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

The assessee denies Ilability to pay interest under section 2344 2348 and 234C of I.T Act 1961. Without prejudice; levy of interest under section 234A 234B and 234C of LT; Act 1961 is unjustified, unwarranted ad excessive. 2 In its appeal, While the Revenue has taken the following grounds of appeal except change in figures for the assessment year 2008-09: 1. Whether on the facts and circumstances of the case and in law the Ld CIT(A) was right in thwarting the very purpose of search and seizure provisions Of the Act by ignoring seized incriminating documents and thereby directing the AO to tax the income 0n presumed percentage based on surmises 2 Whether on the facts &nd circumstances of the case and in law the Ld. CIT(A) was right in not affording the opportunity to the AO Of being heard during appellate proceedings despite AO has . specifically asked Of being heard vide his letter dated 19.02.Z015 ad thereby passing order in undue haste ignoring provisions of the Act; 3, Whether 0n the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of Ilxe H#Z ETANOs76 & 77 /Nag/2016 I.T,A.Nos.270 & 271/Nag/2016 Rs. 22,47,136/- made On account of bogus sub-contract payments? 4 Whether on the facts and in the circumstances of the and in law; case the Ld. CIT(A) was justified in Of deleting the Rs; 22,47,136/- addition made On account Of bogus sub-contract payments without appreciating the fact revealed from the Seized materials ad statements recorded that the sub-contractors only name lenders and have not executed are any sub-contract? 5. Whether On the facts and circumstances of the case and law the Ld. CIT(A) waS Tight in hoiding that te encriminadng diaries seized from residence of the main person Of the cannot be said to be belonging to particular group documentary concern ignoring the evidence ad the admission Of Shri Mitesh Bhangdiva himself that the entries in the diaries pertain totene details of cash flow of assessee group s business activity and the entries in the diaries were not compietely recorded in the books Of account 6. Whether 0n the facts and in the circumstances of the and in law; the Ld. CIT(A) was right in deleting che addtorasf Of Rs. 22,47,136/- being unaccounted income? 7. Whether on the facts ad in the circumstances Of tha and in Iaw; Case the Ld CIT(A) was justified in Of deleting Rs; the addition 22,47,136/- being unaccounted income without appreciating the evidences found and seized during a seizure action? the search 3 3 M Zinns 8 Whether on the facts and In the circumstances of the and in law; the Ld. CIT(A) was justified in Case directing AO to adopt total income Of the assessee at the rate of 16% of by ignoring the findings given by the AO regardingTgus Gubt bogus sub- contractors, unaccounted income and gratification payments? 9 On the fact and circumstance of the Ld. CITIA) erred case and in law the in accepting assessee's contention that Various Sub contractors used to keep deposit of money withdrawn by them from bank With the assessee group for safe was]recorded custody which On the credit side of the frre aigetine diaries without appreciating that if the contention of_ then the assessee is true credit entries shali be in the name Of the Sub E.T.ANos.76 & 77 (Mag/2016 I.T.ANos.270 & 271/Nag/Z016 contractors but the fact is otherwise a5 only names of thee banks were found written there, IO On the fact ad circumstance of the case ad In law the Ld. CIT(A) erred in accepting assessees contention that the Sub contractors kept their money for Safe custody with the assessee group and amounts In small quantities them For were later withdrawn by 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, Il On the fact &d circumstance of the case ad in law the Ld CIT(A) erred in not calculating exact unexplained expenditure and unaccounted investment mentioned in seized incriminating diaries a5 well aS inflated claim Of expenditure in various projects and directing the AO to assume certain percentage 12 On te fact &d circumstance of the case ad 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 &s non genuine; ignoring the fact that sub contract payments were assessed in the hands of the assessee group a5 bogus sub contract payments ad in the hands Of the sub contractors protective assessments were made by treating the entire receipts a5 income 35 no contract executed