M/S MITCON INFRAPROJECT PVT. LTD,MUMBAI vs. D.C.I.T CENTRAL CIR.2)1), NAGPUR

The notice issued under sectian 153A4 0f LT. Act 1961 is illegal, invalid and bad in law and consequent assessmentframed thereupon Is liable to be cancelled.. 2 The learned CITQA} ought to have directed to gccept the income as shown in return filed u/s 1534 of L.T Act 1961, L3ag - 122,9 2 281/NAG/Z016 MITCON INFRAPROJECT 3 The learverl CITfA} errerl i17 nnt accepting the proyer {f assessee to thc eStimatrd incomg Dt the hands ff adopt net rereip! for detrrminin cifior exeluding Lhli rrcoyerics mttle by tte {Jovernmenl Ossessee DeparemerLs (!! Urccvutt Of muLer iu} stppliel Sales tux urit Service Lax etc The additinn made by learnedl CIT(A) by adopting 16% of receipts is unjustified, unworrantec ad excessivr The learned CIT{AJ erred in enhuncing income by Rs: 92,99,652/- in respect to aclivily 0f business The addition made by kearned CIT(A) at Rs 92,99,652/- to the income from business is unjustified, unwarranted and excessive 7 The assesxr denies Iiahility t ptiy interest under section 2344, 2348 und 2340" of LT Act 1964. Wizhicu prejudice; levy ff inlerest under section 2344, 2348 urc 234C 0f IT Acl 1961 is unjustifiedl, unwarranted and excessive: OM 3 Grounds No; 1 and 2 silice Iot pressed therefore the same stand dismissed a5 not pressed 4_ In respect ta thc grnuncls no 3 ;nt 4 the Ll. AR hefore US contended that the issue invoiver] in Lhis #ppeal is similr to) kthe issut: invulved In assessee'$ Mitesh ITA Nu 261-265/NAG/2016 and appeal in the Caxe {3] Bhangdiy:l whalever view this Tribunal may take in (he case Of' Mitesh Bhangdiya same Inay be taken in the case ofthe assessee. La. DR also agreed for the same 5 We have heard tho rival submission and carefully considcred the same We have gonc through thc order of this Tribunal in the casc of Mitcsh Bhangdiya +a8 3 1230 281/NAG/2016 MITCON INFRAPROJECT in ITA No. 56 61/NAG/2016 and 261-265/NAG/2016 We noled in that Case Tribunal has passed the consolidated ordcr in the uppeals filed both by the assessee as well as by the Revenue by holding vide order dated 29.06.2017 as under:

We have heard the rival submissions, curefully considered the same ulong with the orders of the tax authorities below We noted that the facts and the issue involved in all the years under appeal in the case of the asSessee are similar and identical: The CIT(A) has passed 0 consolidgted order: The undisputed facts in the cose of the' assessee and the group concern are that & search and seizure action u/s 132 0f the Act was carried out in the Bhangdiya Group 0f cases on 19/07/2011` Simultaneously, the business and residential premises of the assessee were alsu searched During the course of search conducted, incriminating papers and documents were found and seized. Shri Mitesh Gotumal Bhangdiya is the key person of the group: Shri Mitesh Bhangdiya mas two sons numely Shri Kirtikumar M. Bhangdiya and Shri Srikant M, Bhangdiya and Ohe daughter Neha. The business of the Bhangdiya group is being lanked after by Shri Mitesh Bhangdiya and his two sons: The other key persons ussociated with: the group are Shri Sanjay Rameshchandra Heda; hustand of Mitesh Bhangdiya's sister; Smt Pradnya, resident 0f Amravati anc} Smnt Manisha 0. Maniyar, widowed sister of Shri Mitesh Bhangdiya who lives with Bhangdiya family. 12,1 The min business concerns Of the group (including those discovered as a result of the search action} are as follows 1 M/s M.G, Bhangdiya (AERPBZS03E} (Prop MGB}; converted into 0 company MJs MKS Constro-venture Pvt {AAHCM0383T} Ltd: from 01.04.2011, Mfs Mahendra Construction, Prop. Shri Sanjay Heda (MC} [AADPHZIO9J) M/s Mahendra Construction 85 M.G Bhangdiya (V) {AANFM5658B} Mfs Kirtikumar M Bhangdiya (Prop KMB}; converted into 4 company M/s M.KS Acme Buildcun Pvt Ltd. (AAHCMO38ZK) from 01.04.2011. (AGYPBI659G) 2 3 SADel; 2 J3& 123/ 281 MAG;2O16 MITCON INFRAPROJECT M{t KM, Thangdiya Mahendiu Construction (JV) {AAKXKISZUC} t. Mjs Shrikant M Rhangdiva (Prop SMB}(ATCPB1337J} 7. Mitcn Infruprwjec! FvL Lid. (MPL} (AAGCMI8GBIT} 8, Lokshahi Publicatlons fvt Ltd. (LPPLH(AABCL6673L) 9 MITZ Infruprojecl Pvc HAL{AMGCM3047A) 1O, Sakshi Gruh Nirman Pvt Ltd. (SGNPLJ(AA0CS7974G)

Buluji Stturte' Crusher & Infraventure Pvl Ltd (AADCB5273C) 12.2 The group has Qlsp entered into joint ventures with various other civil controctors of the city tr} ~ecure sSome civil controcts A few Qf them are [isted below: 1_ M/s M.G. Bhangdiya & Hitbhav Engg (JV) (AAOFM474SL) M/s M.G. Rhanguiyu & $ $. Putil & Co {JVHABIFS3645L} Mfs Darshan Constructton (JV} (AAHFDO654N) M/s M R Dhohic Rs K M Rhungdiya (JV)fAAPFMOGZZB) 2. 