A,C.I.T. CENTRAL CIR.- 2(1), NAGPUR vs. SHRI MITESH BHANGADIYA, NAGPUR

47 ITA.No-56 to 61/Nag/2016 I.T.A.No.Z61 to 265/Nag/2016 Assessment Year5;2007-08-2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K BANSAL VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER I.TA Nos; 56 TO 61/Nag/2016 Assessment Years:2007-08 TO 2012-13) ACIT CENTRAL CIR 2(1}, 3RD FLOOR, ROOM NO. 312, AAYAKAR BHAWAN_ CIVIL LINES_ NAGPUR 440 001, (Appellant) Vs MITESH GOTULALJI BHANGADIYA 20-2, HOUSE NO. 526, NEAR GATEWELL HOSPITAL; DHANTOLI, NAGPUR 440012 PAN: AERPB2SO3E (Respondent) I,T,A. Nos. 261 TO 265/Nag/2016 Assessment Years:2007-08 TO 2011-12) MITESH GOTULALJI BHANGADIYA 20-2, HOUSE NO. 526, NEAR GATEWELL HOSPITAL; DHANTQLI; NAGPUR 440012 PAN: AERPBZSO3E (Appellant) Vs DCIT CENTRAL CIR 2(1), AAYAKAR BHAWAN, CIVIL LINES, NAGPUR 440 001, (Respondent) Revenue by Assessee by Date of hearing Date Qf pronouncement Shri A, R, Ninave Shri K, P. Dewani 19/06/2017 29/06/2017 QRDER PER BKBANSALVB All these cross appeals have been filed against the order of the CIT(A) dated 30/12/2015. The assessee in all the assessment years in its appeal has taken the following common grounds of appeal; 698 ITAA No 56 to 61/ Nag/2016 ETANc261to 265/Nag/2016 Assessment Years:2007-08-2011-12 2 "1 The notice issued under Section 1534 1961 is Illegal, Of LT Act; invalid and bad In Iaw and assessment framed thereupon i5 liable t becancolsequent 2 Thee Learned CIT(A) ought to have directed to the income accept a5 Shown in return filed us. pursuance to notice 153A Of IT. Act 1961 and deleted the entire addition as made by the A.o. in the assessment framed.

The Learned CIT(A) erred in not accepting the_ of assessee t prayer adopt net receipt for determining the estimated income at the hands of assessee after the excuding recoveries made by the Government Departments On account of material supplied, sales tax and service tax etc: 4, The addition confirmed by learned CIT(A) adopting 16% of receipts is unjustified, by excessive; unwarranted and PE 5 The learned CIT(A) erred In upholding the part addition made by A.O. by adopting 16% of receipts; 6. The assessee denies liability to pay interest under section 2344 2348 and 234C of IT Act 1961, Without prejudice levy %f interest under section 2344, 2348 ad 234C of IT Act 1961 {5 unjustified, unwarranted excessive; and 2 The Revenue in its appeal for A.Y.07-08 has taken grounds of appeal. the following Similar grounds are taken except change in figures: in A.Y.08-09 to 12013 I Whether On the facts and circumstances of the and in law the Ld; CIT(A) was right in thwarting te vese purpose Of search very and seizure provisions of the ignoring seized Act by incriminating directing the A0 to tcx theaticomeorunrests and thereby based on presumed On surmises; percentage 25 Whether on the facts ad circumstances of the and in law the Ld CIT(A) Case was right in not affording the oppartunity bo the AO Or being heard during proceedings despite Ao hasespecificardy dkieg appeeate being 3 694 ITANo.56 to 61/Nag/2016 IT.A,No.261 to 265/Nag/2016 Assessment Years;2007-08-2011-12 heard vide his letter dated 19.02.2015 &d thereby passing order in undue haste ignoring provisions of the Act: 3 Whether on the facts and in the circumstances Of the case ad in law the Ld. CIT(A) was right in deleting the addition of Rs. 40,98,887/- made on account of bogus sub- contract payments? Whether on the facts ad in the circumstances of the case and in law; the Ld. CIT(A) was justified in deleting the addition of Rs. 40,98,887/- made On account of bogus sub- contract payments without appreciating the fact revealed from the seized materials and statements recorded that the sub-contractors are only name lenders and have not executed any sub-contract? 5. Whether on the facts ad circumstances of the case and in law the Ld. CIT(A) waS right in holding that the incriminating diaries seized From residence of the main person of the group cannot be said to be belonging to Particular concern ignoring the documentary evidence and the admission of Shri Mitesh Bhangdiya himself that the entries in the diaries pertain to the details of cash flow of assessee group's business activity &nd the entries in the diaries were not completely recorded in the bopks Of account; 6. Whether 0n the facts and in the circumstances of the case and in Iaw; the Ld, CIT(A) was right in deleting the addition Of Rs. 94,82,027/- being unaccounted income? 7 Whether on the facts and in the circumstances of the case and in Iaw; the Ld. CITA) was justified in deleting the addition Of Rs; 94,82,027/- being unaccounted incame without appreciating the evidences found and seized during the search &nd seizure action? 8, Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) was justified in directing AO to adopt total income of the assessee at the rate of 16% gross receipt by ignoring the findings given by the AO regarding bogus sub-contractors, unaccounted income and gratification payments? Zni IT,ANo.56 ta 61/Nag/2016 IT,ANo,261 t0 Z65/Nag/2016 Assessment Years;2007-08-2011-1z 9 On the fact ad circumstance of the case and in Iaw the Ld CIT(A) erred in accepting assessee'5 contention that various sub contractors used to keep deposit of money withdrawn by them from bank with the assessee group for safe custody which was recorded on the credit side of the incriminating diaries without appreciating that if the contention Of the assessee is true then the credit entries shall be in the name of the sub-contractors but the fact is otherwise as only names of the banks were found written there 10, On the fact ad circumstance of the case ad in law the Ld CITIA) erred in accepting assessee's contention that the sub contractors kept their money for safe custody with the assessee group ad amounts in small quantities were later withdrawn bv them for meeting the expenses at sites by ignoring the fact that none of the names Of the sub contractors appeared on debit side Of the incriminating diaries; 11. On the fact &d circumstance &f the case and in law the Ld CITIA) erred In not calculating exact unexplained expenditure and unaccounted investment mentioned in seized incriminating diaries 35 weli as inflated claim Of expenditure in various projects &d directing the AO to assume certain percentage 12 On the fact and circumstance of the case and in law the Ld. CIT(A) erred in holding that having been accepted receipts from the assessee for assessing the income in the hands of sub contractors the payments made by assessee group to such sub contractors cannot be treated a5 non genuine,, ignoring the fact that sub contract payments were assessed in the hands %f the assessee group as bogus sub contract payments ad in the hands of the sub contractors protective assessments were made by treating the entire receipts a5 income a5 no cantract was executed, 13, On the fact ad circumstance of the case &d in Iaw the Ld. CIT(A) erred in observing that unaccounted payments Or unallowable expenses like gratification paid to various politicians and government employers have no Owi 78 IT,A No.56 to 61/Nag/2016 IT,A.No.261 to 265/Nag/2016 5 Assessment Years:2007-08-2011-12 corroborative evidence on record to hold that assessee has made payments of any illegal gratification: The onus in On the assessee to prove that the payments were genuine and incurred legally. As the cash payments were not recorded in the regular books of account and aS the assessee failed to substantiate those payments, the CIT(A) ought to have upheld that the entire amount of Rs. 171.10 crores I5 unaccounted expenditure 14 On the fact and circumstance of the case and in law the Ld. CIT(A) erred in relying On the decision Or Hon ble ITAT in Bhangdiya group Of cases 35 at that time the information contained in incriminating diaries Was not available either to the AO or to the appellate authorities while restricting it to 12%. The CIT(A) ought not have relied On the decision Of Honble ITAT when seized documents prove clear concealed income ad unexplained expenditure: 15 On the fact &d circumstance of the case and in law the Ld, CIT(A) ought to have appreciated the fact that in the case Of assessees group it is not feasible to estimate the net profit at a particular ratio a5 out of gross receipts of 579 crores the assessee group made unaccounted payments to the tune of Rs. 171 crares and hence spent only Rs. 408 crores towards execution of contract wOrk Whatever profit was derived On execution Of the contract work by the assessee group; to that profit unexplained unrecorded expenses of Rs. 171 crores were required to be added to arive at the correct taxable income Of the a5sessee M 16,. On the fact ad circumstance of the case and in law the Ld CITIA) failed to appreciate that the taxable income need not be equal to the actual net profit derived by the assessee 35 it may include addition towards various other provisions Iike section 40A(3) , 40(a)(ia) , 68, 69, 69C etc and in the case Of the assessee group addition ufs. 69C is applicable 7ex- ET ANo.56 to 61/Nag/2016 ET.A,No.261 to 265/ Nag/ 2016 Assessment Years:2007-08-2011-12 3_ Ground No: 1 & 2 taken by the assessee were not pressed during the course of hearing therefore, these grounds are dismissed as not pressed. 4 Ground Nos. 3 to 5 in assessees appeal as well as ground nos. 1, 2 16 in Revenues appeals relate to the common issue regarding the detetion of addition made QOn account of bogus sub-contract payment, deletion Qf addition being unaccounted income by the CIT(A) and sustaining the addition by CIT(A) by estimating the profit by adopting 16% of the gross receipts. 5 The facts and circumstances and issue involved in all the six years of the appeal are similar and identical therefore, all these appeals ae being disposed of by this consolidated order for the sake of convenience The assessment year-wise details of date of filing of return; returned inicome assessed income and the section are laid down as under: 5 NoJA,Y Date Df filing Qf return Returned Income (Rs ) Assessed Income Section ((Rs;) 2007-08 31.01.2013 4795480 16472525 1534 2 2008-09 31.01.2013 4162970 13743360 1534 3 200g-1Q 31.01.2013 8805660 14465371 1534 2010-11 31.01.2013 113080060 262827426 1534 2D11-12 31.01.2013 '3552534Q0 745949819 1534 2012-13 03.12.2013 10421350 101024303 143 {3) 6_ The facts of the case; in brief; are that Search and seizure operations were conducted in the residential premises of Shri Mitesh G, Bhangdiya on 19/7/2011. Simuttaneously search actions were carried out in other premises belonging to Bhangdiva Group including three Fez IT ANo,56 to 61/Nag}2016 LTANo,261 to 265/Nag/2016 Assessment Years:2007-08-2011-12 residential-cum-business premises, one office and one residential premises which are spread across Nagpur, Amravati; Chandrapur; Wardha and Bhopal. Another seven premises at Nagpur, Chandrapur and Mumbai were also covered under section 1334 of the IT. Act During the course of search, books of accounts and large number of incriminating documents and diaries were found and seized, Thereafter notices us 153A of the I.T. Act dated 28/12/2012 were issued and served on assessee o 01/01/2013 requiring him to file the returns of income within 30 days fram the receipt af the notice; The assessee has filed the return for each of the assessment years in response to notice Ufs 1534 declaring income as mentioned in the table given herein above; 6.1 The assessee i.e. Shri Mitesh Gotumal Bhangdiya is the key person of the group: His family consists of the follawing members: Shri Mitesh G, Bhangdiya (MGB) + Megha (Wife of MGB) Kirtikumar (son) + Sonal (wife of Kirtikumar) Shrikant (son) + Aarti (wife of Shrikant) Neha Daughter Besides; the business is handled by Shri Kirtikumar M Bhangdiya (hereinafter referred to as KMB) and Shri Shrikant M Bhangdiva (hereinafter referred to as SMB) The other important persons in the group are: Shri Sanjaykumar Rameshchandra Heda; husband of MGB's sister; Smt: Pradnyd, reslding at Amravati ad Smt: Manisha 0. Maniyar, widowed sister of MGB who lives with the MGB family. 6,2 4.1 The business concerns of the group (including those discovered as a result of the search action) are as follows 1 Ms M.G. Bhangdiya (AERPB2503E) (Prop. MGB); converted into 2 company Ms M.KS: Corstro-venture Pvt; (AAHCM0383T) Ltd. from 01,04.2011, Zoh LTANo.56 to 81/Nag/2016 ITA No.261 to 265/Nag/z016 Assessment Years;2007-08-2011-17 8 Ms_Mahendra Construction; Prop: Shri (AADPH71O9J) Sanjay Heda (MC) 33 Ms Mahendra Construction 85 MG; (AANFM5658B) Bhangdiya (JV) 4 Ms Kirtikumar M; Bhangdiya (Prop. KMB); company Ws M.KS Acme Buiidcon converted into 3 Pvt; Ltd. from 01.04.2011 (AAHCM0382K) (AGYPB16S9G) 5 Ms KM; Bhangdiya & Mahendra (AAKFKIBZOC) Construction (JV)

MitsShrikant M Bhangdiya (Prop:; SMBYATCPB1337J) 7 Litcon Infraproject Pvt itd: (MIPL) (AAGCM1868H) 8 Lokshahi Publications Fvt; Lta (LPPLJ(AABCL6673L) 9 MITZ Infraproject Pvt; Ltd (AAGCM3O47A)

Sakshi Gruh Nirman Pvt: Lta: (SGNPLYAAOCS797AG)

