A,C.I.T. CENTRAL CIR.- 2(1), NAGPUR vs. SHRI AWDHOOT M SHIRPURE, AMRAVATI

#t 1.TA. Nus,98 to }01/Nag/2016 44 3i3 Asstt. Yrs:07-018, 08-009, 10-11 & 12-13 #3 IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH; NAGPUR BEFORE SHRI P_ K, BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER LTA Nos 98 to 10/Nag/201b Asstt_Yts_2007-08 08-09 10-11 & 2012-13 ACL.T_ Central Circle-2(1); Nagpur. Vs, Shri Awdhoot M, Shirpure; At Post: Varha; Tah;Teosa Distt-Amravati: PAN:AKBPS 5966 L (Respondent) (Appellant) Appellant by Respondent by Date of_hearing_ Date %f_pronouncement Shri A. R. Ninave Shri K. P Dewani 20/06/2017 23/06/2017 ORDER PER PK__BANSAL_VP AII these appeals have been filed by the Revenue against the common order of CIT(A) dated 18/01/2016 by taking the following common grounds of appeal except change in the figure: "{W) Whether On the facts and in the circumstances of the case; the Id. CITIA) was right in deleting the addition of Rs.37,95,021f- made on protective basis ? Whether on the facts and In the circumstances Of the case; the Id. CITIA) was justified in deleting the addition of Rs,37,95,021/- without appreciating the fact that the assessee has not executed any sub contract work and was only name lender ? Gp (1) On the facts and in the circumstances of the case and in law; the Id CIT(A) erred in ignoring the evidences Z [,TA. Nos.98tc 101/Nag/ZU16 AsstE Yrs-07-{8, 08-09, 1u-I1 & 12-13 found in the incriminating diaries which conclusively proved that the cash withdrawals made from the bank accounts Of the assessee were returned back and credited In the incriminating diaries maintained by Bhangdiya Group. (iv) On the facts ad in the circumstances of the case ad in law; the Id. CIT(A) erred in holding that sub contract wprk waS executed by the assessee ignoring the fact that the contract amount received from the Bhangdiyas waS returned to them as evident from the incriminating diaries ad no expenses were incurred for executing the contract On the facts and in the circumstances of the case and in Iaw; the Id. CITIA) erred in thwarting the very purpose of search and seizure provisions of the Act by ignoring seized incriminating documents. CT 2 The figures In assessment years 2008-09, 2010-11, and 2012-13 be read as Rs.39,77,340/-, Rs.1,35,53,500/- ad Rs.1,48,15,000/- in place of Rs.37,95,021/- Since the issues as well as the facts involved in ali these appeals are common therefore; both the parties agreed that all these appeals be disposed of by this common order on the basis of facts relating to assessment year 2007-08 and whatever view this Tribunal may take in assessment year 2007-08, the same view may be taken in alf the assessment years: In brief, the assessment year-wise details, date of filing the return, returned income; assessed income, additions made and the section under which the orders were passed are given as under: Sr; Np AY Date pf filling of ReEurned Retutn Income Assessed Section Income Additions disputed 2007-08 107.10.2013 509050 4304071 153C 3795021 2003-09 07, 10.2013 200670 4178010 153C 3977340 1.7',4 No5.98 to 101/Nag/ 2t}f6 Asstt. Yes-(}7-(V8, OR-(9), 10-[[ &12-[3 315 2QIO-11 (7.10,2013 1589480 151429B0 f53C 13553500 2012-13 01.11.2013 151550 14966550 143(3} 14815000 3_ The facts of the case; in brief are that a search & seizure action u/s 132 of the [.T. Act; 1961 was carried out In the Bhangdiya Group of cases n 19/07/2011. During the cqurse of search conducted at residential and office premises of Shri Mitesh Bhangdiya, certain incriminating papers and documents belonging to the assessee Shri Awdhoot M. Shirpure were found and seized. Therefore, notice dated 16/07/2013 u/s. 153C of the I.T. Act; 1961 was issued For the assessment years 2007-08, 2008-0g and 2010-11 ad served On the assessee 0 17/07/2013 requesting him to file the return of income within 30 days from the receipt of notice_ The assessee vide letter dated 07/10/2013 has raised an objection to the notice issued us 153C which iS reproduced in para 3 of the assessment order . The Assessing Officer has dealt with the objection raised by the assessee in para 4 of the assessment order by holding that though the search action uls; 132(1) was conducted in the case of Bhangdiya group but there is sufficient evidence available in the seized material which is incriminating Ind relates to the assessee_ The assessee however, had filed the returns of Income in response to notice U/s. 153C for all the years of the block period Shri Mitesh Gotumal Bhangdiya Is the key person of the group. Shri Mitesh Bhangdiya has two sons namely Shri Kirtikumar M. Bhangdiva and Shri Srikant M. Bhangdiya and one daughter Neha. The business of the Bhangdiya group is belng 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's sister , Smt: Pradnya, resident of Amravati and Smt Manisha 0. Maniyar, widowed sister of Shri Nagp 3k #TANos.98tO 101/182/2016 Asstl, Yrs.07-08, 08-09. 