the assessee no satisfaction of the Assessing Officer of the person searched is recorded before issue of natice u/s 153C, In absence of non recording of the satisfaction by the Assessing Officer of the person searched, the consequent assessment framed is bad in law and the notice issued u/s 153C is bad in law, Reliance was placed in this regard on the decision of ITAT Nagpur Bench in the case of Mansi Commodities Ltd. in I.TANos, 146 to 148/Nag/2014 in which the Tribunal vide order dated 19/12/2016 held that satisfaction for issuance of notice 4/s 153C is to be recorded by the Assessing Officer of the person searched and in the absence thereof the notice issued u/s 153C is bad in law and consequent assessment framed is bad in Iaw, 4, Learned D. R, on the other hand, vehemently relied on the order of the CIT(A) ad contended that the assessee has taken ground No, 1 about the validity of the issuance of notice U/s 153C before the CIT(A) but the assessee did not press this ground before the CIT(A) Even nQ submissions were made for which our attention was drawn towards para 12 of the order of CIT(A} Even otherwise on merit the assessee contended that the diary seized during the course of search contains the name of the assessee from whom the cash has been received noted in the diary, Therefore, it cannot be said that incriminating material belonging to the assessee was found, not 5. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. Coming to the adjudication and admission of ground taken by the assessee about the validity of the notice issued U/s 153C and conseq uently cancellation of the 9 Zt Kn 1T.4, No.155/N:g/2016 Assessment yeai" :20C)7-08 assessment framed thereupon, we have gone through Rule 27 of the ITAT Rules_ We noted that the said Rule read as under: "The respondent; though he may not have appealed, may support the order appeated against On any of the grounds decided against him. 5.1 On the basis of this Rule, it is apparent that even If the assessee has not filed the appeal against the order of CITCA); he may support the conclusion of the CIT(A) by taking any ground which has been decided against him;, From the facts before US, it is apparent that the assessee has taken the ground regarding the validity of the notice issued ufs 153C before the CIT(A) and also validity of consequent assessment framed thereupon: We noted that CIT(A) under para 12 of its order dismissed the said ground of the assessee as the assessee neither filed any submission nor pressed this ground during the appellate proceedings. Whatever may be the reason; the fact remains that the ground taken by the assessee about the validity of the notice Ufs 153C and also the validity of the consequent assessment framed thereupon stands dismissed by the CIT(A): Therefore, in our opinion; the assessee complied with the condition as stipulated under Rule 27 of the ITAT Rules ad the assessee can always raise this ground In view of Rule 27 before the Tribunal. The Tribunal has the power to adjudicate the ground taken under Rule 27_ We accordingly admit the said ground. 5.2 Now coming to the submissions made by both the parties on merit on this ground: We have gone through the provisions of section 153C and noted that this section prior to the amendment made by the Finance Act; 2015 with effect from 01/06/2015 states as under: 'Notwithstanding anything contained in section 139, section 147 section 148, section 149, section 151 and section 153, 3 398 I,T.A. No.155/Nag/2016 Assessinentyear ;2007-U8 wher tic fseswng Officar {5 satisfied that aWy money: bullion, jelvellery Or Oler valuable aiik Or thing, Or books Of AcCDvml O; d{ocuments Seized r requisitioned belongs Or belong to 