was PE4iA> 13, On the fact ad circumstance of the case ad in law the Ld. CIT(A) erred in observing that unaccounted payments Or unallowable expenses like gratification paid to various politicians ard goverment employers have no corroborative evidence On record to hold that assessee has made payments Of gratification, any Illegal The onus in On the assessee to prove that the payments were genuine and incurred legally: As the cash pavments were not recorded in the regular books Of account ad 25 the assessee Failed to substantiate those entire aajurrtor the CITIA) ought to have upheld that the amount Of Rs. 171.10 crores Is unaccounted expenditure 14 On the fact ad circumstance of the case ad in law the Ld; CIT(A) erred in relying on the decision of Hon'ble ITAT in Bhangdiya group Of cases a5 at that time the information contained in incriminating diaries was not available either to the IIS0 LTA_Nos.76 & 77 / Nag/2016 I.T.A.Nos.270 & Z71/Nag/2016 AQ or to the appellate authorities while The restricting it to 12%. CIT(A) ought not have relied ITAT when on the decision of Hon'ble selzed documents prove clear concealed income and unexplained expenditure: 15 On the fact ad circumstance of the Ld. CIT(A) ought to have case and in law the appreciated the fact that in the case Of assessee.S group It is not feasible to estimate the particular ratio net profit at a 35 Out Of gross receipts Of 579 assessee group made unaccounted crores the 171 crores and payments to the tune of Rs. hence spent only Rs; 408 execution Crores of contract towards work; Whatever profit execution Of the contract work was derived &n profit by the assessee group, unexplained to that unrecorded expenses of Rs. 171 crores were required to be added to arrive at the correct taxable the assessee income Of 16. On the fact &nd circumstance of the Ld CIT(A) failed to case and in law the be appreciate that the taxable income need not equal to the actual net profit derived by the may include addition assessee a5 it towards various section other provisions like 404{3) 4(a ia), 68, 69, 69C etc and in thevsssf te assessee group addition U/s 69C is applicable, 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 0f ground Nos. 3 to 5 taken by the assessee in its appeal and ground No, 1 to 16 taken by the Revenue in its appeal in its appeal; both the parties agreed that the issue involved in assessee's appeal as well as in Revenue's appeal in all these grounds is common and identical to the grounds raised by the Revenue as well as by the assessee for the assessment year 2007-08 to 2011-12 in the case of Mitesh Gotulalji Bhangadiya ad whatever view this Tribunal may take in the case of Mitesh Gotulalji Bhangadiya in ITA.Nos. 56 to 61/Nag/2016 and 261 to 265/Nag/2016, the same vlew may be taken in all these appeals. #4s Il5/ IT_ANos.76 & 77/Nag/2o16 IT.ANos.270 & 271/Nag/Z016 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 I.TANOS. 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 as by the Revenue in that appeal are similar and 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: "12 We have heard the rival submissions, carefully the same along with the orders 9f thes sa authoeties beiosideree below: We noted that the facts &d the issue involved in all the years under appeal in the case of the assessee are similar and identical CIT(A) has passed & consolidated order. The The the undisputed facts in Case of the assessee and the group concern are that 2 search ad seizure zction U/s 132 of the Act was carried out the Bhangdiya Group of cases an 19/07/2011. in Simultaneously, the business ad residential premises of the searched assessee were &lso Duting the course Of search conducted , incriminating papers and documents were found and seized, Shri Gotumal Bhangdiya is the Mitesh key person of the group: Shri Mitesh BnangdiaShas two Sons namely Shri KirtikumaupA. Bhangdya and Shri Srikant M Bhangdiya and one daughter Neta. The business of the Bhangdiya group 15 being looked after by Shri Mitesh Bhangdiya and his two sons; The other key associated with the group are Shri Sanjay RamesnchaedraeHedas husband of Mitesh Heda, Bhangdiya'5 sister, Smt Pradnya, resident of Antravati ad Smt Manisha O Maniyar , Widowed sister Of Shri Mitesh Bhangdiya who lives with Bhangdiya family. 3 ReLLAd 3 1 12.1 The main business concerns of the group (including those discovered as & resutt of the Search action) are a5 follows I. Mfs M.G, Bhangdiya (AERPBZ503E) , (Prop. MGB); converted into : company M/s MK.S Constro-venture Pvt: (AAHCMO383T) Ltd. from 01.04.2011 2 Ms Mahendra Construction, Prop: Shri Sanjay Heda (AADPH7109J) (MC) IKS +4x I.T,A.Nos.76 & 77/Nag/2016 IT.A_Nos.270 & 271/Nag/ 2016 3 Ws Mahendra Constructian 85 MG Bhangdiya (JV) (AANFMS6S8B) 4 Ms Kirtikumar M Bhangdiya (Prop. KMB); converted into a company Mjs MKS Acme Buildcon Pvt: Ltd. (AAHCMO38ZK) from 01,04.2011. (AGYPB1659G)