Balaji Stone Crusher & Infraventure Pvt, Ltd (AADCB5273C) 6.3 The group has also entered into joint ventures with various ather civil cantractors of the city to secure some civil contracts A few of them are listed below: 1. 2. 3, 4 Ms MG Bhangdiva & Hitbhav Engg (JV) (AAOFM474SL) Ws MG: Bhangdiya & S. S. Patil & Co Ms Darshan Coasteuiction { PatiAAHFDOGS ABIFS3645L) M/s M R Dhoble 8s K M Bhangdiya (JVJ(AAPFMO6Z2B) 6.4 The nature Qf the business of the group primarily is executing civil contracts. The group work mainly for Government: departments like Ms Vidarbha Irrigation Development Corporation and engaged in executing various contracts pertaining to the irrigation projects in the state of Maharashtra, The evidences seized from the business and residential premises reveal that the entire business activities are managed by Shri Mitesh Bhangdiya and his sons. 6.5 During the course of search operations several incriminating documents were found and seized fram the residential premises of Shri Mitesh Bhangdiva. Item no. 1 to 65 of Annexure-B seized from his 7e5 IT.A.No.56 to 61/Nag/2016 ITAN-261 t0 265/Nag/2016 Assessment Years;2007-08-2011+12 residence are the diaries containing ledgers, daily cash books and bank baoks maintained by the Bhangdiya group. 6.6 Survey operations us 1334 were also conducted against the Bhangdiya Group on 17/02/2009. During the survey operations, it was noticed that the assessee group has inflated the expenses, especially sub- contract expenses; to earn unaccounted income. The assessee Group has accepted the discrepancies and disclosed additional income Of Rs.11,04,48,592/- for the period from AY 2006-07 to 2009-10_ Apart from the above disclosure made during survey operations, the assesee Group has also made additional disclosure of Rs 26 Crore consequent to the search operations, as discussed in ttie subsequent paras below: 6.7 The Assessing Officer in para-5.1 of the assessment order has highlighted the significance of diaries seized at Annexure B-l to B-65. According to the Assessing Officer , the analysis of the entries in the diaries reveals that on receipt side variqus receipts including receipt from withdrawals from bank accounts of group entities and sub- contractors were recorded and on payment side entries of expenses like interest payments; repayment Of loans, deposits into bank accounts, household expenses; personal expenses, payment to various persons in cash and investment in properties are found recorded. The Assessing Officer also found that some of the entries made in the seized diaries were also found reffected in the regular books account maintained by the Bhangdiya group: 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 Bhangdiya was confronted with the entries brne 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 reply to Q-30 of his statemerit recorded has submitted 7c6 IT,A,NO,56 to 61/Nag/2016 I.T,A.No.261 to 265/Mag/2016 Assessmant Years.2007-08-2011-12 Lo) that the entries in the diaries &d the ledger pertain to the business receipts and business expenditure but at present it is very difficult to state whether the entries recorded in the seized diaries are accounted in the regular books of account and the same aan be explained only after verification of entries Qf diaries with the regular books of account maintained by the Bhangdiya group. However, in his reply to Q-38 of his statement recorded On 20/0712011, Shri Mitesh Bhangdiya voluntarily offered additional unaccounted incore of Rs.26 crores (twenty six crores) for the biock period including te current financial year over and above the regular income declared in the returns of income filed for te assessrent years falling within the block periad in the hands of different assessees; During the course of assessment proceedings; Shri Mitesh Bhangdiya was summoned and his statement was again recorded on qath on 27/07/2013 by the Assessing Officer. Shri Mitesh Bhangdiva has confirmed his earlier statement made 0n oath on 20/07/2011 during the course of search action confirming the additional declaration of Rs.26 Crs. Shri Mitesh Bhangdiya in his statement recorded on 27/07/2013 by the Assessing Officer has clearly deposed that the seized diaries were primarily maintained by his father Shri Gotulalji Bhangdiya. The Assessing Officer has also recorded a finding that the seized diaries contain payments made in cash for probable extraneous gratification to various poli iiticians, government officerslofficials which are recorded therein; Prira-facie the Assessing Officer has neither examined such parties referred in the order nor brought any corroborative evidence on record in support of his finding that the payrents made in cash are for probable- extraneous gratification to various politicians and governmenit officersjofficials, despite ample time available Pm 72z IT ANo.56 to 61/Nag/2016 IT.A.No.261 to 265/Nag/2016 Assessment Years:2007-08-2011-13 6.8 The Assessing Officer had made efforts to match the entries of tax payment and receipts with the entries in the regular books of account of the Bhangdiya group. The Assessing Officer found instances where small amounts are found reflected both in the incriminating diaries and regular books of account; 6.9 The Assessing Officer noted that the assessee group has claimed huge expenses On account of sub-contract payments During the AY 2006-07 to 20+2-13 the Bhangdiya group has debited Rs.361 crores towards the sub-contract payments against the gross receipts aggregating to Rs.579 crores which constitutes 62% (not correct} of the gross receipts. On verification of bank accounts of the sub-contractors, the Assessing Officer found that payments were credited in the bank accounts of the sub-contractors through the cheques issued by the Bhangdiya group ad the amounts were subsequently withdrawn in cash. The Assessing Officer has further recorded finding that such withdrawals from the sub- contractors accounts are found credited to the daily cash balance of the seized diaries which were utilized for unaccounted payments ar unaccounted investments _ Shri Mitesh Bhangdiya in his statement recorded on 14/09/2011 had admitted that the entries in the seized diaries marked as Annexure B-1 to B-8S pertaln to daily cash handling of the group, and has reaffirmed in his subseguent statement dated 27/07/2013 recorded by the Assessing Officer. The cash withdrawn from the bank accounts of the sub-contractors and by them ad kept with the assessee for safe custody and to be issued at various sites as per the requirerents on behalf of such sub-contractors. The Assessing Officer concluded that these sub-contractors are name lenders, therefore; the payments made ta them is bogus expenditure. The Assessing Officer in his assessment order, though has discussed the issue of allowability or otherwise of the IT_A.No.56 to 61/Nag/2016 ET.A.No.261 to 265/Nag/ 2016 Assessment Years;2007-08-2011-12 12 expenditure made to these sub-contractors uls 69C but no such addition disallowance finally has been made. 6.10 The Assessing Officer in his order noted that statements of 17 sub- contractors to whom payments have been made by Bhangdiya group under the head subcontract payments were recorded during the survey proceedings in which they have confessed that they were mere name lenders. The Assessing Officer has als0 reproduced the statements of couple of sub-cantractors in the assessment order; The Assessing Officer has referred to the statements of 11 sub-contractors agreement for sub contract and all income-tax matters of these sub-contractors were being handled by the Bhangdiya group; The Assessing Officer has also mentioned that the persons at sites were getting a small amounts ranging between Rs.15,0Q0/- to 25,0ool - at the sites as advance from the assessee group perlodically In cash for making necessary expenses at sites ar ay other task assigned to them and the sub-contractors are also getting approximately Rs,15,000}- to 25,0001- per month: Thus, the Assessing Officer has concluded that the payments made to the sub- contractors are bogus which were siphoned back by the Bhangdiya group a8 per the seized dlaries, 6.11 The Assessing Officer had done the scrutiny of entries made in the diarles seized at Annexure B-l to 8-65 in the assessment order. The diaries are in the form of cash books which contained cash receipts on orie side and cash payments on the other side of each page: The receipt side of the seized diaries contains the amounts withdrawn from the bank accounts of the sub-contractors, the amounts withdrawn from the bank accounts of the Bhangdiya group concerns and amounts and amounts received from individuals; The narration of the entries in some cases mention name and place of the banks and at some places names of some of the sub-contractars are also found reflected. The cash receipts from Te8 2m Fcy IT A.No-56 to 61/Nag/2016 I.T_A.No.261 to Z65/Nag/zOI6 Assessment Years;Z007-08-2011-12 1} the other concerns of the Bhangdiva group are also reflected along with their bank names and such entries of cash are also found reflected on the payment side as well: The Assessing Officer observed from the seized diaries that there were cash transactions amongst the group concerns due to which some entries were found on both the sides, Thus, the Assessing Officer after considering the withdrawals from the bank accounts of the sub-contractors and the withdrawals made by Bhangdiya group concerns arrived at the financial vear-wise unaccounted receipts 35 found credited in the seized diaries as under: Financial Year Amount (In Crores) 2006-07 20.07 2007-08 36.12 2008-09 19.67 2009-10 44.34 m 2010-11 51.32 2O11-12 Ii.QQ Total 182.52 6.12 According to the Assessing Officer , the Bhangdiva group has claimed huge expenses towards sub-contract payments and after depositing the cheques in the respective bank accounts of the sub- contractors, cash was allegedly withdrawn by the Bhangdiya group and braught into the diaries for utilizing the funds for unaccounted expenses such as gratification to politicians ad government officersfofficials, The Assessing Officer has further recorded a finding that the cash payments entered in the seized diaries are Qf various nature such as household expenditure, donation/charity, salaries to staff and domestic help; office expenditure; site expenditure, expenditure on machinery; I.T,A.No.56 to 61/Nag/2016 IT,A.No.261 to 265/Nag/2016 Assessment Years:2007-08-2011-12 14 legal payments to individuals, cash transfer; cash payments to group concerns and cash payments made towards purchase of agricultural lands; payments towards transportation; petrol diesel expenses etc; The Assessing Officer in order to elucidate the modus-operandi has reproduced few scanned copies of pages from seized diaries and ledger in the assessment order . The unaccounted payments, according to the Assessing Officer , given in diaries, are corputed finarcial year-wise as under: Financial Year Amount (In Crores) 2006-07 7.99 2007-08 28.89 2008-09 19.71 200g-10 52.09 2010-11 50,33 2011-12 12.09 Total 171.10 6.13 The unaccounted receipts determined by the Assessing Officer financial year-wise are to the tune of Rs.182.52 crores; Therefore; the Assessing Officer has considered entire unaccounted receipts Qf Rs.182.52 crores for addition in the hands 0f various concerns Qf Bhangdiya group: The Assessing Officer gave & finding that efforts were made to link the csh withdrawals from the bank accounts of the subcontractors and the bank accounts Qf various concerns Qf Bhangdiya group which, according to the Assessing Officer, claimed bogus sub- tle T,A.No.56 to 61/Nag/2016 I.T A.No.261 to 265/Nag/2016 Assessment Year5;2007-08-2011-12 13 contract payments with reference to that particular The relevant finding given is as under: sub-contractar. "Since it was not feasible to correlate the withdrawals from all the Sub-contactors Of the assessee group With the respective group concerns; 21 sub-contractors bank accounts were verifed IC was noticed that cash withdrawals from the bank accounts af these sub-contractors were done immediately after cheques Were credited by the respective group concerns These cash withdrawals were then entered on the receipt side with bank names in the Incriminating diaries in date wise Manner In view Qf this; cash withdrawals from the bank accounts f the subcontractors, as entered in the diaries, are added in the hands of respective group concerns in proportion to the amounts cheques credited by the respective group concerns: Total Of these verified cash withdrawals, to be added in the hands of respective group concerns, comes out to be Rs.54.40 crores 6.14 Thus; according to the Assessing Officer , out Of the total unaccounted receipts of Rs.182.50 Crs; _ a SUM of Rs.54,40 Crs. is attributabie to the amounts deposited in the bank accounts %f the sub- contractors by account payee cheques by various concerns of Bhangadiya group which was subsequently withdrawn in cash, which is found reflected on receipt side of the seized diaries This amount Of Rs.54.40 Crs. has been added by the Assessing Officer in the hands of the respective group concerns of Bhangdiva group in proportion to the amount of cheques credited by the respective group concerns in the various assessment years falling in the block period; Based On such methodology, the Assessing Officer has made the addition in different assessment years falling within the block period in the case of the assessee Qn 7/ I,T,A.No.S6 to 61/Nag/2016 I.T,A-No-261 to 265/Nag/2016 Assessment Years;2007-08-2011-12 16 6.15 As regards to the balance amount of unaccounted income of Rs.128.12 Crs. (Rs.182,52 Crs.-Rs.54.40 Crs:), the Assessing Officer in para 9.2 & 9,3 has recorded the following finding: "With regard to the balance amount of Rs,128.12 Crores; efforts were made t correlate the cash withdrawals which were credited on the receipt side of the diaries with the bank accounts of the remaining subcontractors It i5 essential to note that the assessee group Is having more than 100 sub- contractors; Vide questionnaires issued, assessee group was specifically asked to produce the sub-contractors who have not appeared, along with their books of account ad bank accounts for verification but, there was no cooperation fram the assessee group. Further, the aSsessee group was asked to explain the entries in the diaries but no Such explanation was offered As the entries in the diaries were made giving narration of either name of the bank Or name of the bank along with the branches and as some of the sub-contractors are having bank accounts In the same bank ad branch, it was difficult to match the entries in the diaries with the particular sub-contractor from whose account cash was withdrawn brought into the diaries In view of the above, ad in view of the assessees non-cooperation In this matter , the only opinion left Is t0 add the balance amount of Rs.128.12 Crore to the income of the group concerns 0n prorate basis Le in the ratio of contract receipts shown by the group concern in the respective assessment years t the total turnover of the group concerns in that year; 6.16 It is thus seen from the above finding that the Assessing Officer 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 prorate basis for want of proper correlation between the amounts credited in the selzed diaries and the withdrawals made fram the bank account of the sub-contractors; An addition of Rs.54.40 Crs; has been made on account of entries of withdrawals from the bank account 7i3 IT,A.No,56 to 61/Nag/2016 I,T.A_No-261 to 265/Nag/2016 Assessment Years;2o07-08-2011-12 17 of sub-contractors recorded in the seized diaries in proportion to the cheque payments 6.17 As regards to the balance adition Of Rs.128.12 Crs-, the Assessing Officer in his finding reproduced above has stated that efforts were made to correlate the cash withdrawals credited on the receipt side of the diaries with the bank accounts of the remaining sub-contractors but the same could not be accomplished, therefore, the Assessing Officer made the addition of Rs.128.12 Crs; in the hands of various group concerns on prorate basis in proportion to the cantract receipts declared by such group concerns in various years falling within the block period: 7 When the matter went before the CIT(A); the CIT(A) did not appreciate the method of making the addition by the Assessing Officer in respect of the gross receipt of Rs.182.52 crore but directed the Assessing Officer to compute the addition by estimating the profit by applying rate of 169 on the gross receipts of group concerns and allocated the income s0 arrived among the various assessee group concerns including the assessee; The CIT(A) while estimating the profit @169 appreciated the order of the Tribunal in the case of the assessee group in IT.A.Nos. 268, 269 and 285/Nag/2012 in the case of the assessee dated 03/04/2013 for te assessment year 2006-07 to 2008-09 in which the Tribunal in consequence of the evidence found during the course of survey operation as well as recording te statement of various sub-contractors on which the Assessing Officer has relied while making the addition during the impugned assessment; directed the Assessing Officer to work out the income by applying net profit @12%. The CIT(A) has directed the Assessing Officer to adopt 16% of the gross receipts as the net