8 Vorjon cthzr tnan? {ie Pcrson referrzd t2 In} section 153A, thon the bcoks Qf acCounl pr documerits Or assets SeiZed {; requisitioned shalf be harded Over to tha Assessing Officer having jurisdiction over such other person. This sektin I1a: sy i)3 9;'7ky: by F iv : IT, 2815 wich Txirlad#ifiela: {; effect Fromn: ; "153C Notwithstanding aything contained in section 139, section 147, section 148, section 149, section 151 ad section 153, where the Assessing Officer is satisfied that (a) Any money; bullion jewellery or other valuable article Or thing, seized 0r requisitioned, belongs to; Or (b) Any books Of account Or documents, seized Or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person Other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handied over to the Assessing Officer having jurisdiction over such other person. The Fin::/ 13!1 2/1`; :r'x#m) aindl %:7 [.54 v which this an;emImz_: wxoMajle feads:Sunda; "S-cton 193" pf Nw Ant nxales tJ nss2ssmont 07 incon @f 4' & :"; Tin- exsting Mxwos Gn:ln$ I Sb Sihon {1 ! cX {w? SAW Section JS 17 vjz tikwl nulwnthsanej cthing contamed in Sccix_: 1J;V Stufun: 147, Sclii": 143 Skrinm 14, S0nn 15f a/0 sction 157 whcn th 'Rxmg onicef X: snsti?d IXat ~y M:ney: blliozl jomc?ny {. nthen bau lc ~twJe & Uwy 13/" UocksO; accow'x O: & unmts #1a Un rctWisiticned %unj to &' patson otixn> tnau 1e' UYSon refeiftd tj in Sl/iw {534 tko :e L&"oJ 0*m j" Gurlnens '5#: S28 { nqlisitioned Ww '1and Qver to tfve {ss-Ssin Offices having junsdiim)} cvc suCh} [blinzr Aersan} @i dijt AsseoSws Oirice"" SH1ll { cerd ghS! Chn Such Qthpn Daos and iSSia RPEL) 349 LI,A. No,l55/Na//201g Assessment yratr :2007-08 Slidh; @i" sich J:n? 1534. "oRi1: 2{ ? Zf/ Ock: Sco Dispules Ive 4xu 06 L" (4 HenvahWm wortis "Lu;o'y; '1 in rspect ( & {ucunkti as r iu.nCe When 7 g"ve;} Jx "liw seizert {ium ? persu:} '4 W opJy { lhe Originzi djc m21. Accdingly {{ " poposi} 0 Arit:: mp pforesaid S-Cil: I provide Ual nurwithalan_Mg &nruyg contained {XX seil;"; 159, Scctij; 7 ?7, 437i}: 1-18 5i nto 140, Sccfo 15] ex] Suction J53, wilo ti? fessing Uiticei is slisfes Wwl r:); {noney, bul,fnceen &'J5n3 Vallw article Of Uwy bonjs {0, 4 &} Duoks FC U:t Uf diocunents SeiZed ,0 reqUishioncl peria! LU, 0 any informatian contewed thercin, relales t; 7W} persur 'tier than Lhe DiSim [eferred l0 In sction [53A, Eh) ne bOpks Of account Or Gocinnnts Of asSety sized Ur {@uisiionned shal bc handed Qver to thc' fissesSWg Offccr XvMr jurialktion Over S!C 7314 {eUn an0 tha: Acexsing Qa sa" proveed cOxistohsich othh [xwxm an issu: Svch} #thev persun {ofc A1 bCss i% {co_X> {oWna 2' SLh 7036 perso M arnnng? Vh fe pn s&:sT |534. SutsseqUcntly ; tli CbD: 'vis ?Qn; 3: 3a !i_ 19 M 7J15 dabed 27/11/2015 :V ihir;. #idmal?ry mc 1,} Icrr"',icri a Fin;:ce Acl; 2015 wele |isCuss_, ihr: e"ailkl i.: ;i1 lim:: : ~Ulzif I2l_llilc: to the amenced provision 0f Stxtion 1530 rev)e_edden "3V Ass2ss 0 &f income Of 2 pe;sin oUier tan the p:rson in) whase CzzA Skrch has been inim-ed Or noks Of aCCulint other Oocunis&r as52nhjV Us"'T~"qtvrd 39.1 SzCtio: 153C Of the Iricomk'-tax Act relates Lo assessment of income Of any perSUn Other tjn {he persn in wtiose' Ca52 search has been cO{ cted Oi requisition ha5 been mada The [visions containerd # Sih SFrdon (1) 0fthe sedlion 153C berore amendmem maJ '!:y rw? ACl pnwired that nulwvilh'standing anylhing Conta;d 3J secton 1.39/ Section {47, Sict ]48, Seclion 144, sction lS1 an:} Scclion 153 Qf tha? Iicome-tax Act wher the Assessing Officer 1S satished that any morey, bullion, jewellery &r Olher valuabla aiticle &r thing &"' books af .Calsl CV chjeimnels stizrd Or 1,T.A, No 155/Na3/2016 Asstssmemt year ;2.0107-(8 Koc S= Ivrr '574 !: #1 G*:m {euuigwno: <; 31,0 ia ';andn ;r {L {8: having jus:ho mW 'vai Slic"} (bfl pltox: c"li: [:W/lcns;b Un Iom? ?i}; "@8. "xor: L' V! aCCUW tMkne|%"} [iwe provisions 3 RCt wn {SV< 39.2 DmSput5 n3le Arisen &st0fhe Mpelnon f'}' ivords "belno t' '3t_ 0 Zicn#S ,0; jnmsj"c: 0 given don;w-ik [na Jers;w) j &(py Uf!h: cimai (cwzina:nl ~' Iy #w/S 'W{::cneaJj: Lo provde Uil fnmitisfaniwng anvomy Cm;k; &.tion 139, sccfio;} '47, Srctitn 148 Scction? 