A,C.I.T. CENTRAL CIR.- 2(1), NAGPUR vs. M/S K.M.BHANGADIYA & MAHENDRA CONSTRUCTION(JV), NAGPUR

Whether on the facts and law the Ld. CIT(A) circumstances of the case and in was right in search thwarting the ad seizure provisions very Of purpose of incriminating documents the Act by ignoring and seized thereby income On directing presumed the AO to tax the percentage based on surmises, 2 Whether on the facts and Iaw the circumstances of Ld. CIT(A) the was case and in the AO of right in not affording the being heard during opportunity to has specifically appellate proceedings despite AO asked Of being 19.02.2015 and heard vide his letter dated thereby passing order in undue haste provisions Of the Act ignoring 3, Whether on the facts and in the and in law; circumstances of the case the Ld, CITTA) waS Rs. 25,46,619/- right in deleting the addition Of made On account Or payments? bogus sub-contract 4 Whether On the facts and in the and in Iaw; the Ld. CIT(A) circumstances of the case Of Rs was justiffed in 25,46,619j- deleting the made addition On account Of bogus payments without appreciating the fact sub-contract materials ad statements revealed from the seized only name lenders ad recorded that the sub-contractors are 'have not executed any sub-contract? 2Jj4 5 Whether On the facts and circumstances law the Ld. CITIA) was of the case and right in holding diaries seized from that the incriminating: cannot be said rbeidence of tte main person of the group to be belonging to particular Concern documentary evidence and ignoring the the Bhangdiya himself that the admission Of Shri Mitesh details of cash flow entries in the diaries pertain to the entries in the Of assessee grOUP 5 business activity and the diaries were not completely recorded of account in the books 6 6 Whether on the facts ad in the and in law; the Ld, CIT(A) circumstances of the case was justified in total income of the directing AO to adopt assessee at the rate of 169 Of by ignoring the findings given gross receipt contractors, by the AO regarding bogus sub- unaccounted income and gratification payments? 7 On the facts ad circumstances Ld CITIA) erred Of the case and in in law; the Sub accepting assessees contention that warioug contractors used to keep deposit of money withdrawn by #e 1172 ITA Ncs.73 & 74/Nag/2016 I.T,A.No5.272 & 273/Nag/2016 them from bank with the assessee group for safe WaS recorded On the custody which credit side of the incriminating diaries without appreciating that if the contention then the credit of the assessee is true entries shali be In the name Of the contractors but the fact is otherwise as only Sub were found written there: names of the banks 8. On the facts and circumstances of the Ld CIT(A) erred in case and in law; accepting the the sub contractors assessee 5 contention that the kept their money For safe assessee custody group and with the amounts in Smali quantities withdrawn by them for meeting the were later the fact that none of the expenses at sites by ignoring on debit names of the Sub contractors appeared side of the incriminating diaries, 9 On the fact ad circumstance of the Ld. CITIA} erred in not case and in law the and calculating exact unexplained expenditure unaccounted investment mentioned in seized incriminating diaries 25 well as inflated claim of expenditure and directing in various projects the AO to assume certain percentage: Io. On the fact &d circumstance of the Ld CIT(A) erred in case and in law the holding from the that having been accepted receipts a5sessee for assessing the income in the hands Of 5ub contractors the payments made by assessee contractors cannot be group to such sub that sub treated aS non genuine; ignoring the fact contract payments assessee were assessed in the hands Of the group a5 bogus sub contract hands of the sub contractors payments and in the by treating protective assessments were made the entire receipts a5 income executed; &S no contract was Il On the fact a circumstance of the Ld CIT(A) case and in Iaw the erred in observing that unaccounted payments unallowable Or expenses like gratification paid to various politicians and government employers have no corroborative record to hold that assessee has evidence on gratification: The made payments of ay illegal onus in on the assessee payments to were prove that the genuine ad incurred legaliy. As the cash payments Were not recorded in the regular books of_ &5 the assessee failed account and to substantiate those payments, CIT(A) ought to have upheld that the the entire 171.10 crores Is amount Of Rs; unaccounted expenditure; #F+ II73 I,TANOs_73 & 74/Nag/2016 I.T,A.Nos.272 & 273/Nag/z016 414 12 On the fact and circumstance of the case ad in law the Ld, CIT(A) erred in relying on the decision of Hon "ble ITAT in Bhangdiva group pf cases aS 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 128. The_CIT(A) ought not have relied o the decision of Hon 'ble ITAT when seized documents prove clear concealed income and unexplained expenditure: 13. On the facts and circumstances 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 & particular ratio 25 out of gross receipts of 579 crores the assessee group made unaccounted payments to the tune of Rs: 171 crores 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 arrive at the correct taxable Income of the assessee 0 14 On the fact and 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 as it may inctude addition towards various other provisions like section 40A(3) , 4(a)(ia) , 68, 69, 69C etc and in the case Of the assessee group addition U/s. 69C is applicable 2 In its appeal,; the assessee has taken the following grounds of appeal:

The notice issued under Section 1534 of L.T: Act; 1961 is illegal, invalid and bad in law ad consequent ass2ssment framed thereupon is liable to be cancelled.