profit for the block period of the search comprising of the assessment year 2007-08 ta 1012-13 instead of 12% directed by the Tribunal keeping in view that I,T,A Na.56 to 61/Nagf2016 I.T.A.No.261 to 265/Nag/2016 Assessment Years;?007-08-2011-12 18 the assessee had made the undisclosed investment found during the course of search in the assets and jewellery to the tune of Rs.26 crores and Rs.2_37 crores; Tq cover up the undisclosed investment in the immovable assets amounting to Rs,26 crores and in jewellery of Rs.2.37 crare respectively, the net profit was directed to be adopted 169 of the total turnaver of Rs.579 crares which comes to Rs.92.62 crores ignoring the fact that the grass receipt of the assessee group includes the sum of Rs.50,00,98,566/- in respect of the sales tax and royalty which do not constitute of any profit element but are in fact the liability to be discharged to the thirty party by observing as under: "10.0 I have carefully considered the submissions of the AR of the appellant; the assessment order; the material On record; the remand report of the AO ad the judicial decisions relied upon by the AR 11.0 On careful examination Of the material facts; the following facts have emerged from the submissions of the AR of the appellant: 11.1 The AR has contended that it was explained befare the AO that the deduction like royalty; VAT, Work contract taxes; material supplied in respect to various wprks executed by assessee are t0 the tune Of Rs; 51.29 crores and no income could be said to have bzen earned in respect to such deduction for the purpose of determining the income in the case of assessee: The gross receipts before deduction are to the tune Of Rs. 579 crores &nd the net receipt from it; the assessee possibly could have derived income from contract business are only to the tune Of Rs. 527.71 crores The estimated income declared by assessee in the various returns filed under section 153A of LT Act 1961 is more than reasonable ad thus there is no watrant Or justification for making any addition at the hands Of assessee The action Of AO; in not considering receipts at 527.71 crores ignoring the binding decision of Apex Court in the case of Brij Bhushanlal reported at 115 ITR 524 (SC) is unjustified t/# 7/5 IT,ANO.S6 to 61/Nag/z016 I.T,ANo.261 to 265/Nag/2016 Assessment Years:2007-08-Z011-12 jo 11.2 The AR has further pleaded that the assessee is engaged in the activity of execution Of work for Irrigation Department of State Government of Maharashtra The work has been allotted to the assessee group for executing the orders year after year on completion of the work allotted from time to time There is due process Of verification for execution of work before releasing of payment In the case Qf assessee group execution Of work and receipts for the same are not in dispute; The work having been executed which was not in dispute 3 reasonable rate of profit alone could be liable to be assessed at the hands of assessee The assessment Of income at more than 40% of the receipts in no manner Of consideration can be considered as reasonable; 11.3 The AR has enclosed details of the business income assessed by the AO. in terms of percentage of grOsS receipts Shown in the returns of income by various entities of the group. The various percentages of income a5 computed by the AR would indicate that the income assessed by A.o is inconceivable to have been earned On the business receipts received by assessee group. Therefore; according to the AR, the substantial addition made at the hands of the various business entities Of assessee group i5 excessive and unreasonable Lncqme fro Contract Business Assessed by AQin % terms: Particular AY AY AY AY 4Y 2006- AY AY 2007- 2008-09 2009-1Q 2010- ZC11- 07 2012-13 08 Ms M G Bhangdiya 11 12 11.7906 41.2790 35 6006 18,609 MKS Canstro Venture P, Ltd, 27.46Q0 49,5006 MJs, Mahendra Construction 10.780/ 9.3496 43,1301 25,4406 Ms. Mahendra Const & 11.0496 21.7g0 33.059f 27.7396 M,G. Bhangdiya JV 49,5300 73.4490 17.6996 41.819 16.030 Ms; KM, Bhangdiya 11.9790 23.906 26,76% 26.2691 MKS Acme Bulld p Ltd 15,220 13,940 Ms M G Bhangdiva and 10.289 Hitbhav Engg JV 66.5396 11.989 27,8306 0.WQ% MsM G Bhangdiya and SS PATIL JV 54.8296 129.9296 13,18Q MSKM Bhangdiya JV Mitcon Infra Project P Ltd 25.2896 39.5296 Consolidated 10,079 10.009o 12.360 10,009 47.019 74.3696 18.5296 34.259 49,9706 44.5900 114 It is seen that in the case of assessee group books of account were rejected in regular assessment framed. Prior to 0 FIL IT ANo,56 to 61/Nag/2016 ET.ANo Z61 to 265/Nag/z016 Assessment Years;2007-08-2011-12 Z0 action under Section 13201) of IT; Act 1961, The income returned by assessee {5 also Qn estimated basis being percentage of net receipt received by each of the business entities af the assessee group: The appellant during the assessment proceedings has explained before the A.0 the that verification Of the seized documents with reference to books Gf account loses its relevance in 3s much &5 that the books Of account have not been relied upon by assessee at the time of declaration of income and thus it would be only fair to determine 3 reasonable incame on estimated basis which could be said to hava been derivedfrom the business net receipts received by various business entities Of assessee group. 1145 In the Case of assessee group, the assessments under section 153A 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 ali the assessment years, In year 2006-07, assessment the nature Of work executed for Vidarbha Irrigation Development Corporation remains the Same as in the case Of assessee for subsequent assessment vears: The sub contractors Who have executed the works are also similar In the various assessment years The A.O. in the assessee case Of for assessment year 2006-07 has accepted the income as shown in the return under section 153A Of LT Act 1961 at about 1Z% of the gross receipts. The A.o having accepted the net profit of 12% on the receipts for assessment year 2006-07 , ought not have made additions on different footings in the Case Of assessee group for subsequent assessment years under the similar circumstances. 11.6 The perusal of the assessment; order would make it evident that the source of income of the various business entities of the group is only in respect to execution of government contracts and it has no Other major activity of business where from the income is derived ar generated; The notings found in the Seized documents are pagt er dhe receipts receivved gross from the government department various The notings in the seized document rereipts are part of the gross Of contracts received by group entities i5 not disputed. The inference drawn by Id. AO. in is that the entries the seized document lead to inflating the Sub contract F 4 M Zi IT,ANo-56 to 61/Nap/2016 IT,ANo.261 to 265/ Nag/2016 Assessment Years:2007-08-7011-12 21 payments which have been utilized for incurring illegal expenses; The aforesaid inference drawn by AO. i5 without any finding Of J fact nor it has been corroborated with any independent evidence; In the case of assessee no corroborative evidence Or material waS found during the course Of search Qr anything has been brought On record subsequently in the cOUrse of assessment proceedings to establish that the notings made in the seized document are in relation to incurring Of any Illegal expenses; 11,7 The AR has contended that the notings were made in the seized document at the instancz of Iate Shri Gotulalji Bhangdiya wha has expired in the month of April;, 2011. Therefore; the assessee to the best of his ability has made efforts to explain the notings The employees f assessee in whose handwritings the notings found in the seized document have been examined by A.O in the course of assessment proceedings; The employees while admitting that writings belonged to them have aiso stated that the aforesaid notings have been made at the instance Of late Shri Gotulalji Bhangdiya. The aforesaid independent statement recorded by AO. supports ad substantiates the explanation submitted at the time Of search and in the subsequent proceedings that the notings are in respect to movement of money: 11.8 The perusal of the seized document would make it evident that it cannot be identified to one individual business entity Of assessee group The transactions noted in the seized document are Of mixed nature being business, personal and investment The document being not related to any one identined entity, the notings made cannot be held 35 unexplained credit to be apportioned amongst the various business entities: In fact; even 35 per the A.Os the seized document does not belong to any one assessable individual In the absence Of seized document being identified to any one individual entity &d same being not identified to any business entity it cannot be held to be as belonging to business entity 50 35 to make estimated addition at the hands of various business entities On proportionate basis f turnover of such graup entities M 11.9 The AO in para 6 of the assessment order has observed that assessee group for AY 2006-07 to 2012-13 Fie IT,ANa-56 to 61/Nag/2016 ITA.No,261 to 265/Nag/Z016 22 Assessment Years:2007-08-2011-12 has debited Rs.361 cores towards sub-contract payments out Of gross contract receipts from the Government aggregating to Rs.579 crores Which is more than 62% of gross receipts. It Is seen that subcontract payments include various other payments to associate concerns which are considered 35 receipts In the case Of associate concerns for making assessment by the same AO, The actual payment to outside subcontractors is Rs.263 crores only which i5 459 Of gross contract value. The finding of A.O. t the extent of sub- contract expenses at 62% is factually not correct 11.10 In assessment order at para 5.1, the A.O. has discussed the significance of the diaries 8-1 to B-65 and has observed a5 under: "The analysis of the entries in the diaries revea] that on rceipt side various [eceipts_including receipts_from withdrawals from_bank accounts OI GIQup_entities_and sub-contractors were_recorded_and Qzpayment_side entries_Ol_expenses Iike Interest_payments_ repaymewt pf Ipans deposits into bank accounts house_hold expenses personaL expenses pavments to vajqus persons in casb investment in_progertties Btc were recorded_For the EY: 2006-01 to 2008-09 ad 2011-12 the cash books &d the ledgers mainly contain the cash receipts and the payment entries in cash. It is interesting to observe that some of the entries in these diaries were alsp reflected in the regular books Of accounts maintained by the assessee group. The same para refers to the reply to question No. 30 of the deposition made by Shri Mitesh Bhangadiya on oath On 20/07/2011, wherein Shri Mitesh Bhangdiya has stated that seized documents are details of cash flow: The A.O. at page 9 in the same paragraph has observed that they contain probable extraneous gratifications, It is evident that AO. has no evidence On record for any illegal gratification but observation is made On inferences and presumption: The observation of the AO at para 5 1 inf act clearly explain the nature Of entries found noted in the seized document wherein the Id. AO has recorded & finding that receipts are from bank accounts Of group entities and sub-contractors, On the face of Such observations, the conclusion drawn by the Id AQ. IT.AM56 t0 61/Nag/2016 ITAND.261 to 265/N29/2016 Assessnent Years;2007-08-2011-13 23 holding that credit entries are assessable income at the hands of assessee is unjustified 11.I1 The AO. at para 6 pf assessment order has discussed the nature Of sub-contracts. The A.O. has On enquires from bank accounts found that withdrawals made have been credited in daily cash balance of diaries The A.O. On inference has observed that same are utilized for unaccounted payments; The Ao: at page 17 has observed that most of the sub-contractors are name lenders and are Of meager means and some are employees The names observed are Shri Kesharsingh Rotele and Firous Khan etc_ It is seen that both individuals a5 observed are assessed bY Same A.O. The income from sub-contract work done for assessee group has been accepted in the assessment framed ujs 14363)/153C of IT Act 1961 on the same date. The receipts from assessee group having been accepted for assessing income at the hands Of such individuals, payments made by the assessee group cannot be doubted as non genuine at the hands Of assessee Similarly A.O. has observed names of other sub- contractors Out @f names of subcontractors observed Shri Sanjay Malani, Shri Chintaman M: Nakade; Shri Vishal Rachalwar; Shri Dwarkadas M Bhutada, Shri Dnyaneshwar Meshram and Shri Suresh Masram have been assessed U/s 153C by the same AO. The receipts from assessee group having been accepted for assessing the income in the hands Of sub-contractors, the payments made by assessee group to such Sub-contractors cannot be doubted as non-genuine in the hands of various entities of the Bhangdiya group: m1 11.12 The AO, at para 7 has made analysis of diaries marked &s B-I to B-65, The A.O at para 7.1 has categorically observed that receipt side contains amount withdrawn from banks of assessee group concems and individuals; The financial year wise receipts entered in these diaries were computed at 182.52 crores It is peculiar to note that the Id. AO at one hand has observed that withdrawals from bank account of business concerns and individuals which Were found credited on left side of the diaries and at the Same time he has concluded the same receipts of credits as unaccounted income of the group. The AR has contended that the Id. A.O. has not doubted the deposits in the bank account of assessee. Infact; they are deposit of receipts which are # LTANc.56 to 61/Nag/2016 I,T.A,No.Z6I to 265/ Nag/2016 Assessment Yeats:Z007-08-2011-12 24 considered 25 income, therefore withdrawals of such amount cannot again be assessed as income 11.13 The AO: in the assessment order has observed that the amount withdrawn fram diaries {5 utilized for unaccounted payments Or unallowable expenses like gratification paid to various politicians and Government employees. However, the assessment order does not refer to any corroborative evidence on record to hold that assessee has made payments of any illegal gratification In fact A.O, at page 9 has observed that payment made in cash is for probable extraneous gratification which shows that this is & probable view taken by the AO without bringing the issue to a logical conclusion Therefore; the working made by A.O. at page 36 to 38 about analysis of payments out Of seized documents are just adverse inference drawn on assumptions and is not based on any corroborative evidence on record, 11.14 The AO. has made observation at para 7,3 as regards to the quality Of work executed by the assessee group and in particular visit of A.O: to various sites where work Is executed by Bhangdiya group The AR has contended that it is just a oral information obtained behind the back of assessee which has no evidentiary value Assessee group has executed work 35 per standard parameters specified in the tenders allotted to the asseSsee group: The State Government has due process of verification a5 to quality and quantity of work executed before release of payments In the case of assessee successive works Were allotted year after year Which itself demonstrates the fact that the State Government had no question 35 to quality of work executed by assessee group. 