149, srtic 15; anu Satton 15' c {ilci {nIComwe-[ax Acl Ihere Uie Asse+Sig Officr j S;'we0 [La: AnV moey, bulion, jewela €r Jmver vahiall -nk% [" !in Dlcns t 0: &nv book &f&onto ocunants saed 03 rexzuisition kd "ertamn K 0; cw} inforatuv; Crzinod tweremy 'cale> Lu; any |u3ci ~ic; t'y?; {6 FeXwMe/ete: () m &7o:v: {SWA&-m2 Wmm?v3; Acl Uien !/!:cx5 05 GCrou0 Gonmknnk&,0w Of" 'Resn d eixisrkn?_ {i {ii < haviny JUt: 4% }xtsc +7..= Qftice Si {bia:; S4mOtne: pesS" end "SHUi {jlc &ij; #JgudhQWn 746j; aron '&nWnv 39.3 ApplicWimt;: t}e Ist day Ot June P015, Jwed {s [aken #0 fnm 5,3 In view Of this, it i5 aoparent inat :n2 amended ser-ion 153C are not Fet-os[i:clivi-' Ail A- <>i:idn- wIf; * i ii':T} D'6zn1saxd n.# prizr to ihat, [mh tin: {as ';i i ~S391 Xik} as wef; &1;:Orce W's ]E3C has been issued prior D) 01/06/2015. Since in the case Qf the assessee action us 153C has been taken by issuing the notice dated 16/07/2013 in consequence of the search carried out on 19/07/2011 therefore, the amended provision of section 153C will not apply. As per the provision of section 153C, as was in existence durlng the impugned period, the condition precedent for issuing notice us 153C and assessing Or He| LTA.No.155/Nag/z016 Assessmentyear :2007-08 reassessing the income of 'such other person is that the money, bullion; jewellery or other valuable article or thing; books of account or document seized or requisitioned which belong to such person where dacuments in question recovered during search proceedings did not belong to the assessee; though there was a reference to the assessee therein; issue of notice to the assessee U/s 153C, in our opinian; cannot be held to be Valid, Honble Delti High Court in the case of Pepsi Foods Pvt: Ltd; vs; ACIT 52 Taxman com 220 (Del), We roted has also categorically held that before 3 notice u/s 153C can be issued; the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs a person other than the searched person. Unless until it is established that the documents seized did not belong to the searched person; te provision of section 153C did not get attracted This is not disputed that the notice in the case of the assessee Ufs 153C has been issued in consequence of search Seizure action taken Ufs 132 in the Bhangdiya Group from whom premises diaries marked B-I to B-65 were found and seized. These diaries belong to the Bhangdiya Group not to the assessee. Even though the name f the assessee is mentioned in the diary that does not mean that the diary belong to the assessee It May be said tnat the diary contains the information regarding the assessee; In our opinion, even the amended provision supports the case of the assessee The Legislation has amended section 153C with effect from 01/06/2015 and widened the scope Us 153C by substituting in place of word 'belorigs Or belong' to word 'pertain Qr pertain to or any information contained therein', Now under the amended provision; even if the material seized does not beiong lo the assessee but it contains the Information relating to the assessee, the proceedings initiated u/s 153C will be valid. But this amended provision; as is apparent; is applicable from 01/06/2015, Leamed DR, before uS even though vehemently relied on the order of the Assessing Officer but could not Hox_ 1..