The Learned CIT(A) ought to have directed to accept the income 3S shown in return filed pursuance to notice u/s. 1534 of IT Act 1961 and deleted the entire addition 35 made by the A.O. In the assessment framed 3, The Leamed CIT(A) erred in not accepting the prayer of assessee to adopt net receipt for determining the estimated income &t the hands of assessee after excluding the recoveries pmi MFH +7a ITANos-73 & 74/Nag/2016 E.T.A Nos.272 & 273/Nag/Z016 5 made by the Government Departments on account of material supplied, sales tax ad Service tax etc: 4 Thecaddition confrmed by learned CITA) by adopting 1696 of receipts is unjustified, Unwarranted and excessive 5 The learned CITIA) erred in upholding the part addition made by AO. by adopting 169 of receipts; 6. The assessee denies liability to pay interest under section 2344, 234B and 234C of LT, Act 1961. Without Of interest under Section 234A4C23496and }haUt? Tejudict {91 levy 15 unjustified, unwarranted and excessive. 3 At the outset; the assessee did not press ground Nos 1 & 2 during the course of hearing therefore; these grounds are dismissed as not pressed: 4 In respect of ground Nos 3 t 5 taken by the assessee in its appeal and ground No. 1 to 14 taken by the Revenue in its appeal in its appeal, both the parties agreed that the issue involved in assessee s appeal as weli as in Revenue's appeal in all these grounds I5 common and identical to the grounds raised by the Revenue as well as by the assessee for the assessnent year 2007-08 ta 2011-12 in the case of Mitesh Gotulalji Bhangadiya and whatever view this Tribunal may take in the case of Mitesh Gotulalji Bhangadiya in LT.A Nos 56 to 61/Nag/2016 ad 261 to 265/Nag/2016, the same view may be taken in all these appeals. 5_ We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below as well as the order of this Tribunal dated 29/06/2017 in LT.ANoS. 56 to 61/Nag/2016 and 261 to 265/Nag/2016 in the case of Mitesh Gotulalji Bhangadiya: We noted that the similar issue has arisen in that case. The grounds of appeal taken by the assessee as Well a5 by the Revenue in that appeal are similar ad identical to the grounds of appeal taken in the case of Mitesh Gotulalji Bhangadiya. In that case the tribunal under para 12 has held as under: 7 1#53 ITA Nos,73 & 78/Nag/2016 LT.A.Nos.272 & 273/Nag/2016 26 "12 We have heard the rival the same along Sbmessaonsu carefully considered with the orders noted that the facts the tax authorities below. We and the issue involved in ali the appeal in the case Of the assessee years under CITIA) has passed are similar &d identical a consolidated order: The the case Of the assessee The undisputed facts In ad the group concern search and seizure action are that 7 the Bhangdiya Us 132 Of the Act wa5 carried out in Group of cases on 19/07/2011. the business and residential premises Of Simultaneousl; searched During the the assessee were aiso papers tcourse of search conducted, incrininating and documents were found and Gotumal Bhangdiya Is the seized, Shri Mitesh key Bhangdiya has two person Of the group. Shri Mitesh and Shri Srikant SChs mnamely Shri Kirtikumar M` Bhangdiya M Bhangdiya business pf and one daughter Neha. the Bhangdiva group The Mitesh 15 Bhangdiya being looked after by Shri and his two sons associated with The the other key persons group are Shri Sanjay Rameshchandra husband of Mitesh Bhangdiya'5 sister; Heda, Smt Amravati ad Smt Manisha 0. Pradnya, resident of Mitesh Bhangdiya who lives Maniyar , widowed sister of Shri with Bhangdiya family. LiA %0 6 12.1 The main business concerns of the Mojm discovered a5 a result of the search group (including those: action) are as follows 1 Ms MG Bhangdiya (AERPB2503E) , converted into a (Prop: MGB); company M/s MK.S; Constro-vVenture Pvt (AAHICMO383T) Ltd. from 01.04.2011, 2 Ms Mahendra Construction, Prop. (AADPH7109)) Shri Sanjay Heda (MC) 3, Mfs Mahendra Construction 85 M.G (AANFMSGS8B} Bhangdiya (Jv) 4, Ms Kirtikumar M; Bhangdiva (Prop. KMB); 9 company Mfs MKS converted into Acme (AAHCMO3BZK) Buildcon Pvvt Ltd: 5 M/s from 01.04.2011. (AGYPB1659G) KM Bhangdiya & Mahendra (AAKFK18Z0C) Construction (JV) 6 MicohriintKi Bhangdiya (Prop: SMBJATCPB1337J)

Lotghahn fraproject Pvc Lta; (MiPL_(AAGCM1868H) 9, Losani Publications Fvt Eta (LPPLYAABCL6668Y) MITZ Infraproject Pvt Ltd (AAGCM3OA7AB 10 Sakshi Gruh Nirman Pvt Ltd. (SGNPLJAAOC57974G) 1ts #7} IT,AN9s73 & 74/Nag/2016 I.T.A.Nos-272 & 273/Nag/2016 11, Balaji Stone Crusher Ltd (AADCB5273C) & Infraventure Pvt 12.2 The group has also entered into joint ventures with various+other civil contractors of the city t secure some civil contracts. A few of them are listed below: 1, Ms MG Bhangdiya & Hitbhav Engg (JV) (AAOFM474SL) Ms M.G Bhangdiva & 5 5, Patil & Co: (JVJABIF536451) 2 Ms Darshan Construction (JV) (AAHFDO6SAN) Mfs M R Dhoble &s K M Bhangdiya (JVYAAPFMO6ZZB) 12.3 The nature of the business Of the Bhangdiya Primarily i5 executing civil contracts The group worgaivaintyofor Government departments like Ms Vidarbha Irrigation Dericlopment Corporation and has been engaged in exegating various contracts pertaining to the irrigation projects in the State af Maharashtra, During the course of search incriminating operations documents were found and seized from the residential prerises Of Shri Mitesh Bhangdiya, Of Item no, 1 Annexure-B to 65 seized from his residence are the diaries containing ledgers, daily cash books and bank books maintained by the Bhangdiva Iroup: 36 Cash books contained entries fori tne period from 26/07/2006 to 18/07/2011 and 27 diaries relate to the financial year 2006-07 to 2010-11 whereas the remaining two diaries Were maintained for house hold and miscellaneous expenses; A statement cf Shri Mitesh Bhangdiya was recorded on ath o 20.07.2011. In his sworn statement the recorded course Of during search action, Shri Mitesh confronted with Bhangdiya Was the entries borne out from the marked a5 seized diaries B-f to B-65 ad to explain the contents of these diaries, Shri Mitesh Bhangdiya in his statement recorded has submitted that the entries In the diaries and the ledger penain &5 the business receipts and business