10-11 & 12-13 3Aj Mitesh Bhangdiya who iives 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: MGB} converted into a company M/s M.KS: Constro-venture Pvt: (AAHCM 0383 T) Ltd_ from 01/04/2011 Mahendra Construction; Prop. Shri Sanjay Heda (MC) 2 (AADPH 7109J) 3 Ms Mahendra Construction M.G, Bhangdiya (JV) (AANFMS6S8B} Ms Kirtikumar M Bhangdiya (Prop. KMB); converted into_ a company M/s MRS Acme Buildcon Pvt. Ltd. (AAHCMO38ZR) from 01.04.2011. (AGYPB1659G) 5 Ms RM; Bhangdiva Mahendra Construction (JV) (AARFR18ZOC) 6, Mjs Shrikant M Bhangdiya (Prop: SMB) (ATCPB1337J) 7 Mitcon Infraproject Pvt; Utd. (MIPL) (AAGCM1868H) 8 MITZ Infraproject Pvt: Ltd. (AAGCM3O4ZA)_ 9. Sakshi Gruh Nirman Pvt: Ltd. (SGNPL) (AAOCS7974G) Stone Crusher Infraventure Pvt. Ltd; 10. Balaji (AADCB5273C) The Bhangdiya Group has also entered into joint ventures with various other civil contractors. Some af them are as under: 1 Ms, M,G. Bhangdiya Hitbhav Engg; (JV} (AAOFM4745L) 2 Ms: MG, Bhangdiya & S.s. Patll & Co. (JV) (ABIFS364SL) 33 Ms: Darshan Construction (JV) (AAHFDO65AN) 4_ Ms M.R. Dhoble & RM: Bhangdiya (JV) (AAPFMO6ZZB) 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 of search operations incriminating documents were found and seized from the residential premises of Shri LP? ELl; 1.T.A, Nos,98 L0 101/NagfZI)LG1 Asstt, Yrs:07-0R, (A-(9, 10-11 & 12-13 5it Mitesh Bhangdiya. Item no. 1 to 65 of 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 path on 20.07.2011. In his sworn statement recorded during the course of search action; Shri Mitesh Bhangdiva as confronted with the entries borne out from the seized diaries marked as B- 1 to B-65 and to explain the contents of these diaries, Shri Mitesh Bhangdiya 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 a 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 Bhangdiva group which was confirmed by Shri Mitesh G, Bhangdiya in his statement dated 14/09/2011. The Assessing Officer has reproduced the statement of 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. 200g-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 maintained for income-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 Awdhoot M: Shirpure, the assessee, recorded during the action: The Assessing Officer has reproduced the statement Of Shri Awdhoot M. Shirpure in the assessment order. The Assessing Officer, on YaGPU} J003r L.T,4, Nus.98 to 10] /Nag/2016 Asstt Yrs:O7-Ox, 08-09, 10-11 & 12-13 318 the basis of the statement of Shri Awdhoot M. Shirpure; concluded that the bank accounts of the assessee were being handled by Shri M.G. Bhangdiya The Assessing Officer has given a summary of all the bank group. 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 in each af the assessment holding that there were no expenses incurred and no contract work vear was executed by the assessee who, according to the Assessing Officer, is merely a name lender to the Bhangdiya group: The assessee care in appeal before the CIT(A) challenging the notice issued u/s 153C as well as cash withdrawals from bank on protective basi5. The the addition for CIT(A) deleted the said addition in all the years. 1'> 0.9] 1//e; ra 2 axv3O: keloie Us under Eule 27 of the I.T.A.T. Rules for each of the assessment year 2007-08, 08- 09 and 2010-11 challenging the validity of the notices issued u/s 153C of the Act as there was no incriminating material belonging to the assessee found in the course 0f search: It was stated that the assessments In the case Of the assessee were framed u/s 153C read with section 143(3) of the The assessee before the CIT(A) raised ground No 1 and challenged Act, notices issued Ufs 153C of the Act: The CIT(A) has the validity of the dismissed the ground chailenging the validity of the notices issued U/s 153C the appeals Of the assessee On merit due to which and decided all made in the hands of the assessee stand deleted: protective addition the assessee did not file