No.155/Na3/2016 Assessmnientyear:2007-08 adduce any cogent material or evidence which may prove that the diaries found and seized during the course of search in Bhangdiya Group belong to the assessee. Since during the course of search in Bhangdiya Group no material relating to the addition made belonging to the assessee was found therefore; the notice Issued u/s 153C, in our opinion, cannot be regarded to be valid one, Same_view_has_been _taken by Hon'ble Bombay High Court in the case of Bharti Vidyapeeth in ITA No. 923 of 2012 vide its order dated 11/09/2014, This fact also finds support as the Revenue has made the addition in the hands of the assessee in each of the assessment year only on protective basis which proves that the Revenue was also not satisfied with the incrir iminating material in fact belong to the assessee, On this basis we set aside the order of CIT(A) and hold that the notice Issued ujs 153C Is Peli, not valid and in consequence thereupon, the assessment made is annulled, 6 Thus, the ground taken by the assessee under Rule 27 Is allowed. 4 6 6 Now coming to the ground taken by the Revenue We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below, We noted that the Assessing Officer has made the addition in the case of the assessee on protective basis In respect of the cash being shown: as receipt in the diary seized during the course of search in Bhangdiya Group: When the matter went before the CIT(A); the CIT(A) deleted the said addition years by observing as under: "9.1 Before adjudicating the issue in hand; it would be relevant to briefly discuss the background of additians made in the case Of Shri Mitesh G. Bhangdiya & Group concerns on the basis of seized evidences a5 per Annexure-B-] to 8-65. The Ld AO has made the total addition Of Rs.182.52 Crs in the hands of various concerns of Bhangdiya group in various assessment years falling within the block period on prorata basis for want of proper correlation between the amounts credited to the seized diaries and the withdrawals made from the bank accounts Of the sub-contractors Qut of the total 403 # I.T'A, Nu.155/Nag/2016 Assessilent ye;tt" :2007-08 addition of Rs.182.52 crores, an addition of Rs.54.40 Crs; has been made On account of entries of withdrawals from the bank account of sub-contractors recorded in the seized diaries in proportion tp the cheque payments made t2 the sub- contractors by varioUs entities of the Bhangdiya group: The various concemns of the Bhangdiya group had made the payments by account payee cheques to the sub-contractors. The Ld AO after analyzing the bank accounts of 21 sub- contractors out of total more than 100 sub-contractors has arrived at the conclusion that the cash withdrawn from the accounts of the subcontractors has been found deposited on the credit side Of the seized diaries marked a5 Annexure B-1 to B-65 seized from the premises of Shri Mitesh G, Bhangdiya. Thus; the Ld AO had inferred that the Bhangdiya group by adopting such modus-operandi had inflated the expenditure by making cheque payments ad subsequently withdrawing the cash from the bank accounts Of the sub- contractors who; according to the AO; are merely name lenders. The contention of Shri Mitesh Bhangdiya was that the cash withdrawn from the account of the subcontractors which 15 found reflected in the diaries was kept with Late Shri Gotulalji Bhangdiya, father of Shri Mitesh Bhangdiya by such sub-contractors which was being issued to various sites for the use of subcontractors a5 per the requirements at the site Further that te money kept by sub-contractors waS retumed to them or through any of the intermediaries in the course Of handling of cash, The Assessing Officer however, declined to agree with the explanation filed by the appellant and has held that all the 21 sub-contractors examined by him are merely name lenders and the amounts paid tO them under the head sub-contracts ae bogus payments, therefore; the corresponding receipts by way of withdrawals from the bank accounts Of the subcontractors i5 liable to be added a5 unaccounted income in the hands of various concerns Of Bhangdiya group in various assessment years of the block period in proportion to the cheque payments made by 5uch group concerns: 9.2 In the case Of Bhangdiya group; the assessments under section 1534 of IT Act 1961 have been framed for assessment years 2006-07 to assessment year 2012-13. The nature of activity being execution Of government contracts was the same during all the assessment years. In assessment ear 2006-07, the nature Of work executed for Vidarbha Hor [T.