11.15 The AO in para 8 has discussed a5 to confronting &f seized documents to assessee The replies submitted have been partl reproduced It Is seen that in the course af search; the statement of the Shri Mitesh Bhangdiya was recorded on 20/07/2011 and the assessee in answer to question No.30 has explained that seized documents are details 0f cash flow and same has been reproduced In assessment order on page 5 During the assessment proceedings too, the assessee has explained that the diaries are notings for movement of cash in reply t questian No: 23 in the statement recorded 27/07/2013. On The assessee ali along in the cpurse Of IT ANo:56 to 61/Nag/2016 LTANoZ61 to 265/ Nag/2016 Assessment Yeara;2007-08-2011-12 25 assessment proceedings had explained that the seized documents are to be in the nature Of notings For fund It movement Of Was explained in the course Or assessment proceedings that the sub contractors on withdrawal %f from their bank accounts Used to money keep in the trust/safe custody amounts which are found to be noted in documents, the seized The explanation submitted by assessee verified by the A.0. was and it was found that the made withdrawals from the bank accounts of the sub contractors is On certain occasion credited In} the seized document further explained It was that the amounts credited in te seized document being the amounts received from contractors the SUb were remitted to the sites where contractors Such sub werz executing the wOrk; The amount remitted was through ay representative of the subcontractor person going t0 or any various sites which places: are located at remote The seized documents contain notings in respect to handling Of cash by late Shri Gotulaljee Bhangdiya who has expired in April 2011. The assessee in the assessment course of proceedings has explained a5 to how notings happened to be made in the seized document In the assessee; case Of the statement of assessee was recorded seized document ad On the in particular questions were asked &s regard to tthe names Which had similarity with the names 0f some politicians The assessee in the statement recorded 0n oath has clearly explained that the notings made in the documents had seized nothing to do with plitical leaders in a5 much 35 Such political leaders have no business transaction with any of the business entities of Bhangdiya group: The assessee in his statement made in the course of assessment proceedings had deposed that the Seized documents are in movement of cash with respect to regard t0 activity of business, personal expenses and investments made bY assessee has Thus; the AR contended that neither the Investigation Wing of the Department nor the A.0, In & span Of almost more than three ad half years have brought ay evidence on record to show that the Various notings made in the seized documents are in relation to ay Illegal expenses incurred The AR by assessee group: further contended that explanation assessee submitted by was substantiated by submitting evidence independent of affidavits Of sub-contractors that they had collected back the amounts deposited with late Shri Bhangdiya. The various persons who 'hate Subi Goeulalite the 7a KTANo.56 to 61/Nag/2016 IT,ANc261 to 265 /Nag/2016 Assessmnent Years;2007-08-2011-12 26 affdavits have not been cross examingd subsequent affidavits submitted nor any material to Or has been evidence on record brought to dislodge the affidavits. averment made in the Therefore; the AR pleads that tne contents of the affidavits filed by Sub-contractors have gone Urirebutted have to be taken and as true and correct In this regard the appellant has relied on the decision of Hon 'ble Apex Court in the case Df Mehta Parekh reported at 30 ITR 181 wherein it has been held (SC} that: "No further documents &r vouchers in relation to those entries were called for, nor was the presence Of deponents of the the three affidavits considered necessary by either party. The appellants took it that the affdavits 0hthese Parties were enough ad neither the AAG the ITO nor who was present at the hearing before the AAC, considered of the appeal it necessary to call for them in order to cross-examine them with reference statements to the made by them in their affdavits, these circumstances__I Udet W2s not opgn_to_the Revenue Lq challenae_me_correctness_p me Lash_entey statements pr_tte made by those deponents_ 2ffdavits; in theit 11.16 The A.o. has observed that the contractors in the variqus Sub Case Of assessee are name lenders ad bogus The A.O. has listed the names af suca seb contractors at Para 9! of the assessment order. In this that the aforesaid Sub regard;, it is seen contractors are also assessed by the ACIT; Central Crcle-2 (1) Nagpur who is also the assessee group: AO, Of In cases of such sub-contractors notices under section 153C of LT Act 1961 were submitted were issued and returns by Such sub contractors pursuance to Of notice under receipt section 153C Of IT Act 1961, The assessments have been framed 1961 under section 153C of LT: Act by the same A.O: wherein the incpme respect of business returned in income shown arising to Such Sub- contractors Out of receipt received from the have been accepted assessee group Thus, the A.O. having business receipts accepted the in the hands Of sub-contractors determining the income in the cases Of for sub-contractors could not have concuded that te payments made by assessee group to such sub contractors are bogus: 0 7a3 ITAN0.S6 to 61/Nag/2016 LTAN261 to 265/Nag/2016 Assessment Years:2007-08-2011-12 27 1117 The AO. In the assessment order has observed tat some Of the Sub-contractors are working 35 employees like drivers/supervisors of the assessee group: There is prohibition no for working as employee and also operating 35 sub-contractor. The AR in this regard has submitted that the assessee in order to encourage his employees ha5 provided employees to be sub-contractor in order t0 make more personal gain by such employees: In view Of above there i5 nothing which can be held adversely in respect to such observation: 11.18 As regards to the addition of Rs. 54.40 crores made by the AO On the basis of the depositions Of the sub- contractors; the AR has contended that & opportunity of tross examination of such sub-contractors has not been given to the appellant which is in violation to the principles Of natural justice: The AR of the appellant in this regard has placed reliance On the decision of Hon ble Supreme Court in the case Of MJs Andaman Timber Industries VS: Commissioner %f Central Excise . Kolkata (Civil Appeal Nos 4228 of 2006). The Honble Apex Court in this case has held as under: "According t US, not allowing the assessee to cross examine the witness by the Adjudicating Authority though the statements of those witness were mhade the basis of the impugned order isa serious flaw which makes the order nullity inasmuch a it amounted to violation of principles of natural justice because of which the assessee was adversely affected. In view Of the above; we are Of the opinion that if the testimony Of these two witness is discredited, there was no material with the Department on the basis of which it could justify its action 35 the statement Of the aforesaid two witness was the only basis of _ issuing the Show Cause Notice: We; thus, set aside the impugned order as passed by the Tribunal and allow this appeal" The ratio laid down by the Hon'ble Apex Court is mutatis mutandi applicable to the facts and circumstances of the present case of the appellant group. 7d KTANo.56 to 61/Nag/2016 ETANc,261 t0 265/Nag/7016. Assessment Years:2007-08-20i1-13 28 12.0 The AR of the appellant has submitted that in the assessment framed various additions made are based On the seized documents from B-I to 8-65. It is further submitted that Dotings on Seized documents were explained by appellant by Dlacing Iegal evidences On record The AR tus contendeaf that it is settled position of law that in the absence of corroborative evidence On record no adverse view can be taken in respect Of notings found in the seized documents . AR in According the to the case of assessee for notings made, corroborative evidence no adverse was found in the course Of search action Or has been brought On record by the Id. AO during the course Of assessment proceedings at the time of framing of assessment The AR therefore; pleaded that in the absence of aeiy adverse corroborative evidence on record fr notings On seized documents, addition made by AO on the basis of such notings are unjustified ad unsustainable In support of his contention ; the AR has relied on the following judicial decisions: 1) (1978)115 ITR 524 (SC) Brij Bhushan Lal Parduman Kumar vs. CIT In this case the Hon'ble Apex Court has held as under: "It is true that, ordinarily, when 3 works conbract Is put through Or completed by a contractor the income or profits derived by the contractor from such the contract is determined on value Of the contract a5 & whole and cannot be determined by considering several iters that go to form such value Of the contract but in Our view where certain storesImaterial is supplied at fixed rates by the Department to the contractor solely fr being USed or fixed Or incorporated in the works undertaken On terms &d conditions mentioned above; the real total value Of the entire contract wouid bertee value minus the cost Of such stores/material Therefore; Since no element Of pradt ew35 arvaived inSteolter in the turn over represented by the cost of storesfmaterial supplied by the M.ES to the assessee firms; the income or profits derived by the assessee firms from such contracts will have to determined be on the basis Of the value of the contracts represented by the cash payments received by the assessee- ITANo.56 to 61/Nag/2016 ITAND.26I to 265/Nag/2016 Assessment Years:2007-08-2011-12 29 firms from the MES Department exclusive of thee cost of the material stores received for being used; fixed Or incorporated in the works undertaken by them 2) (1973) 92 ITR 90 (Mad ) CIT vs: K.S; Guruswami Gounder & K.S, Krishnaraju The Honble Madras High Court has held "if the assessee gave its tender on the definite understanding that the Department concerned is to Supply the required materials for the construction of the buildings, the rates quoted by him would have been adjusted on that basis, Therefore; there 15 no question Of the assessee purchasing the materials required for the buildings from outside ad putting itself to & disadvantage. Admittedly; the materials supplied by the Departments had been Used In the construction of the buildings and the assessee did not; in fact; earn any profit in relation thereto; We are not; therefore, in a position to say that the turnover represented by the cast Of the material supplied, in any manner , contributed to the profit of the assessee 3) AIR 1998 (SC) 1406 Central Bureau of Investigation Vs: V.C Shukla & Ors: 39 A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence Of their trustworthiness; fix a liability Upon & person Keeping in View the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the entries in the Other books ad loose sheets (which we have already found to be not admissible in evidence under Section 34) are admissible under section 9 of the Act to support an inference about the formers' correctness still thase entries Would not be sufficient to charge Shri Advani and Shri Shukla with the accusations leveled against them for there Is not an iota Of independent evidence in support thereof In that view of the matter we need not discuss, delve into or decide upon the contention raised by Mr, Altaf Ahmed in this regard. Suffice it 76 ET,AN -56 t0 61/Nag/2016 IT ANo,261 to 265/Nag/Z016 Assessment Years:2007-08-2011-12 30) t0 SaY that the statements of the four witnesses, who have admitted receipts %f the Payments as shown against them in MR 71/91, can at best be proof of reliability 0f the entries far they are concerned and no others. In other words, the statements of the above witnesses cannot be evidence independent under Section 34 85 against the above two respondents, So far & Shri Advani is concerned Section 34 would not come in aid of the prosecution for another also. reason 4 (1965) 57 ITR 532(SC) Parimisetti Seetharamamma Vs. CIT The Hon'ble Apex Court has held a5 under: "By 55. 3 and 4 the Act imposes & general liability to tax all income But the Act does not provideataty hateveros i5 received by & person must be regarded a5 income liable to tax In aI_c2ses_in_Wtich a receipt is soucht to be taxed_ 25 incgme_the_burden lies upon the_Department t_prove Mattt isWithin _the taxinQ provision_Where Iqwever_a [eceiptis _f Menature_of_income the burder QL_providing _that it_is not trable because it falls_Within_an exemption _proved by_Meadt [es_upon the a55essee 5) (2007) 294 ITR 49 (SC) CIT vS. P,V. Kalyanasundaram In this case the Hon'ble Supreme Court has observed under; 35 "M "The respondent assessee vide & registered sale deed dt 27 Oct: , 1998 purchased certain land at Brindavan Road; Fairlands, Salem far & Sum of Rs.4,10 lakhs. During a search of the Office ad residential premises of Polimer Net Work; certain notes on loose, sheets allegedly in the hands of the respondent were found and seized by the Department: In his statement recorded on &h Dec:, 1998, the assessee submitted that he could not remember as to Why the notings had been made The statement was further confirmedby another statement on 1jth Dec , 1998. The Department also recorded the Statement of the Vendor Rajarathinam on 8" Dec , 1998 which too was confirmed On 11 Dec , 1998 in which he AP 727 IT_ANa-56 to 61/Nag/2016 IT A No.261 ta 265/Nag/2016 Assessment Years;2007-08-2011-11 admitted that he had in fact received & total consideration of Rs.34.35 lakhs ad that the sum of R5.4.10 lakhs reflected in the sale deed had been received by him by way of a demand draft ad the balance in cash Rajarathinam however retracted from his statement on &h Jan , 1999 ad filed & affdavit deposing that the sale price was Rs.4.1O lakhs only and that his statements earlier given to the authorities were incorrect: In a subsequent statement recorded On 20n Nov,, 2000 Rajarathinam again reverted to his earlier portion and deposed that the sale price was Rs.34.85 lakhs; The CIT accordingly deteted the addition made; An appeal was thereafter preferred by the Revenue against the order Of the CIT before the Tribunal. The Tribunal in its order dt 6th July 2005 held that the notings on the loose pieces of paper on the basis of which the initial suspicion with regard t the undervaluation had been raised were Vague and could not be relied upon a5 it appeared that the total area with respect to the sale deeds and that refiected in the loose sheet was discrepant; "When the assesse did not give any explanation to the notings found and at the same tme the Revenue 15 able to corroborate the same with the statement of the seller for te purpose of determination of actual sale value, would the lower authority be justified in interfering with the Same? Be that as it may; we are Of the opinion that the three questions repraduced above can; in no way; be called substantial questions of Iaw, The fact a5 t0 the actual sale price of the property, the implication Of the contradictory statements made by Rajarathinam or whether reliance could be placed On tte loose sheets recovered in the course Of the raid are all questions of fact We therefore find no infirmity in the Order of the High Court Accordingly, we dismiss the appeal: 6) (1999) 237 ITR 570 (SC) CIT VS; Smt: P,K Noorjahan "The Tribunal however, held that even though the explanation about the nature ad sources of the purchase money was not satisfactory but In the facts and circumstances of the case it 7ae IT,ANo.56 to 61/Nag/2016 LTANo261 to 265/ Nag/z016 Assessment Years:2007-08-2011-12 32 was not possible for the assessee to earn the amount invested in the properties ad that by no stretch of imagination could be assessee be credited with having earned tis income in the course %f the assessment year Or was even in a position to earn it for & decade or more; The Tribunal took the view that although the explanation of the assessee was liable rejected, to be s 69 of the Act conferred only a discretion on the ITO to deal with the investment a5 income of the assessee and that it did not make it mandatory on his part to deal with the investment as income of the assessee aS spon a5 the latterS explanation happened to be rejected This clearly indicates that the intention of Parliament in enacting 5. 