3 4, 12.3 The hature Of the business 0f the Bhangdiya grovp primarily is executing civi} Ernntrocls The Krup works' rainly for Government departments like M/s Vidarbha Irrigotion Development Corporation and has heen enguged in executing Varitk!s crnitracty pertuining to the irrigation projects In the state uf Maharashtru During the course of search operations incriminating docinzcntf were found and seized from the residential pretises tf Shri Mitesh Whc"ydiyu. Iteri nu. 1 &o 65 0f Annexure- B seized from his residence 6iy the diaries containing ledgers, daily cash hooks and hank buoks mnaintuined hy Lhe Bhunydiyu group 36 Cosh books contained entries for the period from 26/07/2006 to 18/07/2011 und 27 digries relale t} the financitx} year 2006-07 to 2010-11 whereas the remaining LWo cliories were maintained for house hold and miscellaneous expenses 4 stotenent %f Shri Mitesh Bhangdiya WaS recorded on oath on 20.07.2011. J his ~wurm SLuetEXt recurdet during Lhe Colrsp 0f seurch action, Shri Mitesh Bhangdiya WAs confronted with the entries borne Jut frtm the seizcc} diaries truarkr" rrs B3-1 to B-65 und t( explaain the contents of these diaries: Shri Mitesh Bhtungdiya in his stotement recorded has submitted that the entries in the ditries und the ledger pertain to thc business receipts tx 5 123 281(NAG/2016 MITCON INFRAPROJECT and business expenditure The Assessing Officer i#t Lhe assessment order has recarded 4 finding that as per the item no 1 T0 65 0f annexure-B, it is opparent that the amounts withdrawn from the bank uccounts of the sub- contractors were credited to the daily cash balmce of Bhangdiya group which was confirmed by Shri Mitesh G Bhangdiyt in his statement dated 14/09/2011. The Assessing Officer has reprocnced the statement of Shri Mitesh Bhangdiya recorded On 14/09/2011 in para 6 uf' the assessment order: The Assessing Officer in the assessment nrder has also recorded Q finding that the seized ducuments being B-1 to 1-65 cuntain entries of all expenses incurred by the Bhangdiya group {47 cCS} from AX 2006-07 onwards and expenses incurred through Lhe bank uccounts from FY 2009- 10 onwards Thus; the Assessing Officer fuund Utat the actual expenses incurred do not match with those shown tu have been incurred in the books The Assessing Officer thus concluded that the Ioks (f accvunt of Shri MG Bhangdiya maintained for income-tax purpose do not reflect the true business affairs and are not at all reliable The Assessing Officer analyzed the entries in thg diaries and took the view that on receipt side various receipts including the withdrawal from the bank of the assessee group concerhs were recorded and 0h1 payment side entries of expenses Ilkke interest payment; repayment of loan, deposit into bank account Icusehruld expenses, personal expenses payment to various persons in cash ond investment in properties are found recorded It was also noted by the Asxessing Officer that some of the entries made in the seized diaries were fowd reflected in the boaks of occount maintained by the Bhangdiya Groutp Staterent of Mitesh Bhangdiya was recorded on 20/07/2011, Dwwrin} L/e course 0f search; Mitesh Bhangdiya was confronted with the entries borie out fram the seized diaries marked B-l to B-65, In reply to questinn No. 30 of his stutement Mitesh Bhangdiya submitted that the entries in te diaries and ledgers pertain to the business receipts and business expencilure but ac present it is very difficult fur him to state whether the enlries recorded in the seized diaries and accounted in the regular books 0{ accomt and same can be expiained only after verification of the entries 0} the ciaries with rhe regular books of account maintained by the Bhandiyc Group, Shri Mitesh Bhangdiyd, reply to question No. 38, we nuted vrlunLorily offered additional unaccounted income of Rs26 crores far the Ilock period including the current financial vear over and above the ref:ilar {ncome declared in the return filed for the assessment year falling wWSin Lhe block period. The income so declared are summarized as under: BHANGWLXA GRCWIE 4Y 06-07 AX 2007- 08 AX zdd&: 09 AY Zong- [P 4Y2017, I} Crond Tamal (Rs Porticilar AYZ010:' ~I: ziWX.IZ WMS_Rhonadiun 74336 Ia33 6 281/NAG{2016 MITCON INFRAPROJECT Carnrrt }ImWCS DET" @riginik retirri ddfdititni !xctjxe #sinny rfrtring StIT"VEYL Aue [Wurin {;IEUitie' {Afprew Trr; S99 CurltrI?E? [IJLXC!g DanJred 013,9077 %2,uu}40 Z"ii; iEos "{ jiii242z ~J",6z? "r,#n"mn 2s9/,i60 jX;WW ~3i,i} 964,27,733 "vinR 255/7288 231464,07 FTWz,m} 4A0'eWJ 46013 ~fi WZonmon 470fnunnn WkiConsLz Wnucz PLtd Ctmtru? Xrh"Wr7r' (X3 REr Jrigijj:ntuj Ajditna} [ncXle derini#o ingt Stinvex Ajdicianol {ucote Uxfered Drretc' Segrch Contruft {ncorna DJe( {utrett 1xz_5-I} {82,75,373 104,74627 154,74,627 342,5,M 347,50,00 js Mwlendrw GolstxtToog Todlroct Inconig 125 PEr" Origigul returx 3672,56 "Auidilionui {ncgm;;' #ciared diring 40'i,96 Sungy Aifuetlur uf YnLurtze' OJered Duri Z6A0,48 Aurch Comror: Xirot? Declored '04,0Q13n iz3Wj <640829 281i '1404 7628415 7,,0 Xo6Z0,174 Xfi I07,86,08 377,878 !6,3,9M+ MWm '2M.87m iQ,ioA 2040,512 3479051 2148060 SZ,ViGO #0Qe; Z2,nNW 1710,0} 34,O,OQ 822,00,40 j/s funetlru CQs & LG: #tcoltelie JV Lttstct Incruma' ( [wT Oriotnak tetu'n M5;4775 31o,0rt "J7 35076720 74,774336 1617.0730 A#tilitino} Wrojxn dEclsred dtrig 4"7 #ncitinmi} {ncons Vitered During sen?ch {7!8+ J43QK4/6 843,67,8]2 37.Xi"i 19024,m} T77,77,04 46]964,104 Courrogr [mfpW Decturred 3467740 S0WWujjw MnSm S4",,NVW 24D00Q Jun,58,57 ixx_%H Bixaidtixg Eonrrort Iticum' W1 per crigitgl returs Addittona: Jncung JnIqnain rfuring) Survev 1418,755 Jzu7j5 #@76; 2X0 016.67 3;,3d Jho,W,12[ 14123m 420 1WoSo X0W