expenditure The Assessing Officer in the assessment order has recorded 2 finding that a5 per the item no. f to 65 of annexure-B; it i5 amounts apparent that the withdrawn from the bank accounts Of the Sub- cootractorstwere credited to the daily cash balance of Bhangdiya group which was confirmed by Shri_Mitesh G. Bhangdiya in his statement dated 14/09/2011. The Assessing Officer has reproduced the statement Of Shri Mitesh Bhangdiya recorded 14/09/2011 in para 6 of the assessment order: On The Officer in the assessment order has also recorded & ending %ag the seized documents that being 8-1 to B-65 contain entries of al1 IT.ANos73 & 74/Nag/2016 I.T.A-No5,272 & 273/Nag/2016 1l7z expenses incurred by the Bhangdiya group In 2006-07 cash from FX onwards and expenses incurred through the bank accounts from FX. 2009-10 Onwards Thus, the Assessing Officer found that the actual expenses incurred do not match with those shown to have been incurred In the books. The Assessing Officer thus concluded that the books of account Shri M.G Bhangdiya maintained for income-tax purpose do not reflect the true business affairs and are not at al1 reliable The Assessing Officer analyzed the entries in the diaries and took the view that on receipt Side various receipts including the withdrawal from the bank Of the assessee group concerns were recorded ad on payment side entries Of expenses Iike interest payment; repayment Qf Ioan deposit into bank account; household expenses; personal expenses, Payment to various persons in cash ad investment in properties are found recorded. It Was also noted by the Assessing Officer that some of the entries made in the seized diaries were found reflected in the bpks Of account maintained by the Bhangdiya Group: Statement Of Mitesh Bhangdiya was recorded On 20/07/2011. During the course of search , Mitesh Bhangdiya was confronted with the entries borne out from the seized diaries marked B-1 to B-65, In reply to question No. 30 of his statement; Mitesh Bhangdiva submitted that the entries in the diaries &nd ledgers pertain to the business receipts ad business expenditure butat present it is very difficult for him to state whether the entries recorded in the seized diaries and accounted in the regutar boks Of account and Same Can be explained only afer verification of te entries of the diaries With rhe regular books or account maintained by the Bhangdiya Group. Shri Mitesh Bhangdiya, reply to question No: 38 , we noted voluntarily offered additional unaccounted income of Rs.26 crores for the block period including the Current financial year over ad above the regular income declared in the return filed for the assessment year falling within te block period The income 50 declared are summarized a5 under: RHANGDltA GRQUE Panticular AY 06-07 Ay 2007-8 4Y 20OB-g Ay 2009-10 AY 2q10-11 AY 2011 12 AY201Z-13 Grand Tctal (Rs } MiahG_Ehangdra Conbart InGite a5 Per Original return 22,00,540 24,96,131 18,61,45] 56,30,712 541,18,322 7[4,82,707 1333,90,275 Ojm 47S 78 IT ANos.73 & Z4/Nag/2016 ET.A.Nos.272 & 273/Nag/Z016 Additinar [ncome dexlared during Survey Adcilional Inzomu {Mered Du tirig Eearch 23,97,361 13,44,0c9 27,04,J12 .50,336 66,46,018 6,09,48 27,10,552 570,04,678 255,17,293 864,27,78] Contract Incore Cedared 45,97,901 43,@D,0N 45,06,175 45,0Q(0Q 1J2U,GQ.Q 970,02,002 2314,64,076 Ms Sonsm? Yenture FLm Contract fncomr as per Original return Additicnal Incone declred durlng Suhrey Addicional Inkxome Offered Durlng Sqarch Contract Income Dedlared 182,75,173 182,75,7 164,74,627 164,74,627 342,50,0Q 347,50,00Q MIs_Llthawdgy Constzlpg Contart Encome as per Gdginal return 36,77,656 125,10,051 26,48,914 20,60,655 73,38,274 36,26,315 7,5K,038 J66,20,174 Axlibional Incpmic: declared dunag Gunyey additicnal Inconte #ffeted Durlng Seanth 40,41,896 49,17,076 7,14,112 I1,13,224 107,R6,JQB 26,80,448 17,73,873 1R,96,964 8,26,110 120,0[,926 101,73,085 26,41,512 347,93,51R Contract [rcome Derlared 104,Gn,OD 212,00,QQ S2,D0,omQ #0,QDOm PC2,0O,Q0c 178,02,DCQ J4,DO,DOv 4z2,0o,000 MJs_[ahendca Qnt&M 6 Bhaugdl Contract Income a5 per original ntur:a 157,47,756 310,92,743 '15,14,147 359,75,320 74,77,336 Addrtlonal Income dedlred during Sunvey Additiona: Inome @ifered During Search Contrct Income Declaned 1617,07,302 J57,19,964 193,98,415 492,69.013 841,87,112 257,[6,20 190,Z4,68C 172,22,664 619,64,[64 J[4,67,720 504,90,85B 1465,0,G2Q 549,0,0C4) 247,@0,QDO Ju8D,58,579 Mis KMEbangdly? Coract Income as per Qnginal rcturn Aduitlcnal Income declared dutlna Sunvey 10,10,705 12,06,795 27,20,4t 31,06,36 61,66,6J0 32,99,234 [86,00,111 M4,12,j4+ 25,22,355 19,09,360 7,50,653 65,44,712 #F7 HtI ITANps-73 & 74/Nag/2016 I.T,A,Nos.272 & 273/Nag/2016 10 Adurlicoal Incame Offered Dunng Sparch 8,9Q,B5o 10,70,239 28,41,041 58,34,J30 J1,og,J66 139,36,226 Contat! Ircone Dedared 24,31,049 67,00,Qop 57,00,0Q0 57,00,Qw0 120,4),QQQ S6,Q0,0C0 391,31,0449 MKS mg BulllE Ltd Cotract Incure 3 per DrIginal return Additionaf [ncume declared dunng Sunvey Addltional Income QFercd Dwunng; Search J4,70,653 34,70,653 16,29,J47 16,29,347 Contract Inoame Daclared S1,00,00 51,00,020 WSMG Ahangdk Dg HitbbatEngJ Contact Income &5 er clglnal retrtmn Additignal Iooie derared durlrig Syey Aribionat Incoune Offercd During Searth 26,04,727 2,20,207 4,63,997 4,60,994 J8,37, 5,63,5B3 3,J44 5,93,582 , 2,49,469 1,31,006 3,804475 Curtract Income Declared 32,40,310 S,00,0 4,63, 997 6,0Q,0q2 43,12,307 W:NGi Atangdxz @od SiPATL * Contratt Inone 35 per crlglnal retum eddilipnal Intome dedarco durlng Surxey Addibona) Irtor Offercd During Search 4,65,923 4,77,54 9,43,467 6,01,929 0,28,586 14,40,515 40,0Q 40,04) Contract Incame De-lared 10,67,052 13,16,137 AQ,doc 24,23,982 WSK MBhangdixz J Cortract Income 35 Fet priginal return 5,44,550 9,12,461 Akditional Inccme dedared durng Survey' 14,47,012 178 L8? IT.ANos.73 & 74/Nag/2016 IT.A.Nos.272 & 273/Nag/2016 11 Additical [ncome Dlered During Seaich 5,535,449 [1,67,539 17,52,9B8 Contract Inconie Deriared 11.00,0Qg Ji.IJo),JQQ JZ,0C,COQ MtcoIira Frlec E 4 Contract Income as Per @rginal rturn 6C,39,02 13,98,429 53,20,051 Addibonal [ncpme declared dunng Sunvey Aduiticrial Incomt Cigted DurIng