any appeal or the Cross Under these facts, Objections taking the ground &5 regards to the validity of the notice u/s It was contended that there is no incriminating material 153C of the Act: GPux E 1.T,A, Nos.9810 1Ol/Nag/2016 Asstt. Yrs:)7-(8, 08-03, 10-11 & 12-13 Zat 312 found and seized for the assessment year 2006-07 to 2011-12 belonging to the assessee in the course f the search at the premises of Shri M,G. Bhangdiya. Attention was drawn towvards the satisfaction note which refers to item No: 54 and 8 of Annexure-B and item No. 27 of Annexure-Bl, 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 notice UJs 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 us 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.T.A.Nos 146 to 148/Nag/2014 in which the Tribunal vide order dated 19/12/2016 held that satisfaction for Issuance of notice u/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 Iaw and consequent assessnent framed is bad in law. 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 he validity of the Issuance of notice u/s 153C before the CITCA) but the assessee did not press this ground before the CIT(A) Even no submissions were made for which our attentio was drawn towards page No. 21 para 12 of the order of CIT(A): Even otherwise on merit the assessee contended that the diary seized dluring 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 not found. MAGQun 5_ We have heard the rival submissions, carefully considered the same along with the orders of the tax authprities below. Coring to the [LT.AN0s,98to [Ol/Nag/2016 Asstt. Yrs;0}7-08, 08-019, 10-11 & 12-13 adjudication and admission of ground taken by the assessee about the validity of the notice issued u/s 153C and consequently cancellation of the 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 prder appealed 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 CITIA); 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 Tr4B said ground of the assessee $ the assessee neither filed any submission nor ressed this ground during the appellate proceedings. Whatever may be reason, the fact remains that the ground taken by the assessee about JNI the validity of the notice ujs 153C ad also the validity of the consequent assessment framed thereupon stands dismissed by the CIT(A} Therefore, in Qur opinion; the assessee complied with the condition as stip ipulated under Rule 27 of the ITAT Rules and 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 ITANos.98 to 10L/Nag/2016 Asstt; Yrs:07-QB, 08-09, 10-11 & 12-13 noted that this section prior to the amendment made by the Finance Act; 2015 with effect from 01/06/2015 states 2s under; "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 ad section 153, where the Assessing Officer i5 satisfied that 'anY money; bullion jewellery or Other valuable article Or thing: Or books of account Or documents; seized Or requisitioned, belongs Or belong to 7 person other than the person referred to in section 1534 then the books Of account or documents Or assets seized Ot requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person. This section has subsequently been amended by Finance Act; 2015 with effect from 01/06/2015 The amended section reads as under: "153C Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 &d section 153, where the Assessing Officer Is satisfied that (a) Any money; bullion jewellery ar other vatuable article or thing; seized or requisitioned, belongs to; or (6) Any bpoks Of account Or documents, seized Or requisitioned, pertains or pertain to, or any information contained therein; relates to; TAp ONM 5 3 person other than te person referred to in section 1534 then, the books of account or documents Or assets, Seized or requisitioned shall be handled over to te Assessing Officer having jurisdiction over such other person. 