bfn4Y12 'a3k 7 281/NAG/2016 1:ITCON INFRAPROJECT Additionoi [ncom? Offerea Uorinig Search Controct Xilcoxne Declored 8,90,6.0 [0,70,239 26,41,04] So3333i; #l ' 139,36,226 24,31,049 07,0C,Q0Q 57,Do,onQ 57,00,Q00 120,W/),)fli) 0n.A 391,31,049 W*t Acxn Build_P Ltd ControcL Income g5 per 'originol Irturn Additianol {ncoine decared during Strek Aduitivna} {AcomE Ofjehd During Seorch 7470,653 34,70,653 10,20,347 [6,29,347 Eontrurt Income Declard 51,UInkdQo S1,00,0nQ WSMfBhamudivg and Hithhax Ennq IE Cantroct Inconje Ox per nriginol Fetum Additionol Income declpred durlig Surer Additiorol {ncome Offered During Search Controct [nenmg Declored 2,20,187 4,63,997 VX"M 3837,905 26,84,727 5,61,503 30,34 5,93,927 2,49,469 3,80,475 4,12,307 RFeLL 32,4R,JI0 S,0O,00D 463,997 {EVI MLWGi Bhangdiwa podXS EATLJW Comtroct [ncome 05 per odainnl "ethm Addilond} Incame declored during Suner Additional {ncomg ofered Durimg Seprch Controct Income Declared 9,43,467 4,65,923 473,54 6,01,929 8,38,586 1440,515 #O,Qu 40,02p 24323,582 [0,67,052 13,16130 41,000 LLSEH Bhgngriv [K Corttract Incomc 05 per original return 5,14,551 4,/461 14,47,012 '|a25 P3x Hr* 8 281/NAG/2016 MITCON INFRAPROJECT Addlnond} Income declreu dtring Junvek faditinmal {nzomg Ojtred Dut-Ing} Senrch 5,05,443 11,67,534 I7,52,588 Gontroct {nCome Dutit j!Vu,dno 21,0Q,#J 32040p0 Hto Inky Pmiecr ELtd Cohtroct {ncomg 05 pCr" rrttllnal returtt Audiclono} Incoxne declored during Quu" Addionnal Inzon (yred During Suurchh 60l30,0t)0 43,98,429 33,20,051 {57,57,0 62G1,810 IIl,t571 9,19,949 102,32,520 Contrort Mncome Declarad 123.p.tQU 155,w,0o 62,+0,00 34,40,04 APPe Addirientl Intome Wertdinciaef Indlwiqual Nitzoh Ehongdiyq 74,79,447 74,79,442 Kirtlkumot Bhanguiyo 30,00,000 a84,0Q1 Shrihont Bhouriyd 35,0,Qud 35,00n0 Kesttar Singh Rotele 1n4Z,557 13,03,097 8v,91,200 J0338,910 Canaglidobut Eorav Enttiai Controct Inzome @f PLT" origintl retrrn Adilllfundf Jneumg declared durin) Suovgz Axditolotf {ntoire Offared During Seurch Conttart Income Meclarcd 450,85,476 3990,49,75 278,24.565 6896,H0I 344,01.e56 414,86,202 2J63,0id 1167415934 TI04,+459 70,51,601 251,60 261,28068 51 $22,590 235681,64 216,65,435 261,80,445 51,73,57 39,03,z03 328,92,707 {022,46,043 686,[,5Z4 7451,79399 1n5z,+0uM 2129,63,997 [643,u0po 494,08,010 174,28,950 F5Z.53,772 71521,473 Adtlutionel Incom? in Lu3e5 0f Indivtdkal 10,rl553 I2OS,0N7 84,.93,260 139,79,442 243,18352 1244 From the statemgnt of Shri Mitesh Bhangdiya, it is apparent that the diary fund and seized belongs to the TSSessee group and the assessee group did not disown these diaries gven though in the subsequent 1222 9 K3h 281/NAG/Z016 MITCON INFRAPROJECT 1336 stotemenf recarricdi on 27/07/20/13 Shri Mitesh Bhangdiya stated that these 'ainluineel by his futher Gotural Bhanydiyu: The diuries were prirrurily Assessing Officer. ie noted hcs {{s0 nbserved that these seized diaries Glso machee in cush {wr" probahle extruneous gratificatitn tt crhnuin Lktc? puyment various persons including politicians government officers/officials which are prid. We recnrded alona wirh their nnmes, clurtes of poyment and amount noted that the Aszessing Ulficer hus nat examined these persons for bringing corroborative evidence on record in support % his finding that the cash tag Eoevo by Lhe Ussesscee yrun for prubohle extraneous gratificution pcit We noted paat the Assessing Officer made an exercise to match the entries of wich) UJit? entrics in #he regukr hroks of uccount the tx puyment fifnl receint Tne Asessing Ufficer came tv the conclusion thut the of Bhangdiya Group receipts are predominantly withdrawals from the hank account by Way of creuling boyus sb-contruct expenditure The Assessing Officer found thal 0 sum 0f Rs.361 crores towards the sub- the assessee group hasdeducted the grvss receipus uygreyoting tr Rs.579 crores: It contruct nuymitml ufjeinst was found by him after verifying from 21 contractors thata Sum of Rs54.40 hank account of the sub- crore is attributahle to thc amnunt clenosited in the contractaf byu ccount puyee Cheyues by various concerns %f Bhangdive WWs suhsequently withdrawn in cash and is reflected 0n the Group, which Tlte LOtul unounl SQ reflected in the diaries receipl side of the seixed tiaries: computed at Rs.]82,52 crore The Assessing Officer On the receipt side Ivas added the suid nnaectunteti umouni: of Rs.]82.50 crore in the income f the A suin %f Hs.54.40 crore wa5 added in proportion to assessee group concern the aiouit Of choque credited hy Frpeclive %roup concern in the hands %f Fvr" Lhe bulance umount of Rs.128.12 crore; the respective Uroup Cuncerts the Assessing Officer added the same in proportion to the contract receipt concern in thc respective assessment years to the Eotal shown by the {rtlip in thot year; Now the question before LS turmover 0f" the Group concern of Rs182,52 crores; found recorded in the arises whether the suid Su diaries fuund during Lhe cuurse Uf seurch us recelpt being withdrawal from the bank account of the group concern GS well a5 from the bank account of the sub-contruclo' cum ne regarded I be the unaccunted incume %f the At the inicro Ievel, If we look into the nature of the