Search 157,57,80 62,61,0q [11,01,57] 9,19,549 102,92,520 Contrat Income Dectared 123,00,doD 155,o,0Gp 62,40,od0 340,4D,0Q edduloal locqme QltedinSE85Qf ndixiual Wtest Bhangdiya '4,7942 74,79,442 Kirbkimar Etangdiya 30,00,0Q 30,0,2Q Shrikant Bhangdlya 35,00_ ,000 35,0,p00 Kestar Singh Rotele 10,42,553 12,03,09} H0.91,360 103,33,910 Eoreodatud For_l Emtitiss Contrct Irxone a5 per QrplnaF retum) Additlonal Ixrcine dedared during; Survey alibona} [ncome ahered During Search 60,96,901 349,05,655 414,86,202 #5,],Q1B 1107,15,934 956,85,476 278,24,565 3990,49,752 7B,S[,601 251,55,373 261,28,0648 513,1}.5Q0 1[04,48,592 26,A0,441 51,73,503 29,07,203 323,92,192 1422, Ax,063 6BD,14,524 216, 65,435 2356,81,048 Contrct Incone QJeclared 174,28,950 652,35,572 705,21,473 [652,4,02 2129,61,99} 1641,00,005 494,90,00D 7451,79,992 Addlbtidnal Income Kn 8a5es Gf Indlyldual 10,42,553 12,01,097 80,93,260 (39,79,442 241,18,352 12.4 From the statement Of Shri Mitesh Bhangdiya, apparent that it the i5 diary found and seized belongs to the assessee group and the assessee group did not disown these diaries even though in the subsequent statement recorded on 27/07/2013 Shri Mitesh Bhangdiya Stated that these diaries were primarily maintained by his father Gotumal Bhangdiya The 474 1181 I.T-A.Nos.73 & 74/Nagf2016 I.T.A.Nos.272 & 273/Nag/7016 12 Assessing Officer, We noted, has also observed that these seized diaries also contain the payment made In cash for probable extraneous gratification to various persons including politicians, government officers/officials which are recorded along with their names, dates Of payment and amount paid. We noted that the Assessing Officer has not examined these persons for bringing the corroborative evidence on record in support of his finding that te Cash has been paid by the assessee group for probable extraneous gratification, We noted that the Assessing Officer made an exercise to match the entries of the tax payment and receipt with the entries In the regular books of account of Bhangdiya Group. The Assessing Officer came to the condusion that the receipts are predominantly Withdrawals from the bank account by way of creating bogus sub-contract expenditure The Assessing Officer found that the assessee group hasdeducted & sum Qf Rs.361 Crores towards the sub-contract payment against the gross receipts aggregating to Rs,579 crores, It was found by him after verifying from 21 contractors that a Sum Of Rs,54.40 crore iS attributable to the amount deposited in the bank account of the Sub-contractor by account pavee cheques by various concerns of Bhangdiya Group; which was subsequently withdrawn In cash &d is reflected on the receipt side of the seized diaries The total amount So reflected in the diaries on the receipt side was computed at Rs.182.52 crore The Assessing Officer added the said unaccounted amount Of Rs.182.50 crore in the income of the assessee group concern. A sum of Rs,54.40 crore was added In proportion to the amount of cheque credited by respective group concern in the hands af the respective group concerns; For the balance amount Of Rs.128.12 crore; the Assessing Officer added the Same in Proportion to the contract receipt shown by the group concern in the respective assessment vears to the total turnover Of the group concern in that year Now the question befare uS arises whether the said sum Of Rs.182.52 crores, found recorded in the diaries found during the cOurse Of search 25 receipt being withdrawal from the bank account af the group concern a5 weli 35 from the bank account of the sub-contractor can be regarded to be the unaccounted income of the assessee At the micro Ievel if we look into the nature Of the receipt it i5 not denied by the Revenue that the receipt has come from the bank account Of the assessee group concern and part of the receipt ad has come Out of the cash withdrawn by the sub-contractor t whom the assessee group concern had made the payment The assessment has been made by the Assessing Officer u/s 1534 in 2 1 ni H8o+- I,T.A.Nos,73 & 183_ IT.ANos.272 } 273/Na9/2816 13 the case Of the assessee as well Proceedings have also been 35 assessees group concern the case of the initlated by the Assessing Officer In contractor has sub-contractor Uls 153C of the Aci The sub- 153C The 'f-bontttedthe return in response to te notices sub-contractor has shown 45 contract receipt the being income amount from the The said income paid to them by assessee has duly been accepted by the group: On substantive basis in Assessing Officer the hands Of Assessing Officer thus the sub-contractor has The assessment of the dulv accepted while framing the the subeontache Storcokactor that the payment raceived bp from the assessee a5 group concern were not well 35 the assessee bogus but were the bv performing the obligation for payment received them a under the sub-contract consideration entrusted This Qn Of the assessee a5 well denotes that the relationship contractor, as hasassessee group concern with the sub Officer "'onc geruisub-bas duly been accepted by the the sub-contractor has been Assessing income has duly been assessed &nd their Revenue; On accepted by the Revenue; in our the basis of the Same facts in view; the assessee cannot take the view that the case Of the sub-contractor were the bogus: payment made to the Revenue that the Further it is not the case Of the the Revenue has disallowed the payment sub-contractor: It i5 & case where made to the impugned receipt from the Revenue has added the diaries found ad seized sub-contractor entered into the the analysis during the course of the search. Of these diaries; From categorically given the the Assessing finding Officer has receipt being the that the diaries consist of the ascihe Wehdrahal iadeabval made by the Sub-contradtor & wee of the made by the assessee from the bank group: The diary also consists of the account which relate to the Site payment some Of books expenses, expenses of account; investment recorded in the personal in the immovable eexpenses: expenses for the jewellery property , transferred ad the amount as well as money the case Of the paid to various persons; It