69 was to confer & discretion on the ITO in the matter of treating the source of investment which has not been (satisfactorily explained by the assessee 35 the income of the assessee ad the ITo is not obliged to treat such source Of investment as income in every case where the explanation offered by the assessee is found to be satisfactory; not In the instant case, the Tribunal has held that the discretion had not been properly exercised by te ITO and the AAC tin taking into account the circumstances in which the assessee Was placed ad the Tribunal has found that the sources of investments could not be treated a5 income of the assessee. The High Court has agreed with the said view of te Tribunai We also do not find ay errar in the Said finding recorded by the Tribunal There is thus no merit in these appeais and the same are accordingly dismissed No order a5 to costs. 7) Bombay High Court order in ITA No.1224 0f 2011 in the case &f M/s Supreme Industries Ltd. "A search action wa5 conducted respondent assessee On the and its directors During the course of search, the officers of the document which reads as under; Payment mode 65.00 330Q 98,00 Cheque Cash Rate persq: yard Per Sq: mt 2,019 2,414 729 HT ANo.56 to 61/ Nag/2016 ETANO,2GI to 265/Nag/7016 Assessment Years:2007-08-2011-12 33 Rate offered 1,500 per sq mt = 61,50,00 1,600 persq, mt The Hon'ble High Court observed a5 under: The entries found in the seized document according t te Tribunal cannot be relied upon in the absence of supporting documents; The revenue has not brought On record evidence t0 show that the transaction for the purchece f plot was for Rs.98 Iacs including cash payment of Rs.33 lacs; Thus, the appeal of the respondent assessee was allowed. We note that the Tribunal has allowed the appeal On & finding 4 Fact; This finding by the Tribunal is reached taking into account the various evidences produced by the assessee to conclude that an amount pf Rs.33 lacs had in fact never changed hands Consequently, section 69 of the Act wouid be inapplicable 8) (2008)30TITR137(Guj ) CIT vS- Maulikkumar K Shah' The court has held as under: "The assessee has booked 35 shops 35 On the date of search, on which the Department has charged 'on money' In the asst yr; 1995-96, In his statement recorded under 5 132(4) 5 denied to have charged ay 'on-money . The notings on the seized diary found from the premises of 5. is the only material On the basis of which the AO has made the additions, The AO has not brought ha corroborative pagereal on recard to prove that such sales were made and 'on ~money was received by the assessee outside the books of account The AO has not examined any purchaser to whom the sales of shops were effected, Onus heavily Iay On the Revenue to prove with corroborative evidence that the entries in seized the diary actually represent the sales made by the assessee. Such onus has not been discharged by the Revenue Mere entries in the seized material are not sufficient to that the assessee has indulged in such "aStansaction PrCVs well-settled that if certain documents were found from the possession of the assessee during the cOurse Of search operation, burden lies on the assessee to explain the nature Of 7z2 IT ANJ.56 to 61/Nag/2016 ITANo.261 to 265/Nag/2016 Assessment Year:2007-08-2011-12 34 transactions recorded in the said seized material,. Considering the facts and circumstances of the case in its entirety, we are of the considered view that the addition as made by the AQ. Being based On mere presumptians and assumptions and without any corroborative evidence, cannot be sustained and the said additions have rightly been deleted by the CIT (A) in all the years under consideration The Revenue s appeals, therefore; fail 9) (2007) 293 ITR 43 (Del) CIT vs: S.M. Aggarwal In this case the court has held: "Statement made by assessee's daughter cannot be said to be relevant or admissible evidence against the assessee, since the assessee was not given any opportunity to cross examine her; "It is well seltled that the only person competent to give evidence On the truthfulness of tte contents of the document is the writer thereof So; unless and until the contents of the document are proved against a person; the possession of the document or handwriting of that person, On such document by itself cannot prove the contents of the document These are the findings of fact recorded by both the authorities ie CIT(A) and the Tribunal "The explanation tendered by the assessee that the account beiongs to his daughter Smt Sarla Gupta was categorically denied bv her &d In view of her specific denial, there is no justification to hold it otherwise M "If the evidence collected against 3 person has npt been confronted against him then it cannot be utilized against him. In the present case, the Ao has taken into account the statement of Smt; Sarla Gupta &d has utilized the same against the assessee but the fact remains that this statement was recorded behind the back of the assessee and no opportunity was given to him to cross-examine her. "We have ourselves examined the contents of the document and are unable to draw ay clear ad positive conclusion on Ti ITAANo-56 to 61/Nag/2016 IT,ANO.261 to 265 / Nag/2016 Assessment Years:2007-08-2011-17 35 the basis Of figures noted on it The letter 'H.S, T.Z' and 'D Shop' cannot be explained and no material has been collected to explain the Sane; Likewise; the figures too are totally unexpiained and on the basis of notings and jottings, it cannot be said that these are the transactions carried out by the assessee for advancing money or for taking money: Thus, in Our opinion, this Is a dumb document: 10) (2008) 266 ITR 619 (Dely) CIT vs: Girish Chaudhary "The company and its directors Were searched on 18.01.2000 and & document marked a5 Annex A-37 was found and seized. The said document contained the following entries: Annexure A-37 (Page 13) "Cash RB- 31.50 Ch: 9.50 41.00 16.50 57.50 31.50 16.50 48.00" PE The Hon'ble Delhi High Court following the decision of Apex Court in CBI Vs, VC Shukla (1998) 3SCC 410 has held "Similarly the document Annex A-37 recovered during the course of search in the present case is a dumb document and lead US nowhere Thus, the Tribunal rightly deleted the addition of Rs.48 Iakhs made by the AO On account Of undisclosed income on the basis of seized material. 11) (2014) 39 CCH 034 (Hyd-)(Trib:) Deputy CIT vs. K Babu Rao The Hon'ble IAT, Hyderabad Bench has held as under: "Guess work not possible in case of search assessment framed ufs 14303) or ujs 1534 without any proper material 4O should have basis for assuming that expenditure incurred by assessee i5 out Of undisclosed income Unsubstantiated Ioose sheets cannot be considered &s conclusive evidence to make any addition towards undisdlosed income In instant case T3z ITA,No.56 to 61/Nag/2016 I.T.A.No.261 to 265/2 Nag, [2016 Assessment Years:Z007-08-2011-12 3b additions were made on basis Of entries recorded in two note books seized Entries in note book were unsubstantiated ~-On basis of same AQ concluded that figures mentioned therein are to be read by adding 3 zeros and assessed undisclosed income Other than loose paper, AO has not brought On record ay corroborative material Or evidence CIT(A) rightly concluded that it cannot be acted upon and deleted addition Impugned order upheld Revenue's appeal dismissed: "He observed that in the statement recorded on the date of search; assessee admitted that the seized bopks contain details Of day to day expenditure; In the statement recorded Ws 131 on 23/7/2008, the assessee further admitted that the seized books contain receipts ad payments party related to him and partly related t0 others and the entries were written in coded form; He also admitted that these books were written by his managers ad his two wives Smt Sridevi and Smt Rani "Tax has to be collected On real income but not on hypothetical income: Unless those entries are independently corroborated with contemporaneous record, no adverse view Can be taken by the Assessing Authority. No such direct independent eviderices have been brought to demolish the contention of the assessee As contended by the assessee; no assets have been unearthed during search, which is Uitimate weapon of the Dept , for making such addition on the basis of some mathematical calculation. "As stated earlier, these documents are prepared and maintained by managers, there are bound to be mistakes which cannot fasten On the assessee to pay taxes 0n unearned income During Search and seizure proceedings, cash Rs.4 lakhs ad the two diaries were recovered but no unaccounted assets found, AO did not mention ay of such unaccounted assets found during search In this background additions based On some entries in the diaries by affixing three zeroes for all transactons Is totally unjustified There should be some reasonable matching between the income and the assets &r expenditure;, that nexus is clearly lacking on the facts 35 brought on record. Fy ITAANO-56 to 61/Nag/ 2016 IT.A.No.261 to 265/Nag/7016 Assessment Years:2007-08-2011-12 37 "In the present case; the Seized material (two note books) marked a5 KBRVAVOZ and KBR/A04 wherein certain entries are found recording various transactions pertaining to the assess2e. These entries in the note book are unsubstantiated and on that basis the AO reached to the conclusion that the figures mentioned therein are to be read by adding 3 zeras and thereby he came to conclude that there is undisctosed income in these 6 assessment years; In Qur opinion; the document recovered during the course of search was & dumb document ad led nowhere: The CIT(A) rightly came to the conclusion that it cannot be acted upon &nd deleted the addition: "Other than the loose paper; the AO has not brought On record any corroborative material or evidence to show that the inference made by him is correct: The CITIA) after taking the totality of the circumstances into consideration came to the conciusion that the addition made by the AO is not justified and the argument put forth by the assessee is supported by documentary evidence. This was not a case Where relevant evidence had been Ignored by the CIT(A) and their relevant evidence has been taken into consideration. The only test that was required to be applied was whether on the facts fund and the state of evidence on record, the conclusion arrived at by the CIT(A) was one which could be arrived by & reasonable person properly infarmed in Iaw: Applying this test; it could not be said that the decision recorded by the CIT(A) one which could not have been arrived at by & reasonable person properly informed in law considering the state of evidence On record Hence in our considered opinion the CIT(A) has reached & correct conclusion in deleting the addition made by the AO on the basis of loose sheets, 12) (2005) 92 TTJ (Ctk) 464 Addl. CIT vs. Prasant Ahluwalia The Hon'ble ITAT Cuttack Bench has held "The AO stated that these notings were In the handwriting of the assessee ad therefore; he has t0 explain why the total of which comes to Rs. 7,55,000, were added in the income of the Fgh LT,AN,56 to 61/Nag/Z016 [T.ANo.261 to 265/Nag/2016 Assessment Years 2007-08-2011-12 38 assessee: It was submitted by the assessee during the course of search itself that this Is estimation of expenditure to be incurred For 'forthcoming period "No corroborative material has been brought on record by the AQ for rejecting the assessee 5 contention that jotting on the piece Of paper was &n estimate and not actually expended. As per our considered view additions based on chit papers ad presumption of AO could not be sustained in the absence of any corroborative material or evidence brought On record supporting it "As no corroborative material has been brought on record by the Department to reject the ssessee's contention, we do not find any reason on interfere in the order of the CITIA) for deleting the impugned addition 13) (ZO07) 106 TTJ (Ranchi) 422 ACIT vS. Ashok Kumar Vig Held: "The CIT(A) has taken 7 clear-cut view that the AO did not verify these 50-called balances with the parties whose names were found mentioned: accounts give no indication regarding movement of amount The parties show drastic reduction in the balances but how the payments were accounted for is not forthcoming from these entries: The Authorised Representative has invited attention t the fact that the AO did make enquiry, which the assessee has not disputed. However ; the AO has not brought 0 record the result of such an enquiry: The only plausible conclusion, under these circumstances, would be that the findings of such a exercise was favourable to the assessee; Coming to the applicability of provisions Ofs, 132(4A); the assessee has explained the circumstances under which his employee maintained these documents in the premises of MDSS Thus, the ownership i5 not disputed However; there is no presumption about the earning of income: The assessment i5 made under Chapter XIV-B The AO cannot make addition 0n the basis of incomplete entries; The onus rests On the 4 K3S I,TAANo.56 to 61/Nag/2016 ITAANo.261 to 265/Nag/2016 39 Assessment Years;2007-08-2011-12 Revenue to establish that the asses52e was in receipt Of money then the onus would automatically be shifted to the assessee t prove that the money has been disclosed in the account or the same is not liable to tax; In the present case in hand, the AO has not been able to demonstrate with adequate evidence tat the assessee received