receipt; it Is not assessee the hank account of denied hy the Rcvenue thut the receipt hos comc fram the ussessee ureurp Conpern ant pari of lhe receipt and hus come out &f the cash withdrawn by the sub-contractnr to whom the Gssessee group concern hod mude the puymenL The ussessmnent hus been made by the Assessing 1534 in the case of the assessee QS well aS assessee s group Officer u/s Prreelinys: have Olso been initiated by the Assesving Officer in the conceri 1530' pf the Act The sub-contractor has case 0f the sub-conractor u/s submitted the return in response tc thc notice "/s 1 53C. The suh-contractor has shown Lhe ilconie froni Lhc contruct receipt being anounl paid to Lhem The said inconte has duly been accepted by the Assessing by assessee gratp Dusis in Lhe Iends of Lhe sub-contractr: The Assessing Officer o subsiunLive FeL ON 834 10 1885 281/NAG/2016 MITCON INFRAPROJECT 1337 Officer thus has duty accepted Whtle froming the assessment of the sub- contrttclor lhe}t Lhe peyrnent rezeived by lhe sub-ronlructor from the assessee as !ell as the assessee Jronp comcern were not bogus but were the poymentreceeii hy peerfurminy {h !wligution {cr & considerution entrusted On them undlet E}te' Stfb-contrE "his dlenoles that the relationship of the {rstssee {IS wfi T3{ (sseS6r' Ximii{ Concern !ith the suh-contrartor; d5 genuine, has duly beert @ccepledl by the Assessing Officer: Once the sub- contractor has been assessed and their income has duly been accepted by the Revenue; itt Vur vit:w, Lhe Revenue: on the basis 0] the same fucls in tha case 0f the assessee, annot take the vIew that the payment made to the swb- contractor wert IXWls Further it ks nnt tht Luse of the Revenue that the Revene has disolluwed the pQymet #ade to the Sub-contractor Itb & case where the Revenue has udlded thc impugned receint from the sub-contractor entered inlo lhe dliuries found amt seized during Lhe course 0f the search From the analysis of these diaries the Assessing Officer has categarically given the finding thut the ditries ceunsist of the receipt being Lhe withdruwal made by the suh-iontractor aS well AS the withdrawal made by the assessee from the bank (rront of thc {rown The' dinry nlso} insists of the puyment _ some of which !elole Lu Ute sile expenses, expenses recorded in the books of account; investment in the immovable property personol expenses; expenses fur the jewvellety {5 well LS trfiney bensferred and Lhe utount puid to various persons It is not the case of the Revenue that the assessee has debited the nount paid [0} vrinus perstns into his regular boaks of account and cluimed the detuclion 50 that lhese expenses cun be disallowed PEt by applying the explunation Eo secticn 37 Of the Rct In fact the assessee has Mot cltimed dletluutiuu %f these Expenses The Assessing Olficer added the 3 receipt being amotnt withdrawn by the contractor 05 income %f the assessee #pmah The receipt in fuct 13 coming (t ff the sub contract receipt of the sub- contractor AS well aS assessee &rid group concerns; which has already been assessed to income tax by the Asscssing Officer: The source of the receipt therefere; is 4ppctre!E Whiere Uie #ttLure Grd source %f Lhe receipt stands explained, it cannot be adted to the incnme Of the assessee On thits basis itself' in our vicw, r) afcdititlt in VICW $ the cush withdrawn from the bonk account of the groLp comcern} LInd the Sub-contractor which dre duly disclosed to the ctrpartment; Can he' addrd in the income of the assessee 12.5 This is #lot the case 0f Revenue that chese cash withdrawals are fromn the bank account which have nrit been disclosec to the Revenue or in which the assesee huts deposiledl the cGsh QuLside the bouks 0f account S0 for the source &f the receipt is concerned it is nt denied that the business of tke Gssessee is exrculing Lhe: Governmcnt contract and ull the receipts in the bank account uf the assessee is generated only through the contract receipt from the contraci Litken fiom tha Stute Government Na cogent matrrial or evidence was brought Lv Qur kuuwledye which mcy prove that the State p3t_ 153+ 1339 # R,M. Bhongdiyn 12 281/NAGI2016 MITCON INFRAPROJECT 26707 2462686 1532X 773.9486 10.283 #ITS Axm) Rriid P Led J;98" 834} 0.0Qe M/S.M { Fipemngtiyl [XlL KilbHriv Engy {17Wx M/s M {; Phunjdiydandis PATIL /V 25.250 39.520 MS K N Bhoitjdiya }V 10.07"; fO,005 In.on" Mn{eun {nfya Prufect P {.t} 123p 47039 {4300 JKS2 3425* 44.97 44,99 TbttsuldaLed In the case of the assessee group the Gssessment u/s 1534 have been framed for assessment year 2006-07 to assessment year 2011-12 while assessment for Lhe axsessment yeur 2012-13 4/s 143(3) Of the Acl The nature 0f the activity being execucion 0j governmcnt contract was the same during all the Fet Osessment yeur 2006-07, the nuture of the wark asseEsment yeurs Development Corporation remains the executed for Vidarbha Irrigation in tha €ise' of the assessee Jtvr subsequent assessmentyears The suh- stme n;5 wht Iuve exettled the work EIf'& ulso similar in various contractors, assessmentyears The Assessing Ufficer; we noted, in the case 0f the assesse8 group for the uxxassmenyear 2006-07,hus Gccepted the income