is not amount paid he Reaeious that the assessee has debited the account anad claimedatheudedersons into his regular books of be disallowed the deduction so that these expenses by applying the explanation to can Act; In fact the assessee section 37 of the expenses The has not claimed deduction of these Assessing Officer added amount withdrawn the receipt by the contractor &5 Income Of the being The receipt in fact is coming assessee the out Of the sub-conbactor 35 well sub contract receipt of which has already been as assessee and group concerns, assessed to income tax by the Assessing #8+ 1183 IT.A Nos,73 & 7s /Nag/2016 I.T.A.Nos.272 & Z73/Nag/2016 14 Officer; The source af the receipt therefore, i5 the nature ad source of the apparent Where be added to the receipt stands explained, it cannot income of the assessee Qur view; On this basis itself; no addition in in view Of the cash withdrawn from the bank account of the group concern and the are duly disclosed sub-contractor which to the department; can be income Of the added in assessee: the 12.5 This is not the case of Revenue withdrawals that these cash are from the bank account disclosed which to the have not been Revenue or in which the assessee has the cash outside the books of account deposited So for receipt is the SOurce of the concerned; it is not denied that the assessee {5 business of executing the the Government contract receipts in 'the bank and ali the account of the assessee is generated oly through the contract receipt from the contract taken State Government from the No cogent material to Our knowledge which or evidence was brought has made may_Prove that the State Government the payment to the assessee account Outside On this basis the books Of itself; we confirm the order Of CIT(A) that the addition Cannot be Sustained on the basis of found recorded out of the cash withdrawal cash receipt the contractor from their by the assessee.@r bank account We also noted that tetti deriesing Orficer ha5 not Only analyzed the reseipotedetaf the: Garies but has also aalyzed the payment Side Of the diariet; found from the payment side that a ad 63 sum Of Rs,24,05 been invested in the crore has immovable account and property outside the books of similarly, 3 35 sum Of Rs.8.47 crore has been utilized expenses outside the books of account As observation Of outgoings observed regards to by the Assessing Officer in respect of seized document; it is noted that the Assessing Officer has mainky drawn adverse inference without there being material evidence on record for Such conclusion. any US; no corroborative evidence Even before record Thus, were referred to and brought on the outgoingfinvestment to the extent of Rs.32.52 crore can be regarded to have been incurred outside the books of by the assessee account but the same are spent out Of money withdrawn from bank the Source thereof regarded to be unexplained cannot be We noted that in this case the assessee 35 well as assessee group concer; of search, surrendered during the course a Sum Of Rs.26 crore and filed the return in response to the notice U/s 153A0 accordingly, the Assessing Officer could have At the most the made the addition in respect of unaccounted investment provided they are not covered by Omi |ezk 483 ETA Nos.73 & 74/Nag/2016 I.T.A.Nos.272 & 273/Nag/Z016 J5 the amount surrendered by the assessee during the block period In fact;, in our view, the source of the 5aid expenditure shown in the diary i5 also coming out Of the cash withdrawal from the banks Of the group concern as well a5 of has sub-contractor which already been disciosed to the Revenue and the thereof has already been assessed to income receipt tax 12.6 We noted that the business income Assessing Officer in assessedby the percentage of the gross receipt in the hands Of the Various group concern varies from 9.349 to 129.92%7 15 apparent from the 35 following chart: Particular #Y 2006- Ay 2007 AY 2008- 07 AY 2Qog- 08 Ay 20J10- HAY 2011- 09 10 AY ZQ12- 11 12 13 Mjs MG Bhangdiya 11.7906 41.2796 35,609 18,6090 27 4694 49,5090 MKS Constro Ventute P Ltd 9,3496 Ms Mahendra Construction 10.7896 43,1300 25.4496 12.0400 21,7900 33.058 27.7390 MJs, Mahendra Const, & M. G. Bhangdiya JV 49,5306 171.4400 17, 6906 41.8196 16,039 Ms,K M Bhangdiva 11.9706 23.3950 26,7696 2f1,2690 15,220 13.9480 MKS Acme Buila" Pltd 10.280 MSMG Bhangdiya and Hitbhav Engg Jv 166.534 11.9390 27 .8346 O,ooop MfsG Bhangdiya and SS PATTL Jy 54.8280 129.920 13.189 MSKM Bhangdiya Jv Mitcon Infra Project P Ltd [Consolidated 12.3630 25,2896 39.5276 10.0796 1O,00co I0,QQmp 47.0190 74.3606 18,5206 34.2506 49.97%0 44,590 In the case of the assessee group the been framed for assessment ufs 1534 have asessment year 2006-07 to assessment 2011-12 while assessment for the vear 143(3) of the Act assessment year 2012-13 uts The nature of the activity being execution of government contract was the same during years, all the assessment In assessment year 2006-07, the executed nature for Of the Vidarbha work Irrigation Development Corporation remains te same a5 In the Case of the assessee for assessment years. subsequent The sub-contractors, who have executed the 483 1185 IT,A_Nos.73 & 74/Nag/2016 IT.A.Nos.272 & 273/Nag/2016 16 work; are also similar in various assessment years; The Assessing Officer , we noted; in the case of the assessee group for the assessment year 2006-07, has accepted the income as shown bY the assessee group In the return about 12% Of the gross receipts. The Assessing Officer; a5 is apparent from the aforesaid chart; has assessed the income on different footing in the subsequent a5ses5ment years under the similar circumstances; There had been search in the case of the a5sessee, The nature of the business of the assessee remains the same; No other business activity 0r the business were found from where the income is derived or generated In various noting in the seized documents L.e diaries are part of the gross receipt f the contract receipt Of the group entity, iS not disputed The Assessing Officer, while making the addition; observed that the amount withdrawn from the diary is utilized for unaccounted payments