the amounts in two years as alleged. These entries 35 recorded in 'PKC-60' do not clearly reveal that the assessee has earned income The assessment Of undisclosed income Is under Chapter XIV-B and there is no scope of assumption Or presumption while making assessment Under this chapter . They are dumb documents on which reliance cannot be placed unless they are corroborated with other evidences. There Is no infirmity in the order of CITIA) in deleting the additions Rama Traders VS; ITO (1988) 32 TTJ (Pat) (TM) 483 (1988) 25 ITD 599 (PatY(TM) and Kollipara Subba Rao VS. ITO (1990) 32 ITD 668 (Hyd ) distinguished: 14) (2004) 91 TTJ (Del) 938 NK Malhan VS: Deputy CIT Held: "The document found ad seized might raise strong suspicion, but it could not be held a5 4 conclusive evidence without bringing some corroborative material on record. Heavy Onus lay upon the Revenue tp prove that the docurent gives rise to undisclosed investment by the assessee Mmu PM 9 "As regards interest; from mere jottings or calculations it cannot be said that there was &ny liability incurred by the assessee aS he is also not found to have paid the amount from his resources nor utilized the amount for his individual benefits. The Revenue did not examine these parties though the complete identity and particulars thereof were available before them Proof of payment has aiso not been found, In case the calculations were made for interest; they were merely the cost @stimates but cannot be said aS a payment in reality or & liability incurred by the assessee In any event the burden was on the Revenue to show that the documents represented undisclosed Income Of the assessee: Without bringing any corroboratory evidence by the Revenue; this burden cannot be held to have been discharged. Under such 736 IT.ANo.56 to 61/Nag/2016 ITANo-Z61 to 265/Nag/2016 40} Assessment Years:Z007-08-2011-12 peculiar circumstances ad the facts a5 emerging from record, the entries of Rs.l,65,000 could not have been treated a5 undisclosed income Of the assessee for the block period The addition so made is, therefore; directed to be deleted" "The document found and seized might raise strong suspicion, but it could not be held aS 2 conclusive evidence without bringing some corroborative material Qn record The document contained only the rough calculations and was silent about any investment; On the basis of such 3 dumb document; it cannot be said that there were investments made in fact by the assessee Heavy onus lay Upon the Revenue to prove that the document gives rise to undisclosed investment by the assessee: This Onus has not been discharged: Accordingly no addition af undisclosed income could be made on the basis of such a document". 15, (2004) 89 TTJ (Cal) 9171CIT v5. West Bengal Trading Agency Held: "No positive material , direct or circumstantial, to establish that amount was received by assessee Addition made On the basis of suspicion was rightly deleted by CIT(A" "It was necessary for the AO to gather material either direct or circumstantial fo establish that the intention expressed in the diary by K was actually implemented and that the assessee had received the money from K The very receipt of money from K is doubtful ad, therefore; the tax liability cannot be fastened % the assessee merely On the basis of suspicion; The CIT(A) was justified in deleting the addition 16) (2008} 10 DTR (Del) (Trib:} 507 Sonal Constructions VS: Deputy CIT Held: 4 "Presumption under $, 132(4) cannot be used in the assessment proceedings to make an assessment of income: 737 LT ANc.56 to 61/Nag/2016 ITANO.26I to 265/Nag/z016 Assessment Yeats:2007-08-2011-12 4] Orie fails to understand a5 to why the AO did not think fit to examine V in the course of assessment proceedings, So also, non-examination of $ by the AO in the course of assessment proceeddings was fatal to the case of the Revenue The seized documents were alone not sufficient t0 draw any definite conclusion regarding the existence of undisclosed income The corroboration could have come In the form of examination Of V and 5; The purchasers of the property from the assessee could have been examined to find out if they had paid consideration over ad above what has been recorded by the assessee in its books Of account The additions made cannot be sustained 1n law. Shivani Properties (P) Ltd Vs. Dy, CIT (ITA Nos; 1957/Del/1999 and 4100/Del/2001, dt 29h Dec;, 2006) relied on; "It is observed that the writing made in the loose papers were treated by the AO, a5 the actual investment made by the assessee &d the actual receipts of the sale of properties We find that the said documents Annex, Al pp: 2 and 29 are Ioose papers ad not ay books of account:' Further, in the said document date-wise break-up Of the alleged payments made or the alleged sales proceeds received are not recorded. From the said documents it cannot be said that the figures stated there in were the actual investment made by the assessee and actual sale proceeds received by the assesse84 No corroborative evidence Of the writing found to be made in the loose papers were found during the course Of search. It is no doubt true that the seized document on which the impugned addition was made by the AO namely Annex: AI Pp: 21 and 29 did give out certain figures regarding the four projects that the assessee had undertaken In the course of his business "The question that would Fall for consideration is 35 to whether this correlation alone was sufticient to make the impugned addition. In this connection , we have to first notice that the document in question Was seized from the residential premises of one of the partners of the assessee firm. At the time of search the statement of the partner was recorded He disowned any knowledge about the seized documents" The Honble Supreme Court in a recent decision in the case of PR, Metrani VS, CIT (2006) 206 CTR (SC} 290 (2006) 287 I.T.A.No.56 to 61 Nag/2016 I.T,ANo.261 to 265/Nag/2016 Assessment Years:2007-08-2011-1z 42 ITR 209 (SC) has laid down that presumption urder 5. 132(4) cannot be used in the assessment proceedings to make an assessment of income" "We are of the view that the seized document Al Pp. 21 and 29 were alone not sufficient to draw ay definite conclusion regarding the existence Of undisclosed income: It waS therefore not possible to draw any inference on the basis Of this document without proper corroboration. As already stated the corroboration could have come in the farm Of examination Of Mr; V.K. Narang & Mr; 55 Sodhi The property could have been got valued by the DVO t find out the real investment In this property: The purchasers of the property from the assessee could have been examined to find out if they had paid consideration over ad above what has been recorded by the assessee In its books of account "It is also Pertinent to note that there was no attempt made by the AO even to make ay enquiry with the concerned flat purchasers from whom the on-money wvas alleged to be received by the assessee on the basis of the contents of the relevant seized documents. The allegation of the AO about the receipt of on-money from the flat purchasers thus was based on mere surmises and conjectures &d in the absence of any evidence to corroborate the same; the addition made by him presuming the receipt of on-money; in Qur opinion; was not justified In that view Of the mater; we set aside the impugned order of the learned CITIA) confirming the said addition ad direct the AO to delete the same. 0 17) (1997) 59 TTJ (Mumbai) 574 ACIT vs. Shailesh 5. Shah Held; "A5.2 result of search at assessees premises on 26h August; 1987 certain loose papers were found and Seized and One of thosg loose papers which has been marked a5 page No. 44 which has been responsible for creating the controversy under appeal before US has the following details: (Details are as per the Entries repeated on page No. 3 & 4 of the order )" F3e ITANo.56 to 61/Nag/2016 I.TA.No.261 to 265/Nag/Z016 Assessment Years:2007-08-2011-12 43 "We are of the opinion that the AO has not invoked any of the deeming provisions Of ss. 69 to 69D and, therefore; it is clear that these figures have been considered a5 assessee'5 income under the substantive provision of the I7 Act: Under the substantive provision of IT Act; it is now settled Iaw that every receipt is not necessarily 0r cannot nexessarily be income In the hands Of the recipient and therefore; the question whether any particular receipt is income or not depends on the nature of the receipt ad true scope &5 well as thg fact of the relevant taxing provisions settled proposition it follows that Revenue can tax only those receipts, which, first have been proved to be income in the hands Of the recipients ad secondly, the same have to b proved as non-exempt from tax; We are; therefore; Of the opinion that it Is Revenues Onus, before assessing any receipt as taxable income; to proved that the receipt in the hands of the recipient i5 income &d this can be proved or established only on the basis of some material or evidence This view finds support from the decision of the Hon ble Allahabad High Court in the case of Lachand Gopaldas VS, CIT "In view Of the above discussions, facts and circumstances of the case aS well as the settled principles of law, we are Of the opinion that the conclusion arrived at by the AO was based purely On suspicions ad the CIT(A) was justified in deleting the additions having been made only on suspicions, The order of the CITIA) is upheld ad the revenue's appeal Is dismissed, As regards to Departmental Representative plea relating to consideration Of assessee'5 explanation by the CIT(A) submitted before hin without giving opportunity t0 AO, we have found that the CITIA) has not based his decision on that explanation, rather had accepted the assessee's plea made before the AO t the effect that the figures On loose paper No.44 were rough working of the firm. This plea is, therefore; rejected; 18) (2008) 5 DTR (Jab) (Trib) 202 ACIT vs: Satyapal Wassan Ie_Honble_Tribunal has held_&s under: "Our view in this regard i5 supported by the decision Of Hon'ble Supreme Court In Govind Saran Ganga Saran VS. CST 7he I.T.A No.56 to 61/Nag/2016 I.T.ANo.261 to 265/Nap/ 2016 44 Assessment Years:2007-08-2011-12 (1985) 155 ITR 144 (SC) wherein it was held that for the purpose of charging to tax there should be four components t0 be satisfied, For the sake Of convenience; we refer to the relevant headnotes farm that decision:- "The component which enter into the concept of a tax are well known: The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed ad who is obliged to pay the tax; the third is the rate at Which the tax is imposed and the fourth Is the measure or value 0n which the rate will be applied for computing the tax liability: If those components are nat clearly and definitely ascertainable, it iS difficult to Say that the lev exists in point of Iaw: Any uncertainty or vagueness in the legislation scheme defining any of those components of the levy will be fatal to its validity: The first component shows that It is necessary to find out the nature of transaction which i5 the Source of generating income: It has to be clearly spelt' out 35 to whether 9 particular transaction is of income yielding nature a5 per IT Iaw; Merely because & document is recovered from the body of a person does not automatically lead to the inference that it belonged to him. It i5 only for certain purposes that presumption under $. 132(4A) has been enacted and not for ali purposes including the assessment: Further, this presumption is not conclusive It is rebuttable. "What amount of evidence one requires to rebut the evidence depends upon facts &f each case: There is no rigid rule in this behalf Sometimes, mere statement of the assessee may be enough. Honble Rajasthan High Court in Addi, CT VS; Thahrayamal Balchand 1977 CTR (Raj ) 219 (1980) 124 ITR 11 (Raj ) observed "a mere statemert of the assessee may be enough in some cases, It does not raise & question of law. "The document andjor follow Up investigation must establish the period of transaction before charge af income tax could be levied during the current assessment year" 7 IT_A.No.56 to 61/ Nag 12016 EANA.Z61 to 265/Nag/2016 Assessment Years;2007-08-2011-12 4S "The A.0, has failed to properly decode the figures mentioned In the document as to whether they are in thousands thousands or in ten Or in lakhs and what iS the unit Of transactions; these The document does not tell anything about this, It could have been done only bV Way Of investigation. It has not been done Therefore, one cannot infer merely from the face of the document 35 tp what i5 the total Of those transactions and whether they are in rupees or in something else kilograms or In the absence Of such praper decoding ad clarification of numberfquantity involved, no charge tax can be levied" : of income "The above discussion also leads US to infer that a charge 0n the basis Of document can be levied only When the i5 a speaking one: document "The speaking from the document should be loud, cear ad unambiguous In respect Of ali the four components described above a5 If it i5 not 50, then document i5 only & dumb document; No charge can be levied on the basis of dumb document" "It Was held in Neena Syal's Case (supra) that where 3 document found during the course of search I5 open to more than one possibility of interpretation and does not coriclusively that any premium was given by thes ass5secoof received by Or the seller then no addition could be made respect in of premium paid On purchase af plot decision, From this it_I5 clear that the document must unmistakably reflect the transaction without having any interpretation second "'The crux Of these decisions Is that a document found the course of search must be a during speaking one and without second interpretation must reflect ali the @deralsabout ae transaction of the assessee in the relevant assessment Any gap in various components a5 mentioned in 5, menttheatt Act must be filled up by the AQ through investigations and correlations with other material found either during the of the search Or on investigation course As a document No.7 is a result; we hold that non-speaking document" KT_A.No.56 to 61/Nag/2016 I.T.ANo.261 to 265/Nag/2016 Assessment Years;2007-08-2011-12 46 13,0 On perusal of the assessment orders of various entities of Bhangdiya group, it is seen that the net profit adopted by the leared AO is quite at variance In each Of the group entities, besides being abnormally high. The following chart depicts the net profit adopted by the AO in various group concerns for the purpose 0f taxable profits: lncoue from Contract Business Assessed By AQin % Particular AY AY AY AY AY AY AY 2006-07 z007-Q8 2008-09 2005-10 2010- 2011- 2012-13 11 12 Ms: M G Bhangdiya 11,7996 41,2796 35,6090 18.6096 27.4696 49.5090 MKS Constro Venture P; Ltd. 9,340 Mfs, Mahendra Construction 10.78% 43.139 25.449 11,040 21,799 33,059 27,7306 Ms Mahendra Const; & M.G. Bhangdiya JV 49,5390 73,4406 17.6906 41.819 16.03%0 MJs. KM. Bhangdiya 11,979 23,39% 26.769 26.2606 15.2206 13,9406 MKS Acme Build P Ltd 10,2856 Mfs; M G Btangdiva and HItbhav Engg JV 66,5390 11.9896 27.83%0 Q,00o6 MJs. M G Bhangdiya and SS PATIL Jv 54.829 129.9290 13.1890 MS K M Bhangdiva Jv 25.2896 39,5290 Mitcon Infra Projert P Ltd 10.0706 10.00%6 IO.D0Qo Consolidated for All Entities 12.360k 47.01% 74.3606 18.5290 34.2500 49.9796 44,5906 14,0 It is quite manifest from the above that the income assessed by the Id. AO for the purpose of taxation in respect of various group concerns; engaged in the same business a5 contractors; Is quite at variance The income assessed by AO a5 percentage receipts for various years varies from 9.34% to 129.92%. M 15.0 In view Of the huge variance In the Income assessed 35 percentage to receipts by the AO and various infirmities pointed outby the AR Of the appellant in the order of the AO as discussed in the faregoing Para No: 11 af this order; the AR has vehemently objected to the income assessed by the AO in the hands of various entities of the group, induding the present appellant: The AR thus has contended that income assessed by the AO in the assessment order is merely an estimation which is quite &t the higher side looking to the facts &d circumstances of the case. The AR of the appellant in this regard has also relied on the decision of the Hon 'ble ITAT, Nagpur Bench , Nagpur in the case of the appellant &d various group entities in ITA No: 268, 74Z LT.ANo.56 to 61/Nag/ 2016 ITANG. 