As shownbv iJt the returm &hout 12% 0f the gross receipts. The the assessee group Assessing Officer, d5' is upparent fram the eforcsaid chart; has ossessed the income on dfferent footing in the subsequent Qssessment years under the Similar circumstMces There had bRen search in the case of the assessee TThe nature (f Lhe busines Uf the axxessee remains the same No other the business wer found from where the income I5 business activity Q} derived or eruled In vurious noling in the seized documents i.e diaries yen: are part of the gross receipt Uf the contract receipt %fthe group entitv is not dispr uted. The Assessing Officcr, whilc making thc additinn, observed that the amount withdrutn from the &fury is ulilized for unaccounted payments which are not allowable Iike gratification paid to politician and Government officiuls However, the Assessing (Hlficer dues not refer lu any corroborative evidence 0n record to hold that the assessee has made payment aS illegal grutification Ie H5 taken u view hy ohserving that poyment made in cash is probable extraneous gratijication During the course of search statement Of Shri Mitesh Rhongdiya Was recarded on 20/07/2011 and he in answer to queslion Na 30 explained thul the seized ducuments are delails of cash flowi Mitesh Bhangdiya has explained During the assessment proceedings Shri that the diaries ure nating for thc mavernent of the cash in reply tn question No. 23, Im the statement recorded on 27/07/2013 It was &lso explained by him in the cours" Of the assessment praceedings that the sub-contractors n the withdrawal Uf the money gave lo his father for safe custody, the amount m [2Hc Kgt 13 281/NAG/ZO16 +38 MITCON INFRAPROJECT L/ which are fqufntt TQ he noted in Ue' SPIed documents In the statement recurded; the G%srsce hus cleurty explaired Uhcl Lhe ntings mnude in the seized documents has norhing ro r wich the political leaders GS much &S politica] leaalers have nc huxinesx !raruttins with Rhangdiya group: Even We noted thet the Assessing Officer has not brought Jut On record any specific evidlence to shuw thut peyment is mridi' W QIy politicion D the Governmenl officer/official Lo #hrm the gratification payment have been given by the asSessee group We noted that the Assessing Officer gut of the suth "f R182.52 rures; Udded 1s.54.40 cores [JII Ehe husis of deposition of the Sub-contractor for which when the QSSeSscE has asked for the CFO55 exuminatitmn, tha: cruss exuminGtitrt Wds {1t. Allrued to thc assessec which is contrary tU the prineiples Of natural justice #onble Suprere Court in the cnse of Andman Tmler Indtustries 1S Commissioner of Central Excise, Kolkula (Civil Appeul Nt' 4ZZ8 0] 2006}. under Lhe similar circumstances when the adjudicating authority did not allow the cross examination of the witnesses; hekd $,s under: "According [Q us, not allowing the axsessee to Cross examing the witness by thr: Adjudicating A#tharity though the statements of those wilness were made &le basis Of the impugned order is & serions fTaw which makes the arder #Illity iasmuch 0S it amountec to violutiun of principles 0} natural justice because of which the issessee was adversely affected In view wf Ihte uiwwve, Wf ur Of Lhee opinioni that if' Lhe testimony of these Ewo witness is discredited, there was no material with the Departrnent an thc hasis af which it culd justify its action, OS lhe Slalettent of the foresuid Llvo wilness was the only basis of issuing tie Show Cause Notice 0 We; LFus, set usite Lhe irrif'ugrted order 0S passed by the Tribunal and allow this appeal" Fullowing the Suid deeisian %f Tlamn Hle Supreme Court the stutement of the sub-contractor; in our view, cannot be relied on Even otherwise also, we nated that o oxrborative evidence heing hrought On record to prove that the receipls; which has been udlded by the Assessing Officer in the income %f the GSSeSS81 Es the undisclosed into)ma" of the &5Sessee In foct the receipts for which Lhe aiuitiun has been inucle hy Lhe Assessing Officer represents the part of the gross receipts of the assessee and assessee group concern and the sub-concructtr; !hich hus' dluly been tuxerf t} incterne tax As pointed by US 03& 14 Z81/NaG/2016 AAp MITCON INFRAPROjECT f24I earlier; due tu rhs acldition, therc has bcen huge variance in the income USsessed as perCerituge with tie rereifts hy Lhve Assessing Officer , The CIT{A) therefore, wcS cOrecl im rejectuw the basis of making the addition by the Assessing {Jfficcr. In IJe Func:ts o} fhe preeseenl CUSL, it is spen thut regulur assesSment cume to be {nade Gs nel profit percentage of receipts and which uphel} in oppellate procredins anet have achicved finality: The were flso} returns u/s 153A {lave uilso becn filec Lly percentage 0f receipts in this group_ elttities 'It wilf anly appropriate t0 determine the income GS percentage cf receipts' DS Lfie' :re un dvuiluble I} record which (Ire accepted by the assessee and the Revenue quthorities Without dispute 12.7 We tnuy mention Lhul in Lhe cose D] the Ussessee group, survey action WaS conducted on 17/02/2009 wherein under the similar situation; the payment C Sih-tntructer Wy dlisputed and doubted by the