Mfs KM. Bhangdiya & Mahendra Construction (JV) (AAKFKI8ZOC)

Mjs Shrikant M Bhangdiya (Prop. SMBYATCPB1337J)

Mitcon Infraproject Pvt: Ltd. (MIPL) (AAGCMI868H) 8 Lokshahi Publications Pvt Ltd, (LPPLY(AABCL6673L) 9, MITZ Infraproject Pvt: Ltd (AAGCM304ZA) IO. Sakshi Gruh Nirman Pvt: Ltd. (SGNPLJ(A4OCS7974G) 11 Balaji Stone Crusher Infraventure Pvt; Ltd (AADCB5273C) 12.2 The group has also entered into joint ventures with various other civil contractors of the city to secure some civil contracts; A few of them are listed below: 1. 3 4 Mjs M.G. Bhangdiya & Hitbhav Engg (JV) (AAOFM474SL) MJs M.G Bhangdiya & S, S, Patil & Co. (JVJ(ABIFS3645L) Mfs Darshan Construction (JV) (AAHFDO6SAN) M/s M R Dhoble 8s K M Bhangdiya (JVJ(AAPFMO6ZZB) 12.3 The nature Of the business Of the Bhangdiya group primariiy is executing civil contracts. The group works mainly for Government departments like MJs Vidarbha Irrigation Development Corporation ad has been engaged In executing various contracts pertaining t0 the irrigation projects in the state of Maharashtra. During the course of search operations incriminating documents were found and seized from the residential premises 0f Shri Mitesh Bhangdiya. Item no. 1 to 65 Of Annexure-B seized trom his residence are the diaries containing ledgers, daily cash books and bank books maintained by the Bhangdiya group. 36 Cash books contained entries for the period from 26/07/2006 to 18/07/2011 ad 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 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 borne out from the seized diaries Marked a5 B-1 to B-65 and to explain the contents Of these diaries, Shri Mitesh Bhangdiya in his statement recorded has +55+ JLSS IT,ANos.76 & 77/Na9/2016 I.T,A_Nas.Z70 & 271/Nag/2016 submitted that the entries in the diaries and the ledger_ pertain to the business receipts ad business expenditure Officer in the The Assessing assessment order has recorded a per the item finding that no; 1 35 to 65 of annexure-B, it {5 amounts withdrawn apparent that the from the bank accounts Of the contractors were credited to sub- the daily cash balance of Bhangdiya group which Was confirmed by Shri Mitesh G. Bhangdiya in his statement dated 14/09/2011. The Assessing Offcer has reproduced the statement Of Shri Mitesh Bhangdiya recorded 14/09/2011 in para 6 of the assessment ordegs On The Officer in the assessment order has also Assessing recorded & the seized finding that documents being 8-1 to B-65 contain entries of all expenses incurred by the Bhangdiya group in cash from 2006-07 FX onwards ad expenses incurred through accounts the from bank FX 2009-10 onwards. Thus, the Assessing Offifcer found that the actual expenses Incurred d nat with those shown match to have been incurred in the books; The Assessing Officer thus conchuded that the books ef ccount he Shri M.G Bhangdiya maintained for income-tax reflect the true business affairs purpose d not and are not at ali reliable The Assessing Officer analyzed the entries in the diaries and tok the view that On receipt side various receipts including withdrawal from the bank Qf the the assessee group concerns were recorded and on payment side entries of expenses like interest payment repayment Of Ioan; deposit into bank household expenses, account personal expenses; payment to various persons in cash ad investment in properties are found It recorded was also noted by te Assessing Officer that some entries made in the seized diaries Of the books were found reflected in the of account maintained by the Bhangdiya Group: Statement of Mitesh Bhangdiya was recorded 0n9(2O;07/20U1, During the course of search, Mitesh Bhangdiya was confronted with the entries borne out from the seized diaries 8-65. marked B-1 to In reply to question No: 30 of his statement; Mitesh Beaagdix -submitted that the entries in the daries end ledgers pertain to the business receipts ad business