No,l55/Nag/2016 Assessment Y al 2007-08 Irrigation Development Corporation remains the same a5 In the case Of assessee for subsequent assessment years. The sub contractors who have executed the works are also similar in the various assessment years, 9.3 The A.O: has observed that the Sub contractors in the case Of Bhangdiya group are name lenders and bogus. In this regard, it i5 significant to mention that the sub contractors including the appellant have been assessed by the ACIT, Central Circle-2 (1), Nagpur who is also the A.O. of Bhangdiya group. Notices under section 153C of IT Act 1961 were issued to subcontractors and returns were submitted by such sub contractars pursuance t0 receipt af notice under section 153C of IT Act 1961. The assessments have been framed under section 153C of LT Act 1961 by the same AO, wherein the income returned in respect of business income shown arising to such sub-contractors out of receipt received from the Bhangdiya group have been accepted Thus, the AO; having accepted the business receipts in the hands of sub- contractors including the appellant for determining the income in the cases of sub-contractors could not have concluded that the payments made by Bhangdiya group to Such Sub contractors are bogus 8 9.4 In view of the huge variance in the income assessed a5 percentage to receipts by the AO and various infirmities 35 emanated from the order of the AQ; net profit has been estimated @ 16% of gross receipts in the hands Of various concerns Of the Bhangdiya group in view of the decision of the Hon'ble ITAT, Nagpur Bench, Nagpur in the Case Of the Bhangdiya group entities in ITA No.268, 269 & 285/Nag/2012 dated 03/04/2013, A survey action was conducted On 17/02/2009 in the Bhangdiya Group Of cases; wherein the similar situation 25 payments to Sub-contractors was disputed ad doubted by the AO. The survey action comprises AY 2006-07 to AY 2008-09 which are alsp forming part of the block periods for the search action conducted 0n the assessee group On 19.07.2011. The Hon'ble ITAT, Nagpur Bench; Nagpur after having considered the similar activity of business and deficiencles In subcontract payments found during the survvey action conducted On 17.02.2009 has decided the appeals for AY 2006-07 to 2008-09. The Hon'ble ITAT; Nagpur Bench, Nagpur after considering the impounded material has Ho5 L.F.A. Nc.155/Nag/2016 Assessmnenr yeai :2007-U8 directed the AQ to adopt the net profit @ 12% a5 against net profit adopted by AQ @ 149k. 9.5 In view af the above facts and circumstances and keeping in view of various infirmities and various judicial decisions relied upon by the appellant and to meet ends of justice; to my considered opinion it was considered fair and reasonable to adopt the net profit @ 16% On the gross receipts of Rs.579 Crs:; being the turnover of the various Bhangdiya group concerns for the block period from AY 2007- 08 to AY 2013-13 In the respective years of the block and bring the same to the taxation On the guidelines determined by the Hon, ITAT, Nagpur Bench, Nagpur in ITA No. 268, 269 & 285/Nag/2012 vide order dated 07/03/2013 On the Similar activities Of business under the similar circumstances, However; in order to cover Up the undisclosed investment Of Rs. 26 crores in immovable properties ad the undisclosed investment in jewellery to the tune Of Rs, 2.37 crores; enhanced net profit @ 16% of total turnover was estimated in the appellate orders dated 31/12/2015 in the cases Of Bhangdiya group a5 against net profit of 12c estimated by Hon'ble ITAT, a5 the issue of undisclosed investment in assets was not there before the Hon 'ble ITAT in the survey appeals.

Thus, I have considered the submissions made by the appellant and evidence On record It is seen that the appellant is & Sub-contractor ad executing work for various business entities belonging to Shri Mitesh Bhangdiya group. The assessee has been regularly assessed to income tax much Prior to the date of search on Shri Mitesh Bhangdiya group On 19/07/2011. In_the Case Of assessee notice has been iSsued us 153C Of IT Act 1961 after there being search on Shri Mitesh Bhagdiya group 19/07/2011 and assessments have been framed for assessment years 2006-07 to 2010-11 & AY 2012-13 in the month of March, 2014 10.1 It is seen from the assessment order that the A.O. has reproduced the statement recorded u/s 132(4) of Shri Mitesh Bhagdiya and has referred to seized documents inventorized as B-1 to 65, In the case of Shri Mitesh Bhagdiya, the AO has found that the withdrawals made from the bank account af assessee are matching with the credits appearing in the seized documents found at the premises of Shri Mitesh Bhagdiya. The A.O. has concluded that appellant i5 only name { Hog 1.1A. No,1SS/Nag/2016 Assessment year:2007-08 lender of Shri Mitesh Bhagdiya. The A,O. accordingly observed that Shri Mitesh Bhangdiya is the ultimate beneficiary of the bogus contract payment which laundered through appellant an is disallowed and added in the respective assessments framed in Bhangdiya group: The A.O. further observed that the cash withdrawn from the bank is added &5 income On protective basis as there was no expenses a5 no contract work was really executed 10.2 The appellant submitted return declaring income