which are not allowable like gratification Paid to politician and Government officials However; the Assessing Officer does not refer to any corroborative evidence on record to hold that the assessee has made payment &s Illegal gratification. He has taken < view by observing that payment made in cash is probable extraneous gratification: During the course of search; statement of Shri Mitesh Bhangdiya was recorded on 20/07/2011 and he In answer to question No: 30 explained that the seized documents details of cash flow. During the assessment proceedings Mitesh Bhangdiya has explained that the diaries are noting the movement of the cash in reply to question No. 23 , in the statement recorded on 27/07/2013. It was also explained by him in the course of the assessment proceedings that the sub- contractors on the withdrawal of the money gave to his father for safe custody, the amount which are found to be noted in the seized documents, In the statement recorded, the assessee has clearly explained that the notings made in the seized documents has nothing to do with the political leaders a5 much aS political leaders have no business transactions with Bhangdiya group. Even we noted that the Assessing Officer has not brought out on record any specific evidence to show that payment Is made to any politician Or the Government officerfofficial to whom the gratification payment have been given by the assessee group. We noted that the Assessing Officer Out Of the Sum of Rs.182.52 crores, added R5.54.40 crores on the basis of deposition of the sub-contractor for which when the assessee has asked for te Cross examination, the crOSs examination was not allowed to the assessee; which Is contrary to the principles of natural justice EL; AE E mi Ile6 Hta4 ItA.Nosz I.7.A.Nos.272 73 & 74_ & (Nag/2016 273/Nag/ = 2016 Hon 'ble Supreme VS; Court Commissioner In the Of case OF 4228 Central Andman Of 2006), Excise, Timber under the simtlsc colkata (Civl tppads Industries adjudicating authority witnesses; did not circumstances; No. held as allow under: the cross when examination the of the "According examine t the US, not witness by the allowing statements the Of Adjudicating assessee those to witness Authority cross impugned order i5 a were made though inasmuch serious the the as it flaw which basis amounted to makes Of justice the because violation the order of which the Of principles nullity assessee was Of adversely natural In View of the affected. testimony Of above; these two we are Of the material with the witness {5 discredited, epinion tat if the justify its action; Department Oh the there J5 the basis was was the statement of which no Only basis af issuing Of the aforesaid it could the Show Cause two Notice: witness We; thus; Tribunal set aside the and allow this impugned appeal" order 35 passed by the Following the statement said decision Of the of Hon" On. sub-contractor, 'ble Even Supreme otherwise in out Court; evidence also, view, the being wa noted cannot be which brought that no relied has been added on record the to prove corroborative assessee by the Assessing that is the the the undisclosed Officer receipts, receipts for income in the which the OF the income Assessing assessee: Of Officer addition assessee represents has been In fact and assessee the part of the made which by has group te duly been concern 9ross receipts of earlier , due taxed to and the the to this addition, income tax sub-contractor; income assessed there as has been As pointed by Assessing Officer; percentage huge variance U5 the The CIT(A) with basis the in the Of_ making therefore , receipts Facts the addition was by correct the cf the present by the in came case; Assessing rejecting to be made it is seen that Officer: were as net profit regular In also the finality Upheld in appellate percentage Of assessment The proceedings receipts returns and percentage us and which Of 153A4 have have receipts in also achieved appropriate to this group been determine entities: filed 35 the same the It a5 are available income assessee a5 percentage will only and the Revenue On record which Of are receipts authorities without accepted by dispute: the 1125 h8F IT A Nos,73 & 74/Nag/2016 I.T.A.N0s.272 & 273/N3g/Z016 18 127 We may mention that in the case of the assessee group; survey action was corducted on 17/02/2009 wherein similar situation, under the the payment to sub-contractor was disputed ad doubted by the Assessing Officer, The survey action relates to the assessment year 2006-07 to 2008-09, which the block period for the search action are part Of The Assessing Officer while conducted on 19/07/2011. making the assessment applied a net Profit @14% but When the _matter reached to the Tribunal, Videunadevagpur Begch in LTANos 268,269 anaez8sibvagyz0h2 vide order dated 03/04/2013, after considering the impounded material,- directed the Assessing Officer to adopt the net profit @12% &5 against the net profit adopted by the @14%. Assessing Officer There are also the similar type of defects found been found in the course of search, as have We noted the the CIT(A) has in impugned assessment years made in consequence of search, directed %e Assessing Officer to estimate the profit @16% &d not @12"