470540- The Finance Bill, 2005 in its memorandum explaining the purpose for which this amendment was made reads a5 under: "Section 153C of the Act relates to assessment of income of any other person. The existing provisions contained in sub- section (1) Of the said section 153C provide that notwithstanding anything contained in section 139, section 147, section 148 section 149, section 151 ad section 153, L.7.A,Nos.98 t0 101/Nag/2016 Asstt. Yrs:07-08, 08-09, 10-11& 12-13 where the Assessing Ofnicer is satisfied that any money; bullion; jewellery or other valuable article or thing or books af account or documents seized or requisitioned belong to any person; other than the person referred to in section 1534 then the books Of account or documents or assets seized or requisitioned shall be handed pver to the Assessing Officer having jurisdiction over such other person ad that Assessing Officer shall proceed against each such other person and issue such other person notice ad assess Or reassess income of Such other person in accordance with the provisions of section 1534 Disputes have arisen; 35 to the interpretation of the words "belongs to in respect of a document a5 for instance when a given document seized from & person i5 & copy of the original document Accordingly, it is proposed to amend te aforesaid sectian to provide that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 ad section 153, where the Assessing Officer is Satisfied that any money, bullion, jewellery or other valuable article Qr thing belongs t0, Dr any books Of account Or documents seized Or requisitioned pertain to; Or any information contained therein, relates to, any person; other than the person referred to in section 1534 then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue Such Other person notice and assess Or reassess income of such other person in accordance with the provisions of section 153A, Subsequently; the CBDT has brought out Circular No. 19 of 2015 dated 27/11/2015 bY which explainatoty note to the provision of Finance Act, 2015 were discussed; The explainatory note in the circular relating to the amended provision of section 153C read as under: "39, Assessment of income of a person other than the person in whose case search has been initiated or books Of account; other documents or assets have been requisitioned. Lute ITANos.98 to 101/Nag/2016 Asstt; Yrs:07-08, 08-09, 10-11&12-13 39.1 'Kion 153C of the Income-tax Act relates to a5sessment of income of any person other than the person in whnsc: case search ha5 been conducted Dr requisition has been made The provisions contained in sub-sectian (1) of the section 153C, before amendment made by the Act; provided that notwithstanding anything contained In section 139, sectian 147, section 4 48, section 149, section 151 and sextion 153 of the Income-tax Act; where the Assessing Officer is satisfied that ay money; bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to any person; other than the person referred to in} section 1534 Of the Income-tax Act; then the books Of account Or documents Or assets seized Or requisitioned shall be handed over to the Assessing Oflicer having jurisdiction over such other person ad that Assessing Officer shall proceed against each such other persan and issue notice and assess or reassess incame af such other person in accordance with the provisions of section 153A. 39.2 Disputes have arisen &5 to the interpretation of the words "belong to in respect of a document as for instance When a given document seized from & person is & COpY 0f the original document: Accordingly ; section 153C has been amended so as to provide that notwithstanding anything contained in section 139, section 147 section 148, section 149, section 151 and section 153 Of the Income-tax Act where the Assessing Officer is satisfied that any money, bullian jewellery or other valuable article or thing belongs to, or any books Of account or documents 5eized pr requisitioned pertain to; Or any information contained therein relates to; any persan; Other than the person referred to in section 1534 f the Income-tax Act; then the books af account or documents 0r assets seized r requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person ad that Assessing Officer shall proceed against each such other person and issue notice and assess Or reassess income Of such other perspn in accordance with the provisions of sectian 1534. 