261 to 265/Nag/2016 Assessment Years:2007-08-2011-12 47 269 & 285/Nag/2012 dated 03.04.2013. The AR of the appellant in this regard, has submitted that a survey action was conducted On 17.02.2009 in the Bhangdiya group Df cases wherein the similar situation 35 payments to Sub- contractors was disputed ad doubted by the AO, The survey action comprises AY 2006-07 to AY 2008-09 which are also forming part of the block periods for the search action conducted on the assessee group On 19.07.2011. The AR has pleaded that the Hon ble ITAT after having considered the similar activity of business ad deficiencies in sub-contract payments found during the sunvey action conducted On 17.02.2009 has decided the appeals for AY 2006-07 to 2008- 09, The Han ble ITAT; Nagpur Benchz Nagpur after considering the impounded material has directed the AO to adopt the net profit @ 12% 25 against net profit adopted by AQ 149. Therefore; the AR Of the appellant vetemently contended that the nature Of defects found in the course of search action are similar to that of the evidences impounded in the course Of survey action , therefore; the net profit in ay case shouid not exceed @ 12c &s adjudicated by the Honbie jurisdictional ITAT, Nagpur Bench, Nagpur in the various group cases of assessee for AY 2006-07 to AY 2009-10, 16.0 On perusal of assessment order, remand report and evidence On record ; it Is seen that the entire addition made In the assessment framed is based On the seized documents inventorized a5 B-f to 65, The AO. has analyzed the said documents &nd has faund that the various amounts Shown 3 receipt in the said documents are withdrawals from bank accounts of assessee a5 well as from the bank accounts of Sub contractors It is for this reason the conclusion has been drawn by AO, that payments made to sub contractors are bogus: The AO had examined 21 sub contractors 35 15 evident from the assessment order ad had identified a Sum of Rs 54.40 crores till date of assessment to be credit entries in te seized document having nexus With withdrawals from the bank accounts Of sub contractors In the assessment order A,O. has computed total addition to be made at Rs.182,.52 crores being credits in the seized documents. The sum Of Rs; 54.40 crores was added at the hands of respective assesses In the group On the basis of credits appearing in the bank accounts Of sub contractors; A sum Of Rs. 128.12 crores was assessed at the hands Of various business entities of the M Fhk IT ANo.56 to 61/Nag/2016 LTANG.261 to 265 /Nap/2016 Assessment Years:2007-08-2011-12 48 group in ratio of business receipt The methodology adopted by AO. while distributing the addition on estimate basis itself indicates that the books Of account have not been accepted and have been rejected while determining the assessable income at the hands of assessee: In the case Of assessee in regular assessment proceedings bpoks Of account were rejected and income was estimated as net profit percentage of business receipt at the hands of various business entities Of assessee group: In the course Of remand proceedings, the A.O. had made further exercise to identify the credit entries in the diary having nexus with withdrawals from the bank accounts Of sub contractors; The AO. in the remand has made generai observation that the credit entaeg frephe seized document are withdrawals from the accounts of sub contractors; However in remand report no specinic amount/name Of sub contractor has been Identified by him a5 to credit of whom it was in the seized document The exercise in the remand proceedings Was only to demonstrate that the credit entries in the seized document are in relation to amounbs withdrawn from the bank accounts Of Sub contractors; It is seen that the work executed by assessee group is mainly In relation to work of various government organizations. The State Government has due process Of verification 35 regards to quality and quanbity Of wOrk executed before reiease of payment: In the case of assessee thee work Is allotted by Government year after year This Itself is demonstrative for the fact that the State Government has no question as to quality and quantity Of work executed assessee The execution of work is ot disputed by xeauterdthe case Of assessee Work executed is undisputedly through sub contractors; In view of payments made by assessee to sub contractors cannot be outrightly rejected a5 15 being attempted by the Id. AO. E M 16.1 On perusal Of various observations made in the assessment order &5 regard to seized documents inventorized 35 B-1 t0 B-65, it is evident that the aforesaid documents do not pertain to any one of the business entities of assessee group: The aforesaid seized document had been maintained by late Shri Gotulalji Bhangdiya on memorandum basis fot making the notings in respect t0 handling of cash relating & activities of business The receipt side of assessees diary has been concuded by A.O to be out of withdrawals from the ZMMS TAS IT ANo.56 to 61/Mag/2016 ETANg,261 to 265/Nag/2015 Assessment Years;2007-0m-2011-12 49 bank account of assessee group 35 well &s from the bank accounts Of sub contractors, In the assessment order as well as in the remand report submitted by Ao. there is no allegation that the receipt side of the diary contains any receipt over and above in respect to activities of business declared by assessee In the return of income In other words; the credits appearing aree in respect to activity of execution of the various works for Irrigation Department and other government agencies 16.2 In the case Of assessee much prior to the date of search an action 1334 of LT Act 1961 has taken place on 17/2/2009. In the case Of assessee payments made to various SUb contractors was a matter Of dispute by the A.O. pursuance to survey proceedings A.O. had alleged in the course of survey proceedings that the expenditure claimed On account of Pavment to 5ub contractor is bogusfinflated The regular assessments have been framed in the case of assessee for the assessment years 2006-07 to 2008-09 wherein in the pevments made to sub contractor have not been accepted and net profit rate was applied in regular assessment framed, In fact assessments framed subsequent to survey proceedings for assessment vears 2006-07 to 2008-09 have again been framed aS re-assessments for above stated assessment vears in terms of provisions of section 1534 of LT, Act 1961, 16.3 The seized document Is not pertaining to any single entity ad it is record maintained in respect to movementyof money_by late Shri Gotulalji Bhangdiva in the form f cash fow; The aforesaid submission of assessee has also been affirmed by two employees in Whose handwritings the Seized documents are found to be written , 16.4 The analysis Of income assessed by the AO in percentage terms in the various years falling in the block period &5 under: Income from Contract Business Assessed By AQin % Particular AY AY AY AY Ay AY 2006-07 AY 2007 - 2008-09 2009- 2010- 2011- 2012-13 08 Ms; M G Bhangdiy 10 11 12 11.7906 41,2706 35,6090 18.6004 MKS Constro Venture P. 27.4696 Ltd, 49,509 M/s. Mahendra Construction 10,7896 9.340 43,1340 25.449 11,0406 21.7906 33,0S06 27,7306 FX6 ETANG 56 to 61/ Nag/2016 ETANc,261 to 265/Nag/2016 Assessment Years:2o07-08-ZOII-1z 50 Ms, Mahendra Const & M,G. Dhangdiva JV Mls KM, Ahangdiya MKS Acme Build P Ltd Ms MG Bhangdiva and Hitbhav Engg Jv Ms M G Bhangdiva &nd 5S PATIL JV MSKM Bhangdiya Jv Mitcon Infra Project P Ltd Consolidated 49,5396 73,449 17.690 41.81%a 16.0390 11,9790 23.3986 26.760 26.2690 15.2206 13.9406 IO_2891 66_5390 11,9806 27,839 0.0nd 54.820 129.920 13.189 25.2896 39,5206 12.36%0 47.019 10.0796 74.3606 10.00%6 10.009 18,5296 34,2506 49,970 44,5990 The income assessed in , various years by the Id. AO varies fro? 9 34% to 129.92% and brings in absurdity in incore determined with reference to business receipts For years various under consideration; The above analysis justifies; als0 fully the determination Of income shouid be at net pront rate of receipts at tte hands of appellant group: 16.5 The perusal of the assessment order would it evident that the make source Of income of the various business entities of the various group is only in respect to execution of government contracts ad it has nO other major activity of business where from the income is derived or generated The notings found in the seized documents are part Of the receipt received from grass the government department The various noting in the seized document are part of the gross Teceipt of contract received by grOup entities is not disputes, The inference drawn by A.O. is that the entries In the seized document are by inflating the Sub contract payments which have been Utilized for incurring illegal expenses In the case Of assessee no corroborative evidence Or material during wva5 found the course of search or anything has been brought On record subsequently in the course of assessment to establish that the notingscOlarde In the geize8 Gocorendiage in relation to are Incurring of ay illegal expenses; has Thus; the AR pleaded that the explanation Submitted by assessee 35 Bnaaddto movemert of money noted by late Shri Gotulaljee Bhangdiva Is plausible and reasonabie explanation wbichahes been disbelievedfdiscarded for no valid justification. find substantial force in the submission of appellant 16.6 The perusal of the seized document would make it evident that it cannot be identified to one individual business entity f assessee group. The transactions noted in the seized document are of mixed nature being business; personal &d investment: The document being not related to 7Xt ETANO,56 to 61/Nag/2016 ITANo,261 to 265/Nag/2016 Assessment Year3:2007-08-2011-13 51 any one identified entity the notings made cannot be held as unexplained credit t be apportioned amongst the business entities: various In fact; even a5 per the AQ the seized document does not belong to any one assessable individual. In the absence Of seized document being Identified to any One individual entity and same being not identified to any business entity it cannot be held to be 3s belonging to business S0 to entity 35 make estimated addition at the hands of various business entities in proportion t0 the turnover: 16.7 The A.O; at para 6 Of the assessment order has observed that the assessee group For AY 2006-07 to 2012-13 has debited Rs.361 cores towards sub-contract payment out Of gross contract receipts from the Government totaling to Rs.579 crores which i5 more that 629 Of gross receipts. It I5 Seen that sub-contract payments include various payment to associate concerns which are cansidered 35 receipts in the Case of associate concerns for making assessment by same A.

The actual payment to outside sub-contractors is Rs.263 crores only which is 4596 of gross contract value: The finding of A.O. to the extent of sub-contract expenses at 62% Is factually not correct 16.8 In assessment order at para 5.1, the A.0, has discussed the significance of the diaries Bl to B65 and has observed &s under: "The analysis of the entries in the diaries [svealthat_on rereipt_side various_receipts_including_receipts_fom withdrawals from_bank eccQunts Of group entiies_an subcontragtors were [ecorded_2nd O_payent_side entries_pf_expenses Ike_Interest_payments [Bpyment OL_toans deposits into bank_accounts; house hold expenses personal expenses pavments t2 various persons in casb investment In properties etc were recorded For the [ Y 2006-07 to 2008-09 and 2011-12 the cash books and the ledgers mainly contain the cash receipts and the payment entries in cash; It 15 interesting tD observe that some 0f the entries in these diaries were also refected in the regular books of accounts maintained by the assessee group. 7hB IT.A No-56 to 61/Nag/2016 IT_ANo,261 to 265/ Nag/2016 Assessment Years:2007-08-Z01f-I2 52 In the same Para in answer to question No. 30 from the statement of Shri Mitesh Bhangadiya recorded On Oath On 20/07/2011 It is evident that It is stated that seized documers are details of cash flow The AO. at page 9 in the same paragraph has observed that they contain probable extraneous gratifications. It is evident that A.O. has no evidence o record for ay illegal gratification but observation is made on inferences &d presumption. The observation at para 5.1 infact clearly explain the nature of entries found noted in the selzed document to be in the nature of cash flow: The AO, has also recorded that receipts are from bank accounts of group entities &d subcontractors On the face of such observation condusion af A.Q. holding that credit entries are assessable income at the hands Of assessee a5 unexplained credits Is unjustified 16.9 The AO; at para 6 of assessment order has discussed the nature of sub-contracts. The AO. has On enquires from bank account found that withdrawals made has been credited in daily cash balance of diaries The AO. On inference has observed that same are utilized for unaccounted The AO. at page I7 has observed uhaLcoostecraheneuts Sub- contractors are name lenders and are of meager names &nd some are employees: The names observved are Shri Kesharsingh Rotele and Firous Khan etc It is seen that both individuals a5 Observed are assessed by same Ao The incore from sub-contract work done for assessee has been accepted in the assessment framed ufs 143632/153C of IT Act 1961 on the same date The receipts from having assessee been accepted for assessing income at te hands of such individuals, payment made by assessee doubted cannot be 35 non genuine at the hands Of asessee Similarly AO: has Observed names of Other subcontractore: Out of names of sub-contractors observed Shri Sanjay Malani; Shri Chintaman M Nakade, Shri Vishal Rachalwar; Dwarkadas Shri M Bhutada, Shri Dnyaneshwar Meshram and Shri Suresh Masram have been assessed us 153C by the same A.