Even though the CIT(A) was fully aware Of that during the assessment Year 2006-07 to 2009-10, the assessee group has surrendered additional incore at Rs.1l crore &d the Tribunal has directed the Assessing Officer to estimate the net profit @12%. The Tribunal in that order under para a5 under: 4 observed 72 E" "4 Brief facts of the case are that a survey ufs. 133A Of Income Tax Act; 1961 was carried out in the business Rremis of the assesses &nd his associates on 17.02.2009 During _ the course of surver operations it was found that most of the bils; vouchers and Other evidence in support of the entries in books Of the account like labour charges, material purchases;, 'machine hire charges, site expenses, sub contract expenses; Qil ad lubricants, repairs and maintenance etc: pertaining to this A,Y were not available Statement of Sri Mitesh Bhangadiya was recorded under Section 1334 ad 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 other deficiencies, respect to the assessee admitted additional income in group cases Of Rs. 1l crare and proportionately between were allocated ali the a5sessment years relating to these assessee four For the year under consideration L.e, For assessment year 2006-07 in case of Sri Mithesh Bhangadiya, income the additional was offered at Rs.23,97,361/- besides shown the income originally at Rs,23,63,910/- Due tax was paid before Om 1/83 Hec IT,ANos73 &.74 / Nag/2016 E.T.A_Nos.272 & 273/Nag/z016 19 the issuance Of notice under Section 148 a5 admitted in para by the AO 2 Of his order: The important contents of submission recorded On 24-02-2009 and 13-3-2009 Of Bhangadiya Sri are Mithesh incorporated in the order Of the AO. question No; 11, it In query of was answered that during the survey; course Of it was noticed that there are certain discrepancies and omissions ad to cover up all such discrepancies we have made out mind to offer additional income: income over ad above the regular We are under the process to determine such additional income to avoid litigation-and, t buy in peace Of mind, Thereafter response t question Nos 18 & 19 of the statement On 13-3-2009, it recorded was answered that the sub contractors awarded the sub contract were work by our firms a5 per contract notes and the nature Of sub contractors has charges and machine hire been that labour charges: The sub contractors by a Iacge literate and therefore; their books Of accountscfound toand incomplete without maintenance or any bills and vouctecs 5 The exlenses incurred by Qur firm has been on the basis of the So Calted vouchers raised by them and therefore; the there discrepancies in the appears expenses claimed stated that the It was further assessee has admitted in his previous statement recorded during the course of survey that there are discrepancies certain and anomalies in the Sub contract expenses their books Of accounts, non availability of bills in the past three assessment and vouchers for years Accordingly, that there it was submitted were certain discrepancies and anomalies in the Sub contract accounts, in books Of accounts for assessment 2006-07 to 2009-1O. The years assessee declared income Of Rs. the additional 11 crore in their firm ad the five sister concerns in the assessment year 2006-07 to 2009-10, The working additional income Of Rs: 11 crores will be af the the same will be shown: These done accordingly ad part of the statements have been incorporated in the order of the AO a state above: the AO started scrutiny of the Thereafter case; The AO assessee has shown noted that the various expenses under the head labour & wages; maching hire charges, site expenses and sub contract expenses etc on very higher side; which are not supported by valid vouchers Neither any further evidence also was filed observed It was by the AO that since there deficiencies in are various accounts of sub conbracts and the has Offered a Sum of Rs, 23,97,361/- on assessee in respect to account of discrepancies Sub contract therefore, he proceeded make further addition to On account Of in absence various deficiencies i.e 0f bills and vouchers; excess claim towards #E Jieg ITANos.73 & 74/Nag/2016 IT.A.Nos.272 & 273/Nag/2016 20 machinery hire charges; verification of of Section 194C and denial of applicability of provision the sub contract given aleged sub contractors regarding bv the assessee, are noted by the AII these AO in his order discrepancies has observed that after Thereafter in para 7, the AQ the assessee having rejected the books Of account f under Section 1 '4503) of the Act, assessee has to be estimated the prafit 0f the reasonably: that the assessee has The AQ also observed the total declared net profit ratio of 6% &nd 7%ef turnover in After assessment years 2006-07 offering additional & 2007-08 income assessment Of vear Rs.23,97,360/- 2006-07 the results in revised net for to 12.87% of the contract profit comes found by the AO OfOloraer Sideeipthe However this net Profit was group case side The AO noted that in one of the Bhangadiase Jvjamel Mjs Mahendra Construction & MG Who had declared additional 1,57,47, 760/- in the Assessment income of Rs, Year 2007-08, net profit ratio of 13.84% of the which gives & tese facts the AO net contract receipts. adopted 149 net profit In view Of completed the assessment Thereafter the AO 30,12,722f- and made against addition Of Rs; at Rs '23,9796051 addhticnal [iesuitee Shown by the assessee which resulted Rs.6,15,362/- further addition Of ad ultimately under para 7 a reproduced net profit @129: hereunder, estimated "

After considering the submission on record we find that the and perusing the matel appeal in part We noted for theeseee deserves to succeed in his assessment the year under consideration |e. for year 2006-07, the assessee's NP 22,87%3 fO1 assessment vear 2007-08, rate comes to comes to 10.._ 539, the assessees NP rate Of all the concerns erpedeely; We also noted that if the NP rate are taken into that all the consideration , then it is seen assesses have shown Rs.258,55,37,850/- government and income receipt at shown by these on these contracts have been rate of 6.38% , asbessee at Rs.6,49,57,111/- Which gives @eep The declared during assessee has offered additional income NP the Survey at Rs: 11, 03,85, ,877/-, rate of 4.27% ad te total NP which gives a comes to 10.65%. Of rate in all these concerns crore Or Odd course , the additional income of Rs was 1l contract segregated proportionately O the basis of receipts in the hands of each concern. Mahendra Construction & M.G In Case Of Mjs Bhangadia (JV) comes to 13.84% Le for the NP rate assessment year 2007-08 and this rate APPEL _ Qm Ilp Hee ITA Nos,73 & 74/Nag/2016 E.T.A.Nos.272 & 273/Nag/2016 21 hnasbeen adopted by the AO ad has applied _ in all the years in case Of the NP rate of 14% ali these was conducted. In view; this assesses 0n whom a survey approach of approach: the In case Of MG, AO was not correct Bhangadiya, the years come to 9.879 NP rate whereas of three Sanjay Heda, in case Of other assesses Ms Mahendra Construction i.e: (JV) the NP & M.G, Bhangadiya Sate comes to 9 50% and in case Of Mjs Construction & MG: Bhangadiya (JV) Mahendra three the years comes average to NP rate Of 11.289 KirtikumarBhangadiya, and in case Of Mjs Of MG the NP- rate comes to 8.72% &nd in case Bhangadihangadivhe IA rate Cofanendra "9onstructon (JV) & M.G, the NP rate comes to 6,12%. Bhangadiya &d S.S. Patil & MG In Case Of MG years comes to 11.5S%. Bhangadiya, the NP of three As stated a1i the above, assesses for the average NP rate Of ali the three Therefore; in years comes our view; to 2 10.65%k , rational adopted bV the AO or by approach should have been the Mfs Mahendra learned CIT (A) For one case Le was 13.84% donistruction & MG Bhangadia (JVh, the CNgerae and if this rate I5 applied in ail other Dur view; is not justified cases; which in there were So However there (S also no dispute that Sub 'cortaact maco uiscrepancies in maintaining VoUchers; bils;, accounts and other heads; {4 veriflable, therefore; the assessee which wer no offer an additional and his group came forwefd income of Rs. offered and Il crore and the same has ak2 due tax has been paid. Since a5 stated are certain discrepancies, above there 1296 we are Of the view; i5 adopted instead of that if NP rate Of 14%, justice: that We will made meet the end Of it ciear that where NP rate shown assessee in any year is more than 12% by the shown by the assessee has then the more NP rate himself and to be taken a5 assessee has declared in other years where NP rate shown is lower than 12%, then 1Z% NP by the assessee will recomputed the rate has to be taken The AO clarification ; income accordingly: For the in case Of assessee for sake Of the NP rate comes assessment year 2006-07, to 12.87%/ income, therefore; the income after showing the additional accepted However; for shown by the assessee has t be the NP rate shown assessment years 2007-08 & 2008-09, by the assessee corhes to 10.69%6 ad 10.53%, after additional income The AO 12% and will compute the will adopt the rate of income accordingly. 12.8 We noted that the CIT(A) even of the Tribunal in the case Of though followed the order year 2006-07 to 2009-10 the assessee for the assessment but directed the Assessing Officer to +84 I1S1 ITANos;73 & 74 / Nag/2016 I,T.A.NDs.272 & 273/Nag/2016 22 estimate the net profit during the block that he has given the reasons period @16% and for the years under that there Is material difference in appeal Le search action has also resulted detection of the unaccounted assets into and unaccounted to the tune of Rs.26 crores disclosed 'aeseellery of Rs.2.37 crores which has not beer by the assessee group In their nor the Source of such respective returns filed explained acquisition of such satisfactorily, assets could be CIT(A) a5 We do not agree with such we noted that finding during Of the has surrendered Rs.11 block period, crore the assessee during assessment the course Of survey for the Year 2006-07 to 2008-09 and further Sum Of Rs.26 crore during was surrendered, search a crore was available with Thus; A Sum Of Rs.37 utilized for the assessee Which assessee could have investment in the assets 3s well as for the of jewellery: The unaccounted purchase jewellery is assets 2s well as unaccounted only Rs.28.37 crore; which is much Iess and covered by the disclosure of R5,37 15 duly made by the crore during the block period assessee; Rs,1l crore Crore during during the the block survey and Rs_26 period. Even Assessing Officer; otherwise als0, the we noted, has gathered unaccounted assets the information and Of documents found unaccounted jewellery out Of the utilization pf "during te course Of search which shows the the amount which the assessee has received of withdrawal from the bank account by way weli 25 from the bank of the group conagin account cannot be of the sub-contractor, Whic regarded to be undisclosed. agree with the We; therefore; %p ot reasoning of the CIT(A) @16% in Of the gross receipts. adopting the net profit: In account of our Opinion, no addition unaccounted assets to the extent of Rs.26 0n unaccounted jewellery of Rs.2.37 crores and therefore; after crores could be made considering the facts of the casee pasd We; relevant case laws &d nature of the activities history, assessee are Of the View that the carried On by the the CIT(A) is at & higher side estimation of the income by set aside the and is not justified. Order Therefore; of CIT(A) to the we Assessing Officer to estimate the net extent of directing the receipts ad direct the profit @16% of the gross Assessing Officer profit on the to estimate gross receipt @IZ% the net 25 has been estimated returned bY the assessee group in their and in response to the notice respective returns filed Income Tax Act; issued u/s 1534 ad u/s 139 of the Om Ho II* I;T ANos.73 & 74/Nag/2016 I,T.A.N0s.272 & 273/Nag/2016 '23 6 Respectfully following the said decision of this Tribunal, we dismiss the ground taken by the Revenue and partly allow the ground taken by the assessee and direct the Assessing Officer to estimate the income of the assessee in each of the assessment years by applying the net profit @12% on the gross contract receipt of each year which has been applied by the assessee while filing the return. 7 The last ground in assessee's appeal relates to the charging of interest Wjs 2344, 2348 and 234C of the Act Learned AR. was fair enough to concede that this ground is consequential in nature. We, therefore, direct the Assessing Officer that the interest chargeable 4/s 234A, 2348 ad 234C be recomputed after giving effect to our this order: Thus, this ground is allowed for statistical purposes in all the appeal. 8 In the result; both the appeals of the Revenue are dismissed whereas both the appeals of the assessee are partly allowed; M1 (Order pronounced in the open court on 30/06/2017 Sd] _ (AMARJIT SINGH) Sd; _ Judicial Member P K BANSAL ) Vice President Dated:30/06/2017 *Singh Copy_of_the order_forwarded_te 1 The Appellant 2 The Respondent 3 Concerned CIT 4. The CIT(A} 5. DR:, (umJ Ik Asstt: 'Registrar #rrmt Toniam Assistant #MTw #Iah Registrar Income Tax &er#V{ T3 ~TTI+a tpoellete Tribuua: 1 Nfepi 8p-