39.3 Applicability: This amendment has taken effect from te Ist day of June; 2015. T.TANos.98to 101/Nag/2016 Asstt, Yrs-07-08,08-09, 10-11 & 12-13 1 Z2H 5,3 Ti vilz& U' tiiis; it 15 apparent that tne anicnderl section 153C are not retrospective and are applicabl e with @ffect from 01/06/2015 ad not prior to that. In the case of the assessee, search JS well as notice U/s 153C has been issued prior tg 01/06/2015, Since in the case of the assessee action us 153C has been taken by issuing the natice dated 16/07/2013 in consequence Qf the search catried 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 during the impugned period, the condition precedent for issuing notice us 153C and assessing Or reassessing the income of such other person' is that the money; bulllon; jewellery or other valuable article or thing; books of account or document seized or requisitioned which belong to such person where documents 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 ujs 153C, in our opinion, cannot be held to be valid: Hon'ble Delhi High Court in the case of Pepsi Foods Pvt: Ltd. vs, ACIT 52 axman.com 220 (Del}; we noted has als0 categorically held that before a btice 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 xntil it is established that the documents seized did not belong to the searched person; the pravision of section 153C did not get attracted This is not disputed that the notice in the case of the assessee ujs 153C has been issued in consequence of search seizure action taken uls 132 in the Bhangdiya Group from whom premises diaries marked B-1 to B-65 were found and seized: These diaries belong to the Bhangdiya Group not to the assessee, Even though the name of the assessee Is mentioned in the diary that does not mean that the diary belong to the assessee. It may be said that the diary contains the LTA Nos.98 to 101/Nag/2016 Asstt: Yrs;07-Q8, 08-09, 1O-17 & 12-13 informatian regarding the assessee, In our opinion, even the amended provisicn 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 'belongs or belong' to word 'pertain or pertain to or any information contained therein' . Now under the amended provision; even if the material seized does not belong to the assessee but it contains the informatian relating-to the assessee; the proceedings initiated Ws 153C will be valid, But this amended provision; as is apparent; is applicable from 01/06/2015, Leamed DR, before U5 even though vehemently relied On the order Of the Assessing Officer but could not adduce ay cogent material ar evidence which may prove that the diaries faund and seized during the course of search in Bhangdiva 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. Sane view_has been_taken by Hon'ble Bombay Higj Court in the case af 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 te assessment year only on protective basis which proves that the Revenue was also nat satisfied with the incriminating material in fact belong to the assessee_ On this basis we set aside the order of CIT(A) and hold that the notice issued u/s 153C is not valid and in consequence thereupon; the assessments Made for assessment years 2007-08, 08-09 and 2010-11 are annulled. Thus; the ground taken by the assessee under Rule 27 is allowed, 6 Now coming to the ground taken by te Revenue in all the appeals We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below; We noted that the Assessing 4o38l 326 [I.A Nos.98 t0 101/Nag/2o]6 Asstl, Yrs:07-018, (8-DS, 10-11 & 12-13 Officer has made the additian in each of the assessment year 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 befare the CIT(A); the CIT(A) deleted the said addition in all the assessment vears by observing a5 under: "9.1 Before adjudicating the issue in hand It would be relevant to briefly discuss the background of additions made in the case of Shri Mitesh G, Bhangdiya & Group concerns on the basis of seized evidences a5 per Annexure-B-l to B-65, The Ld AO has made the total addition Of R5.182.52 Crs in the hands pf various concerns of Bhangdlya 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, Out of the total addition af 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 ta the cheque payments made to the Sub- contractors by various entities Of the Bhangdiya group The various concerns Of the Bhangdiya group had made the payments by account payee cheques to the sub-contractors The Ld AQ 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 fram the accounts Of the subcontractors has been found deposited on the credit side of the seized diaries marked as Annexure 8-1 to B-65 seized from the premises of Shri Mitesh 6, Bhangdiya. Thus, the Ld. AO had inferred that the Bhangdiva group by adopting Such modus-operandi had inflated the expenditure by making cheque payments &d 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 withdrawm from the account of the subcontractors which is 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 Woja #hiti' 1,1 4A. Nus,98 t0 101/[ag/Z01b 10-11& 12-13 2452 327 Asstt_ Yrs:07-018, (18-(19) , 44 site Further that the money kept by sub-contractors waS returned to them Or through any of the intermediaries In the course Qf handling of cash The Assessing Officer however, declined to agree with the explanation filed by the appellant and has held that all the Zl sub-contractors examined by him are merely name lenders and the amounts paid to them under the head sub-contracts are bogus payments, therefore, the corresponding receipts by way of withdrawals from the bank accounts Of the subcontractors i5 liable to be added 75 unaccounted income in the hands Of various concerns Of Bhangdiva group In} various assessment years of the block period in proportion to the cheque payments made by such 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 vears: In assessment year 2006-07, the nature Of work executed for Vidarbha Irrigation Development Corporation remains the same 35 in the case of assessee for subsequent assessment years. The sub contractors who have executed the works are &ls0 similar in the various assessment years. 9.3 The A.0. 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 Crcle-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 contractors pursuance to receipt of notice under section 153C of IT Act 1961. The assessments have been framed under section 153C of LT Act 1961 by the same A.O. 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 A.0. 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 'wozh) 3a8 1,7',4. Nos.98 ta 101/Nag/2ul6 #iit_ Asstt Yrs:07-08, 08-(J9, 10-11& [2,13 the payments made by Bhangdiya group to such sub contractors are bogus, 9.4 In view of the huge variance in the income assessed as percentage to receipts by the AO ad various infirmities a5 emanated from the arder of the AO; net profit has been estimated 16% Of gross receipts in the hands pf 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 a5 payments t0 sub-contractors was disputed and doubted by the AO. The survey action comprises AY 2006-07 to AY 2008-09 which are a/s0 forming part of the block periods for the search action conducted on the assessee grup On 19.07.2011. The Hon'ble ITAT, Nagpur Bench; Nagpur after having considered the similar activity of business and deficiencies in subcontract payments found during the action conducted On 17.02.2009 has decided the Survey appeals for AY 2006-07 to 2008-09. The Hon'ble ITAT, Nagpur Bench, Nagpur after considering the impounded material has directed the AO to adopt the net profit @ 12% as against net profit adopted by AO 14%. 2 9,5 In view of the above facts and circumstances and in view of various infirmities and various judicial keeping 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 2012-13 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 0n the similar activities of business under the similar circumstances. in order to cover up the undisclosed investment Of However; Rs. 26 crores in immovable properties ad the undisclosed investment in jewellery to the tune Of Rs. 2,37 crores enhanced net profit 169 of total turnover was estimated in the appellate orders dated 31/12/2015 in the cases Of ~wo5 a L7.A. Nos,98 t0 1(HI /Nag/2016 JE Asstt_ Yrs-(7-08,08-09, 10-11 & 12-13 Bhangdiya group as against net profit of 12% estimated by Hon'ble ITAT; as the issue of undisclosed investment in assets was not there before the Hon 'ble ITAT in the survey appeals. I0, Thus have considered the submissions made by the appellant and evidence on record. It is seen that the appellant is 3 sub-contractor and executing work for various business entities belonging fo 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 ufs 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 201O-1l & 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 ad has referred to seized documents inventorized a5 B-l to 65. In the case Of Shri Mitesh Bhagdiya, the AO has found that the withdrawals made from the bank account of 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 is only name 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 and i5 disallowed ad added in the respective assessments framed in Bhangdiya group: The A.0. further observed that the cash withdrawn from the bank is added a5 Income on protective basis 25 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 a5 well a5 in the return submitted in response to notice issued ujs 153C of IT Act 1961. In the return ot 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 