from sub-contract work in his regular return as well as in the return submitted in response to notice issued Us 153C of IT, Act 1961. In the return of income assessee has shown income arising out of receipts being amount received from the various business entities of Shri Mitesh Bhagdiya group The perusal Of the assessment prder does not indicate any adverse observation with regard to regular books of account on the basis of which Income was declared In the return of appellant It is seen that the profit ad loss account ad balance sheet submitted along with the return of income have not been discredited in the assessment framed in the case of the appellant The AO. in fact has assessed income returned without inviting any adverse observation 35 to income declared from sub-contract work: AFF ELL 10.3 It i5 seen that the withdrawals from the bank account are reflected in the books of account on the basis of which income has been returned The withdrawals from the bank having already been considered for the purpose of determining income at the hands of appellant a5 shown in the return cannot separately constitute income liable to be assessed in the hands of appellant: The addition made by A.O. is thus unjustified and unsustainable 10.4 It Is further seen that thee A.O, has made observation in the assessment order to the effect that in the case Of Shri Mitesh Bhagdiya group disallowance has been made for various expenses claimed On account af sub-contract expenses which includes payment to appellant: It is settled proposition Of law that the substantive assessment must precede framing of protective assessment; In the facts and circumstances Of the case; it is difficult to rationalize how withdrawals from the bank account can constitute assessable income much less On protective basis in the case of the Kof 1.T.A. No,155/N.g/2016 Assssnent Vear .20Q7-08 appellant: The A.O. has made disallowance of sub-contract expenses being amount paid to appellant while determining the income of business entities of Shri Mitesh Bhagdiya group. Such payments are already considered for income shown In the return and assessed as business receipt in the hands of the appellant Addition of such amount again on protective basis defies logic I do not find any rationale to make such protective assessment of the withdrawals made from bank account f assessee in the hands of assessee himself The Income assessed 0n protective basis therefore; i5 held to be unjustified and unsustainable 0n this count a5 well 10.5 The gross receipts in the case of the appellant a well as returned income along with the percentage of income has been tabulated by the appellant for various assessment years and the same is reproduced herein under: Shri Afrozkhan W. Pathan Turnover, returned income and assessed income (AY-10-11) ASSESSMENT YEAR 2D1o-l1 GROSS RECEIPTS 3734020 RETURNED INCOME 298740 %o OF GROSS RECEIPTS 8,Q0%0 ADDITONS UNDER SECTION 3749664 153C ASSESSED INCOME 40148404 % OF GROSS RECEIFTS 108,42%0 10.6 It is seen from the above that the income returned has been accepted in the case Of appellant without inviting any adverse inference and considering the addition made in the hands Of assessee the income assessed a5 percentage Of gross receipt clearly reflected absurdity in the action Of the Id, A.O, while determining the Income in the hands of assessee The addition made by Id. A.0 thus; is unsustainable for the aforesaid reason also. Therefore; the protective addition made pmi 1.['A. No.l55, [N;Ig/2016 Assessmncnr yeal' :2007-08 Yee in the hands of the appellant is directed to be deleted in all the years of the block period. that the CIT(A) has given the finding of fact This is a fact 6.1 We noted that the substantive addition has been made in the hands of the assessee of the Income received by the assessee as sub-contractor: The in respect from his bank account in which the withdrawal made by the assessee the sub-contract receipts has been accepted arises out of the deposit of Such withdrawal, in our opinion, by no stretch of imagination said deposit: in the hands of the assessee, The can constitute assessable Income the taxable income of the business Assessing Officer while determining of the Bhangdiya Group made the disallowance of sub-contract entities the amount paid to the assessee but these payments were expenses being LLAT considered in income shown in the return ad receipt as business already Addition of such amount again on 8 receipt in the hands of the assessee. basis in the hands of the assessee does not have any leg to 'protective O2mi We, therefore; do not find ay illegality or infirmlty in the order of stand: which warrants our interference; The CIT(A) has rightly deleted the CIT(A) We accordingly confirm the order of CIT(A}_ Thus; the the addition. appeal filed by the Revenue stands dismissed: 7 In the result; the appeal of the Revenue stands dismissed. (Order pronounced in the open court on 23/06/2017 Sd] P K, BANSAL ) Vice President Sd_ (AMARJIT SINGH) Judicial Member Dated:23/06/2017 #Singh Hed_ 17F LT. Nu, 155/Na8/2016 Assessmetsl year' ;20)07-08 Copy of_the order forwarded to 1 2 3 4 5 The Appellant The Respondent Concerned CIT The CIT(A) DR: G&tA fle HExBEA ~ASstt _egistrar:' E [RibUntt UX EJn+tl ~AJun. 6: APP et 3