Assessiny Ufficer: The survey action relates tu the assessment year 2006-07 to 2008- 09, which dr part 0f the hock perind for the search action conducteri on 19/07/2011. The Assessing Office: while muking the Gssessment applied & net profit @14% but when the matter reached to the Tribunal, the Tribunal Nuypur Bench in LT.ANos; 268, 269 and 285/Nug/2012 vide order duted 03/04/2013, cfter considerig Llle impounded material; directed the Assessing Officer to utlopt the net profit @12%6 CTS aqainst the net profit adopted by the Assessing Ufficer (l4%. There are also the similar type of defects found a3 have becn found in the course: Of search We noted the CITIA) has in the impugned ussessmnulyeurs made in consequence 0f search; directed the Assessing Offlcer tp estimate the profit @16% and not @12%. Even though the CIT(A) woS fully uware of thut during thc ussessment Jear 2006-07 to Zou'-10, the aSsessee gronp has surrendered additional income at Rs.ll crore ond the Tvihunal has directed the Assessing Officer to estimate the net profit @)124. The Tribunul in Chat order under para 4 observed as under: 0 4. Lriv; fucts Uf the cuse ure Lhut & survey u/s: 133A of Lhe Income Tax Act 1961 was carried out in the business premises of the (ssSe5 @ndl his (ssocittes {n 17.02.2009. During the course of survey operations it Was found that most of the bills; vouchers and other evidence in support of the entries in the books of ueculit like Iehour churges, material purchases; 'machine hire charges, site expenses; Sub contract expenses oil and lubricunts; repuirs untl rlintenance etc: pertaining tu this AY, were not Gvailable: Statement of Sri Mitesh Bhangadiya was recordexl under Section 13.3/ and !/s 131 ofthe fcton beholf of Lhe (rssese_ In Lhe slatemtent dL24.0Z.ZO09 and 13.03.2009, in IxHR_ 131 15 It 281/NAG{2016 MITCON INFRAPROJECT response In wirintfs qxestic)lS relating to the genuineness of the pcyrenls Li' Ltird puriy sufv ctnlruebrs GFIc in} respecl Lo other deficiencies tie {SSC5SCC (Ilmttted additional income in growp COses of" Rs {I fron Liflc proportionately were tlincutec between all the QsSessment years relating to these four assessee For tht Wrr #Idler cnsiclrrtir i.0 for ussessmnent year 2006- 07 in cuSe $f Sri Michesh Bhangudiya, Lhe additional income wuS Offered cft Rs23,97,361/. besidcs the income shown originelly LF Rs.2.3,63,910/ - {Jue tux' WS paid pefore the issuance of notice under Sectioi 148 4S admitted by the AO in puri 2 o his #Ner Tie importunt cchntents of submission recored OJ 24-UZ-Zuu cxr)d 13-3-2009 0f Sri Mithesh Bhangndiya arc mcarporated in the order nf the AO. In query of 4uestiuf {o}. I1, iL iuS answered thct during Ehe course of sutvey; it was noticed that there are certain discrepancies and omissions UnL{ L{) Cover Un all such discrepancies wee huve made out min to offer additional income over and above the regular incomt Wc' are Inder the process to) determine such additional income tU avoid litiguliun and, LO buy peace Of mind Thereafter in response to question Nos 18 & 19 of the statement recorded rjt} 13-3-2009, iL Wus {iSwVered thul the Sub controctors were awarded the sub contract work by Our firms @S per contract notes (ral the nuture of swh cntractors hOs heen that lobour charges atd machine hire chcrges The suh contructors by and large illiterate ond thersforc, their books of accounts found to be incumplete, wilhoul IluinLetunce %f fy bills and vuuchers The expenses incurred by Our firm has been On the basis of the S0 culled vrJfic:hers" rised hy them tnd therefore, there oppears the discrepancies in the expenses claimed It wus further stated thuf the assessee has ndmitted in his previous statement recorded during Lfte CQuTe Q) survey thut lhere are certain discrepancies and anamalies in the sub contract expenses in their books & acctimnLs; No}x avuiluhility of blls ond vouchers fixr the past three assessmentyears Accordingly, it wIS submitted thot ther Wrn: certrin discrenancies ant ancmalies in the sub Conlract (ccounts it buoks 0f accounts for assessment Years 2006-07 tc 2009-10, Thr dssessee declared the additional ineamg of Rs H crore in their Jirm ur tte five sister cuncerns in the assessmnent year 2u0b-07 to 2009-10 The working of the additioont} incrue of Rs: 11 ertres will hetlone accordingly anu zhe Same will be shown 'Ftese part Of the stutements have been incorporat?d in the order nf the AQ 45 state above Thereafter the Av xLurted scruliny 0f thc L'Lisl The AO noted thut the assessee hns shnwn variols expenses under the head labour & wuyes; "wvchite: hire charges; site exjunses und sub contruct #7h667 ph3 16 281/NAG{Z0I6 MITCON INFRAPROJECT expenses &C. nn ry higher side which arc not supported by vulid VtudSidrs. Neither GFy" /uf Lfver' evidence WOS filed Hl was also observed bytheAnthat smce there Are various deficiencies in dcca}lnls (} sub Efili (Tc_ls Gnt lhe usesser has offered u Sum 0f Ms' 23,7,361/- an CCCuuit of discrepancies in respert tc suh cnkndcL therefore hc: procerded to make further addition uf} Eiccoum of variuus Wefeiencies ie. in absence of bills and vouchers tress claint towards machinery hire charges verificaLion