The receipts from assessee having been accepted For assessing income at the hands of sub-contractors, payment made by assessee cannot be doubted 35 genuine non- at the hands of assessee 7u4 ITAAND,56 to 61/Nag/2016 ET,ANG Z61 to 265/Nag/2016 Assessment Years:Z007-08-2011-12 53 16.10 The AO, at para 7 has made analysis of diaries marked on BI to B65. A.O. at para 7.1 it Is categorically observed that receipt side contains amount withdrawn from banks Of assessee group concerns ad individuals The fnancial year wise receipts entered In these diaries were computed at 182.52 crores: It is strange that A.O. atone hand observed that withdrawals from bank acount of business concern and individuals Is credited on left side of the diaries and at the Same time he concluded the same a5 unaccounted income The AO. has not doubted the deposit in the bank account Of assessee In fact they are deposit of receipt which are considered &5 Income withdrawals of such amount cannot again be assessed as income This clearly shOws incorrect ad unjustified approach for 'determining the income 16.11 The A.O. haS observed in various part Of assessment order that amount withdrawn from diaries I5 utilized for unaccounted payment Or unallowable expenses like gratification paid to various politicians and Government employees: The assessment record does not show any corroborative evidence On recard to hold that assessee has made payment %f any illegal gratification In fact A.O. at page 9 has observed that payment made In cash Is for probabie extraneous gratification which supports the submission made that assessee has not paid ay illegal gratification, The conclusion of A.O_is on assumptions and presumptions which are unjustified The A.O. atthough has computed payments Out of seized documents out has not brought 0n record any corroborative evidence to support his inferencef conclusion drawn: 16.12 The working made by Ao. at page 36 to 38 about analysis of payment out of seized documents are just adverse inference drawn On assumptions an Is not based onany corroborative evidence on record, 16.13 The A.O. at para & has observed as to confronting of seized doruments to assessee The replies submitted have been partly reproduced. It is Seen that in the course Of search the statement of the assessee was recorded on 20/07/2011 ad assessee has explained in answer to question No.30 that seized documents are details of cash flow ad same has been reproduced in assessment order On page 5. During the F52 HTAANa 56 to 61/Nag/2016 ETANo261t0 265/Nag/2016 Assessment Years;2007-08-2011-12 54 assessment proceedings too; the the assessee has explained that diaries are notings for movement question of cash No; in 23 reply to in the statement The assessee recorded on 27/07/2013. ali along in the course Of assessment proceedings had explained that te seized documente be in are to the nature of notings for movement Of fund explained in the It Was course Of assessment proceedings that the sub contractors On withdrawal of money from their accounts used to bank keep in trustfsafe custody the which are found to be noted amounts in the seized documents: The explanation submitted by assessee was veritied by the AO. and it was found that the withdrawals made from the bank accounts Of the sub contractors is on certain in the occasion credited seized document It was further explained that amounts credited the in the seized document amounts being the received from the sub to the contractors were remitted sites where such sub contractors work; work executing the The amount remitted was through of the sub-contractor any representative which Or any person going to various sites are located at remote places: The seized contains notings in respect to "handling) oe cshebydocument Gotulalji Bhangdiya Shri who has expired In assessee April 2011, in the The course of explained to best of his assessment proceedings has ability 25 to how be made notings happened to in the seized document The statement the time of search continued as made a to be the same in the course Of assessment proceedings that the seized documents respect to movement are in Of cash with business, regard to activity personal Of expenses and investments assessee made The Investigation by Wing Ao. of the Department nor the in span of almost more than three not brought and half years have 'any evidence On record to show that te various notings made in the seized documents are in nalation Illegal expenses to any incurred by assessee submitted The by explanation assessee was substantiated by submitting independent evidence of affidavits of sub-contractorsunat had collected back they the amounts deposited Gotulaljee Bhangdiya. The with late Shri the ` affdavits various persons who had submitted have not been cross examined Subsequent to affidavits submitted and nor any material or evidence record has been brought to On dislodge the the affdavits; averment made in The contents Of the affidavits have unrebutted ad have to be taken gone 25 tTue and correct: The FS1 IT ANo.56 to 61/Nap/2016 LTANo,261 to 265/Nag/Z016 Assessment Years:2007-08-2011-17 55 aforesaid proposition is in line with the law laid down by Hon 'ble Apex Court in the case of Mehta Parekh reported at 30 ITR 181 (SC) wherein it has been held that: "No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affdavits considered necessary by either party. The appellants took it that the affidavits Of these parties were enough &d neither the AAC; nor the ITO; who was present at the hearing of the appeal before the AAC, considered it necessary t0 call for them in Order to cross-examine them with reference to the statements made by them in their affidavits. Under tbese circumstances iwas _not_opgn_to_the_Revenue t challenge_the cpnactness O_the_cash_entries ot_the statements made by those degongnts in theit affidavits 16.14 The A,O. has observed that the various Stb contractors in the case of assessee are bogus: The A.O. has listed the names Of such sub contractors at para 9.1 of te assessment order; It is observed that the aforesaid Sub contractors are als0 assessed by the ACIT, Central Circle-? (1) , Nagpur who i5 also the A.O. of assessee group In cases %osuch sub contractors notices under section 153C of LT, Act 1961 were issued 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 IT Act 1961 by the same A.O. wherein tnconeh returned In respect to business income shown arising to Such Sub contractors out of receipt received from the assessee have been accepted. The A.O. having accepted the business receipt at the hands Of Sub contractors for determining the income in the cases of sub contractots not have could concluded that the payments made by assessee to such sub contractors are bogus: Considering the entire evidence on record &nd fact that in the Case of assessee bpoks of account have not been accepted in the past assessment years, I am of the considered opinion that assessee' 5 income in the case of assessee needs to be estimated on the basis of business receipts and that would be most appropriate and reasonable manner for IT.ANO;56 to 61/Nag/2016 ETANo,261 to 265 /Nag/2016 Assessment Years:Z007-08-ZO11-12 56 derermination of income at the hards of assessee group. addition The made by A,O. by referring to seized diaries I5 unjustified and unsustainable for various reasons observed hereinabove; The income Of assessee need to be determined at estimated percentage of business receipt at the hands of respective assesseets Of group: I7.0 It is settled proposition of law that the income sought to be taxed should be in the nature of real income of assessee The aforesaid proposition is in line with the decision 0f Hon'ble Apex Court in the case of Sanjeev Woolen Mills VS, CIT reported at 279 ITR 434. In the case of assessee the A6. made has addition during the block period to the tune Rs.182.52 Of Crores; The addition made I5 over and above income affered by assessee in the return &5 additional income of Rs.Z6 crores Offered during the course of search and Rs. 11 crores offered during the course of survey proceedings for the years falling in the block period In the course Of search assessee 15 not found to have possessed any Such huge undisclosed assets 5o as to justify assessment Of such huge income at the hands of assessee The addition made by AO Of such huge income cannot be held to be justified On principie Of real income a5 settled by Honble Apex Court addition The made by AO thus is clearly excessive and unreasonable 18.0 It is seen that in assessment framed in the case of Mfs; Admane Construction Co. for assessment year 2005-06, had AO. made additions in respect to bogus labour bogus Sundry creditors and other disalowvancaboun Deyapeai Tied by Such assessee before CTC (Appergcet Wastheeid 8at the income needs to be determined at the estimated percentage of business receipt towards civil and construction accordingly it was directed to assess net profcrst yViof the contract receipt: Thedepartment challenged the before the matter Hon'ble IAT seeking to additions Sustain specific on account Of bogus labour payments and bogus trade creditors, The appeal filedby the dismissed revenue was by Hon'ble ITAT in ITA No 93/Nag/2012 vide order dated 01/05/2013, The appeal filed by against the the revenue order of ITAT has also been dismissed by the Hon ble Bombay High Court Nagpur Bench in ITA No. 134 Of 2013 vide judgment dated 09/12/2015. The ratio laid down m1 753 KT ANo-56 to 61/Nag/2016 ITANO,Z61 to 265 Nag/2016 Assessment Years:2007-08-2011-12 57 the afaresaid case fully supports the submission Of the assessee that in the case of assessee determination of _ income on estimated basis is most reasonable and rational manner For determining the tax liability at the hands Of assesaee, 19.0 In the case of Shri Mitesh Bhangdiya ad Group; an action under section 1334 of L.T: Act 1961 was also taken by the Department on 17.02.2009 prior to the date Of In the course Of survey under section I3BA Qe JaLeAc 5196c. the statements Of various sub-Contractors were recorded and the verification Of the records maintained by assessee undertaken by the A.O, having jurisdiction; "Ensthegcoursevas course Of survey action In pursuance to discussion with the AO after and considering the fact that no complete available record with assessee a5 weli as with the subcontractoas executing the work it was agreed to offer additional income at Rs: II Crores amongst the various business entities the Bhangdiya group for the assessment years 2006-07 toezooge I0 The aforesaid assessment years covered by survey action ar2 alsp forming the part of the block period which is assessed in terms of provisions of section 153A of LT. Act; 1961, In the Case Of the assessee group, prior to the date Of regular assessments were completed up te asaessnfeneaebr 2008-09. In the regular assessments framed, themot ater considering the additional income offered at the time Of survev proceedings and the facts ad circumstances 0n record including that payments made to sub-contractorseandt Vaerious defects/mistakes a5 found during the cOUrse Of survey, had estimated the net profit at 14% of the net receipts computed at the time Qf assessment proceedings The aforesaid estimated addition made at the hands of subject assessee matter were Of challenge before During CIT(Appeals) , Nagpur. the period while appellate action under section hilezadpetlate Praceegi9 hadrakerrdiag taken place at the business premises of assessee group on 19.07,.2011, TheeCIT(Appeals) after noticing the fact 35 regard to action under Section 132(1) of LT Act; 1961 at the premises of assessee and considering the additional disclasure assessee made by group in the course dismissed of search proceedings, had the appeal filed by assessee vide 05.03.2012 Order dated F5h IT ANo,56 to 61/ Nag/2016 LTANo.Z61 to 265/Nag/2016 Assessment Years:2007-08-2011-17 38 20.0 The order passed In the case of assessee In appellate proceedings WaS challenged before Hon'ble ITAT, Nagpur Bench , Nagpur. The Hon ble ITAT, after considering the entire material facts ad evidence on' record, concluded that assessee group to be assessed at 12% of the receipts and thereby granted part relief In the Cases Of various assesses Of Bhangdiya group. 21.0 It i5 thus seen tat Prior to proceedings having been initiated under section 132/1) of LT Act 1961,an action under section 1334 Of IT Act 1961 had taken place at the business premises of assessee on 17.02.2009. Pursuance action to under section 1334 Of IT Act 1961, J amount lump-sum was offered for taxation in respect to various assessment vears which are also forming part of block period for the search. In the case Of assessee books of account were not accepted and were rejected in assessment framed under section 14303) of LT Act 1961, It is & fact on record that books Of account had not been accepted for the purpose of framing assessment at the hands of assessee. In view of the above verification of entries with reference to regular books Of account looses relevance ad has no bearing for determining assessable income In the hands of assessee 22.0 In view Of the above facts and circumstances &d keeping in view Of various infirmities and various judicial decisions as discussed in foregoing paras Of this order and to meet ends Of justice; to mY considered opinion, it would be fair ad reasonable to adopt the net prafit @ 16% gross receipts on the of Rs.579 Crs ; being the turnover Of the various group concerns for the block period from AY 2007-08 to AY 2012-13 in the respective years Of the block &d bring the same to the taxation On the guidelines determined Hon ITAT Nagpur Bench , Nagpur In ITA No.268, Zsghe 285/Nag/2012 vide order dtd.07.03,2013 On the similar activities Of business a5 well as deficiencies found in the case of the appellant during the course of survey action conducted at the premises of the appellant group on 17.02.2009 The relevant facts 3S emanated from para- 4 of the order of the Horble ITAT in the case of the appellant are 35 under: "4, Brief facts of the case are that a survey us. 133A of the Income Tax Act; 1961 waS carried out in the business F55 ITAANo.56 to 61/Nag/2016 ITAND261 to 265/ Nag/z016 Assessment Years;Zoo7-08-201-12 50 premises Of the assesses ad his associates on 17.02.2009. 'During the course of survey Operations it was found that most of the bills; vouchers and other evidence entries insupport of the in the books Of account like labour Taterial Durchasooksmachinecticutharges sitewpenshargeb contract expenses, Oil and lubricants, repairs and maintenance etc: pertaining to this AY. were not available Statement of Sri Mitesh Bhangadiya Was recorded under Section 1334 and u/s, 131 Of the Act on behalf of the assesse. In the statement dt.24.02-2009 and 13,03.2009, In response to various questions relating to the genuineness of the payments to third party Sub contractors and in respect t0 other deficiencies; the assessee admitted additional income in group cases of Rs I1 crore and proportionately were allocated between ali the assessment years relating to these four 3Ssessee. For the year under consideration ie for assessment year 2006-07 in case of Sri Mithesh Bhangadiva, the additional income Was offered at Rs.23,97,361f- besides the income shown originally at Rs.23,63,910/- Due tax was paid before the issuance of notice under Section 148 as admitted by the AO in para 2 of his order, The important contents of submission recorded 24-02-2009 an and 13-3-2009 of Sri Mithesh Bhangadiya are incorporated in the order of the AO. In query of question No. 11, it was answered that during the course of survey, it was noticed that there are certain discrepancies and omissions &nd to cover Up all such discrepancies we have made out mind to offer additional income over and above the regular income We are under the process to determine Such additional income to avoid litigation and, to buy peace Of mind; Thereafter in response to question Nos. 18 & 19 of the statement recorded on 13-3-2009, it was answered that the sub contractors were awarded the Sub contract work by OUr firms a5 per contract notes and the nature of sub contractors has been that labour charges ad machine hire charges. The sub contractors by and large illiterate and therefore; their boks of accounts found to be incomplete; without maintenance of ay bills and vouchers; The expenses incurred by Our firm has been 0n the basis Of the SO called vouchers raised by them and terefore, there appears the discrepancies in the expenses claimed It was further Stated that the assessee has admitted in his previous statement recorded during the course Of survey that there are certain discrepancies and anomalies in the sub contract expenses in their books Of accounts, non availability 7S6 I.TANo-56 to 61/Nag/2016 I.T.A.No.261 to 265/Nag/2016 G0 Assessment Years:2007-08-2011-12 of bills ad vouchers for the past three assessment years Accordingly, it was submitted that there were certain discrepancies and anomalies in the sub contract accounts; in books Of accounts for assessment years 2006-07 to 2009-10. The assessee declared the additional income of Rs. 1l crore in their firm &d the five sister concerns in the assessment year 2006-07 to 2009-10, The working of the additional income Of Rs; 11 crores will be done accordingly and the same will be shown These part of the statements have been incorporated In the order Of the AO &s state above Thereaher the AO started scrutiny of the case: The AO noted that the assessee has shown various expenses under the head labour & wages; machine hire charges; site expenses and sub contract expenses etc On very higher side, which are not supported by valid vouchers Neither ay further evidence was filed, It was also observed by the AO that since there are various deficiencies In accounts Of sub contracts &d the assessee has offered 9 sum Of Rs 23,97,361f- On account Of discrepancies in respect to Sub contract therefore; he proceeded to make further addition an account Of various deficiencies ie in absence Of bills and vouchers; excess claim towards machinery hire charges, verification of applicability %f provision of Section 194C ad denial of alleged sub contractors regarding the sub contract given by the assessee Al these discrepancies are noted by the AO in his order; Thereafter in para 7, the AO has observed that after having rejected the bOokS of account of the assessee under Section 145(3) of the Act; the profit of the assessee has to be estimated reasonably. The AO also observed that the assessee has declared net profit ratio of 6% and 7%6 of the total turnover in assessment years 2006-07 & 2007-08. Aftar offering additional income of Rs.23,97,360/- for assessment year 2006-07, the results in revised net profit comes to 12.87%6 of the contract receipts However , this net profit was found by the AO on Iower side. The AO noted that in one of te group case namely; Mls Mahendra Construction & M.G Bhangadia (JV) who had dedared additional income of Rs: 1,57,47.760/- in the Assessment Year 2007-08, which gives & net profit ratio of 13.84% of the net contract receipts. In view of these facts the AO adopted 14% net profit Thereafter the AO completed the assessment and made addition of Rs: 30,12,722/- against additional incame shown by the 4