order 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 Juoba I."T.A. Nos.98 tu 401_ /Nag/2016 Asstt, Yrs:07-08, OB-(J9, 10-11 & 12-13 330 It i5 seen that the profit and loss account &d balance sheet submitted along with the return pf income have not been discredited in the assessment framed in the case of the The A.O. in fact has assessed income returned appellant without inviting any adverse abservation 25 to income declared from sub-contract work. 1033 It is seen that the withdrawals from the bank account are reflected in the books Of account On the basis of which has been returned The withdrawals from the bank income already been considered for the purpose pf having determining income at the hands of appellant a5 shown in the cannot separately constitute income liable to be return assessed in the hands of appellant The addition made by A,0: i5 thus unjustified and unsustainable, 10.4 It is further seen that the A.O. has made observation in the assessment order to te effect that In the case of Shri Mitesh Bhagdiya group disallowance has been made for various expenses claimed On account of sub-contract expenses which Includes payment to appellant: It is settled proposition 0f 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 much less On protective basis in the case Of the income appellant: The 4.0. 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 ad assessed a5 business receipt in the hands of the appellant, Addition of such amount again On protective basis defies logic [ do not find ay rationale to make Such protective assessment Of the withdrawals made from bank account of assessee in the hands of assessee himself The income assessed on protective basis therefore; is held to be unjustified and unsustainable on this count a5 well 10.5 The gross receipts in the case of the appellant as well as retured income along with the percentage of income has been tabulated by the appellant for various assessment years and the same Is reproduced herein under: QOQui [LTA. Nus,98 to [O]/Nag/2o[6 ASS1L. Yrs-07-018, 013,(19, 10-11& 12-13 33 Shri Awdhoot M. Shirpure TURNOVER, RETURNED INCOME AND ASSESSED INCOME AY 2007-08, 2008-09, 2010-11 and 1012-13 ASSESSMENT YEAR 2007-08 2008-09 2010-11 2012-13 GROSS RECEIPTS S0, 10,068 50,34,386 3,79,80,542 NO RECEIPT RETURNED INCOME 5,09,050 2,00,670 15, 89, 480 1,51,550 90 OF GROSS RECEIPTS 10.1690 3.990u 4,1896 NO RECEIPT ADDITIONS UNDER SECTION 153C 37,95,021 39,77,340 1,35,53,500 1,48,15,00 ASSESSED INCOME 43,04, 071 41,78,010 1,51,42, 980 1,49, 66,550 Op QF GROSS RECELPTS 85,9100 82.9954 39,8706 NO RECEIPT 10.6 It i5 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 in the hands of the appellant is directed to be deleted in all the years of the block period 6.1 We noted that the CIT(A) has given the finding of fact This is a fact that the substantive addition has been made in the hands af the assessee in respect of the income recelved by the assessee as sub-contractor in each of the assessment vears. The withdrawal made by the assessee from his bank account in which the deposit of the sub-contract receipts has been accepted arises out of the said deposit: Such withdrawal, in our opinion; by no stretch of imagination can constitute assessable income in the hands 1 Mooe) LT.A Nos.98s [0 10l/Nap/Z016 Assti, Yrs.o7-08,08-09, 10-11 & 12-13 of the assessee; The Assessing Officer while determining the taxable of the business entities of the Bhangdiya Group made the incomc disaliowance of sub-contract expenses being the amount paid to the assessee but these payments were already considered in income shown in the return and receipt as business receipt in the hands of the assessee_ Addition of such amount again On protective basis in the hands Of the does have any leg to stand_ We, therefore, do not find a5sessee any illegality Or infirmity in the order of the CIT(A) which warrants Qur interference. The CIT(A) has rightly deleted the addition in each of the assessment Year, We accordingly confirm the order of CIT(A) Thus, the by the Revenue in each of the assessment vear stand appeal filed dismissed. 7 In the result; all the appeals of the Revenue stand dismissed (Order pronounced in the open court on 23/06/2017 - Sd} - (AMARJIT SINGH) Judicial Member PK BANSAL ) Vice President Dated:23/06/2017 4 Singh Copy of the order forwarded_to 1 1 The Appellant 2. The Respondent 3. Concerned CIT 4. The CITA)