Uf epplicuhility (f pruvision Of" Sectian 194C and denial %f alleged sub contractors regarding the sub contract given by lhe ussesSft ill theese ciserepuncies ure noted by the AQ in his ordei: Thereafter In para 7, the AO has &bserved that after having rejected the books of account of the assessee under Section 14503) %f the Act, [Hee prufit uf the assessee has to be estimated reasunably. The AO also observed thot the assessee has declured net profit rutit T] 646 and 7%5 of the totul turnover in nssess?nent years 20ub-07 4 2007-08 After offering additiona} income of Rs.2.3,97,360/- for ossessment year 2006" 07 , Lhe esttlts i1 reviszal nz[ profil comes to 12.8706 of the contract receipts. However. this net profit was found by the AO Ofi {oWEF" siut The A0 Joletl Lhtut irt ofe "f Lhe group Cuse namely, Ms #ehendrt Constrtction & MG. Bhangadia (JV} who} hacl dcerlererl udditionul incoume f Rs 1,57,47, 760f. in the Assessment Year 2007-U8, which gives net profit ratio of 13.84% of the net cntrac receipts In view of chese facts the AO adupted 149 rigl prvjit, Thereofter the AQ completed the assessment and made eddition of Rs: 30,12,722 /- against (dditional incone shown by the ussessce at Rs 23,97,360/- which resulted further addition of Rs.6,15,362 /- 3 and ultimately undcr par 7 o5 repraluced hercunder; estimated net profit @12c: "7, After considering the swhmission and perusing the materiuh un recor, we find thut Lhe &ssessee deserves tO succeed in his appea} in part We noted for the year under consideration i@ for USNAssrren} Jepr 20(6-07, lhe ussessee's NP rate comes to 12.879, for assessment year 2007-08, the assessee 5 NP rate come t) I0.539, respectively: We also noted that if the NP rate of ail the concerns are taker! Into considerution; then It is seen that clf thc a,se5ses have shown government receipt at Rs258,55,37.X50/- unl Icurr{? O)tl thesc conlructs hove been shown by these GSSeSec ctt Rs6,49,S7,111/- which gives 0 NP K4 17 HR 281 NAG/2016 13HH MITCON INFRAPROJECT of" 638X 'The {IS'SW"t has offered edditional incume rute tieclareul during Lhe survey &l Rs: 11. 003,85,877/- which gives Q NP rate Qf 4.2705 and tie total NP rate in &ll these concerns M) 1.6sx (f {urst, !he: uciditionu} income of Rs 11 Cties odd Wds segregated propurtionately on the basis of crore or contract rccipts in thc hands of coch cncern In case %f Mfs Mahendru Construction & M.G, Bhongadia UVJ} the NP rate comes to 1.3.849 1e. for assessment year 2007-08 and this rate has beer ucopu:d hy the AO} #Jcl hos' uppliet lhe NP rate %f 14 in Gll the yrats in Lase Qf &ll these assesses On whom { survey wq; conalur"Eeet. In viewv, this eppra:h of the AO was not carrect approuch In case of MG Bhangadtya, the NP rate % three years cone tn 9.8796 wherens in 04058 of other assesses i.e Sanjay ffecla, Mfs Muhendru Corstructitn & M.G. Bhangadiyu (V} , lhe to 9,50H end in Cuse pf Mfs Mahendra NP rate cOmes Constructicg & M.G Bhungudiyd UV) the qverage NP rute of comes [o Ii.Z8" and in cuse 0f M}s three yeurs KirtikumarBhangadiya, the NP rat: COmcs to 8.72% and in cose 0f MG Bhunyadiyu end M/s Mahendra Cunstruction 2 MG Bhangadiya (JV} the NP rate comes ta 6.12%. In case %f MG Bhungudiyo und S.S Pulil & M.l: Bhangudiyu; lhe NP Of three years comes to 11.55". As stoted above, the average NP rate % for {ll} {hc tirrr? ycors comes to 10.6.596. ulf the [SSCIES Therefure. in OlI' view: 4 rational approach should have been adopted hy tho A0 or by the learned (T (4} For Ine cose ie MJs Muhenlru Conszruclivn & M.G: Bhungadiu UV} lhe NP rate was 13,847&Rd If this rate is applied in al} other cases; which in our vivw; is nor justificd. Htwvever; there is ulsc nt} dispute that there were SQ many cliscrepencies in maintaining vouchers; bills, contrarts accounts Gnd other heads, which were not sub verifiuble, therefvre, the usessee Gnd his group came forward to offer an arlditional Incame of Rs 1l crore and the same has also offered uncl cute tcx has Fcen paid Sinte 45 stuted ubove, there are certain discrepancies, We re Of the View that if NP rate of 12% is adopted instend of 14%, that will meet the end of justice We made it Llear hat where NP rate shown by the assessee in Jeat i3 more than 129 then the more NP rate shown by the uny _ ussessee hcis L) tue: Luken 4S asexsee hax declured hirnself and in other yetrs where NP rare shown by the assessee is lower than 12%6, Lhrn 12% NP ratce hs' t') ha taken The AO} will recomputed the income uccordingly For the sake of clurification, in case of gssessec for assessment yerr' 2006-07. the NP rate comes t} afler shuwing Lhe ucelition} inctane, therefore; the 12.8796 income shown by the OSSessee has to be accepted. However, for Gsxessmulyears 2007-0 & Z00f-09, Lhe NP rute shown by the OM 18 281/NAG;Z0I6 MITCON INFRAPROBECT 4e3 Rh= assesser oftrr additinnal income rnmes tq 10.69% and 10.53%6. Zhe AU wi! iiaepl Lfe {utt Vf }Z% Liati will compute Lhe income accorclive}' 12.8 We W)Ltcl Uhiut Ahce CITUA} #VAT Lhaugh foltowed the order of the Tribunal in the case Uf' Llte assessee fur the assessment year 2u06-07 to 200g- 10 but directed thr Assessing Offirer Et) estimate the nec profit during the block period @16%, ane for Lhat he Is given the redsons that there is material difference in the years under appeal i.e search action hos nlso resulted intu deteetion Of Lhe uncetunted assets to the tune of Rs26 crures and unaccouted jcwellery of Rs.2.37 crores which has not been disclosed by the ssessee srtJop in their respective returns filed nor the source Of such acquisition Df such assets could be explained satisfactorily: We do not agree with such fintting of CITfA) aS WC nrited that during the block period, the assessee hlts surrenderet Rs]] ente during tke Lurse 0f survey Jor the assessment year 2006-07 to 200X-09 ond further during search 0 sum Qf Rs,Z6 crore WUS surrendered. Thes {I Sutt] of Rs.37 crore Wus avuilable with the assessee which assessee ruuld have "tilized for investment In the assets CT5 well os for thc: nurchnse of jewellery. The "noccovnted nssets aS well as unaccounted jewellery is unly Ks.28.37 crore, which is much less and Is duly covered by the disclosure of Rx37 crore during the block period made by the Dssessee; Rs.1 ] Crort during lhe survey und Rs.26 crore during the bluck period Even otherwise also, the Assessing Officer; we noted, has gathered the informution of unuccanted asSeLv ond unaccounted jewellery out of the documents fourd during the course &f search which shows the utilization of the amunt which thc assessec ha;s received by way Of withdrawal from the bank CcOunl uf the group concert U5 well as frutn the bank account of the stb-contractor which connot be regarded to be undisclosed. We; therefore, dlo nol ogree wilh Lhe reusoning 'f Lhe CIT(A) in udopting the net profit @l6% 0f the @FUss receipts itt oWr opinion; n0 addition on account Df unaccnunted assets to the' extent of Rs.2G crores and unaccounted jewellery of Rs.2.37 crores colia be' madle: We, Lherefore, @fter considering the facts of the case; past history, rctevanc case laws and nature of the activities carried on by the UssEssee:; ure !f Lc view Lhut Lhe estimutitn Of the income by the CIT(A} is at @ higher side and is nor justified Therefore, we set aside the arder 0f CITIA} tt the extent of direccing the Assessing Officer to estimate the het profit @16%6 of the gross receipts and direct the Assessing Officer to estinate the net prafit 0n1 the grnas receipt @12% as has been estimated and returned hy-the &Ssessee grvup itt U}eir respective returns filed in response to the notice issuted tfs 153A and "/s 1399 ofthe Income Tax Act hat 19 ta8 281/NAG/2016 MITCON INFRAPROJECT Ia6 G, RospcUilly {,'1i"g !hie: slit] itcisil, Wv( yrt aside thc order of the CIT(A) to} tlc: exlvD olw:t inx; hc' /0 to) {xtimalte the net profit at the rate uf 1fy &f Lhe gross receL 4lil direcL !he AQ) iu exlimale Le nel prolit on the gross receipls at lhe rate I 1Zu &* Hus heen &timialed #uc/ relurned in the return filed. 7 Now there remuins groud nos 5 &d 6 fer our adjudicallon 8 Wc heard tha rival submission carcfully considercd the sale alongwith thc orders of thc tax authoritics bclw, Wc noted that thc only issue involved in thesc grounds is enhanccment of thc incomc by the CITTA) to the: tune of Rs 92,99,652/- This intine has bec enhanecd due t the fact that CITTA) has given the direcLian (0 Uu AC Lo estimale Ule incoie by applying net prolie rate of 1606 On the contracl !eeeipl by lhe assessee: The itcorne in Lhis manner came to Rs 2,47,99,652/- "The AU has estimated the incone from the contract activitie at Rs. 1,55,00,000/- thcreiore, the Income of the assessee has becn enhanced b the amount of Rs. 92,942,6.52/- We noted thaf during the impugned Assessment Year; thc assessce has shown thc confract incomc 0f Rs. 1,55 Lalhs The Ld AR hcfore Us has taken the plez that thc fnts involved and the issue involved in the case af the assesst* ix iclenlical l0 bht isSuu involved in Lhe case of Mitesh Bhangdiya This Tribunal ir the preceding parugraph ir the case of Mitesh Bhangdiya has directedl Ilie AO lo eslimile the Iel prulit ol the assessee at the rate of 12% Of the gOss receipt therefore, we accordingly, direct the AO to assess the income from contract activities at Rs 1,85,99,739/- in the Case of the assessce ie 1256 Qf thc contract receipt amounting to Rs; 415,49,97,826/- thcreforc, thc incolc: lanccd by thc (T(A} got reduced to Rs 35,99,738/- from Rs 92,99,652f. tus, these' grwnds ;1rf: partly allowerl PE 9 The last grouru it ;sessee's Jppe:al relates Ev the charging of interest ufs 2344, 234B an 234 [.earned counsef Iur Lhe ussessee vuAS lait enough to 20 016 ECT !FI 13 cancede that these grounds are consequential Assessing Officer that the interest charge:' recomputed after giving effect to this order. statistical purposes in all the appeals. the 1cl be 10. In the result; the appeal filed by the asses"- 1'n"!mve Order pronounced in the open court 01) Sdf- Slf- 43.[NSAL) 'NT (AMARJIT SINGH) JUDICIAL MEMBER Nagpur Date: 30* [une, 2017 R. Dhoke; PS, Copy tox 1} The Appellant; 2 The Respondent; 3) The CITCA}; 4) The CIT; Nagpur City Concerned; 5] The DR ITAT, Nagpur; 6}Guard File 6 Hfjr} #aiaa yunv Asslsttnt Rzgistrar ON4+7 #m . 'fA #RerrL Income Tar "burltate Trbuna TTT zzit / Nzapur Bench For