expenditure present it is but at very difficult for him to state whether the entries recorded in the seized diaries and accounted books Of in account the regular and Same can be explained only after verification Of the entries of the diaries with rhe regular books of account maintained by the Bhangdiya Bhangdiya, Group. Shri Mitesh reply to question No: 38 , we noted voluntarily blfered additional unaccounted income of Rs.26 croresitforathe block period including the current financial vear oveorend abohe REit4 3 IISh N3 I.T,A Nos.76 & 77/Nag/2016 IT.A.Nos.270 & 271/Nag/Z016 the regular income declared In the return filed for the assessment year falling within the block period. The income SO declared are summarized a5 under: phangolu GROUE Parlicular AY 06-0} Ay Zo0}-GB 4y ZO0B-9 AY zon9-I0 #Y Zol(-]] KY Z061-1Z AY Z0Iz IJ Grnd Total (R3j} Ns MS Bhang Contract Inccne &$ Per ciqinal Tejurn Adltinal Irxcone de-[ared durng Survey Addltional Inzome Offered Durlng Search 22,0,540 28,96,131 16,61,B5] 56,J0,712 543,18,322 714.82,J0; 1383,94,275 23,97,76] 1394,009 27,f14,312 1,50,336 66,46,0IB 5,09,A60 27,18,952 576,01,676 255,17,293 B64,27,783 Contract Incore Declaned 45,97,9Q1 48,0Q,q0) 45,66,175 A5,Qo,Om 1[20,DC,0J0 2314,64,076 970,O0,QCD MKS Conzte Yenhle PLtd Contract Income a5 per ongina] return Addiical Income derlated durir Sunvey addltibnal Income Offered Durlng Search 1B2,35,373 182,75,173 164,74,627 164,74,627 Ccntract Inctre Derlared 347,50,0Q0 J47,SQ,00 Ma Mabedg Eonstoxtng Conkract Ijicome a5 per Orglnal retum Additlcnal Incame declared dunnn Sunvty Additlonal Incorie Olered Dutng Search Conbart Inccne Doclared 36,77,656 125,0,051 26,48,024 20,60,666 73,30,074 76,26,315 7,50,408 366,20,174 40,41,095 49,17,076 1,14,112 11,13,224 107,06,XQ0 26,00,44# 37,72,073 18,36,964 8,26,110 120,61,926 [D1,73,685 36,41,512 347,93,510 JO4,CD,00) Z1Z,00,00n 52,00,dod 4,0},0oD 202,0D,DW 170,00,CO0 34,QQ,@00 827,00,070 MsMabedgz EnnxAlG Bhzngdel Contract Income as per orlnal return Additional Income declared during SuNyey 157,47,756 310,92,743 715,14,147 35a,75,120 74,77,13 1617,02,32 15},19,954 [91,90,115 497,69.037 B43,07,112 ETANo5,76 & 77 / Nag/2016 [T,A.NOs.270 & Z71/Nag/Zo16 1155 Additlonal Trcore @ffered During Seanch 257,16,B20 190,74 GYU [72,22,664 Contaf! InC? Dedared 619,64,164 H14,67,720 504,50,858 1465,0r,Do 543,0C,Qil 247,0C,Q1G JOBO,5B,5Y8 MsKM_Ebangdua Conbet Inote a5 Per Crlginal retum 10,18,705 J2,86,795 27,20,+01 Z1,0,306 61,66,670 Additonar Income declared dunng Survey nadlbonal [ncune Cffcred Curing Search 32,09,134 186,02,11] 14,13,344 25,22,355 19,09,360" 7,50,651 65,94,712 8,90,B5q 10,70,239 29,41/4] 58,31,330 33,00,766 Contract Incorne Declared *39,36,226 24,JL,E 049 67,00,0OQ 57 d0,oqo 57,D0,d0Q [ZO,0,020 66,0D,(CD J91,J1,049 Mks acqe Dud_E Ly Contract Income &5 Fer Origlnal return Addtlcral Incame declared during Survey Additional Incnie Dlered Dunzg Search 34,70,653 34,70,653 Totract Income #lared [6,29,H} 16,29,347 5),q0,(n s1,00,on0 MSHG Rhandiz adHihba Engily Cotract Income 35 Per Driginal return Aduitlortal Intomc dedlated durlng Survey Addllical Income Onered Durlng Searh 26,R4,727 2,20,187 4,63,997 4,68,994 38,77,905 5,63,50) 30,J44 5,93,927 7,49,469 L,Jl,dOS Contract Jncame Darlared 3,80,475 J2,49, 310 5,00,040 4,63,997 6,Q,000 48,12,707 Nls M g Bhangdtl aSS PAMLJ Coritract Income a5 per original rebrM Atditlonal [ncame declared dutlrg Sunvey 4,65,923 4.77,544 9,43,467 6,01,929 8,78,516 1440,515 QRELL4 Di Ilsc HSt IAN3576 & 7Z /Nag/2016 LT.ANos.270 & 271/ Nag/2016 11 Adlitknal [none Ofered Dving Searcb Contact Inicorne Declarerd QQq 4,0Qo 10,67,052 13,15,130 40,02Q 24,21,082 Mi KM Bhaoudla 1 Contract Income a5 per onginal rebum Aduitlonal Tndome declared durng Sunvey Additional Income Ctfered Dunng Search Eontract Income Declared 5,14,55] 9,32,461 {4,47,012 1,86,444 11,67,539 17,52,908 11,Q0,CQQ 21,00,050 32,00,mod Mtcon Jnia FpltE Ltd Contaad Income 95 per drlgiral rlm Additkonal Income dedared dunng Survey Ankdibona Income Ohered Durng Rearch 60,J9,QQQ 43,98,429 53,20,051 157,57,480 nbact Income rlarzd 62,61,00Q [11,01,57! 9,15,049 182,82,520 123,Q0OUG 155,12,0 62,40,0CQ 340,40,f1D bddlticoal_ Jocqme gienat C2ttiWr Tndkkloual Mitesh Bhangdtya Klrukumar Bhangdiya 74,79,442 74,79,442 Strlkant Bhangdiyz 30,00,000 30,Ot,opo Keshar Singh Ratelt 35,00,fQG J5,0,0M 10,42,553 12,03,097 Consoluated Forull Enttig6 8Q,91,260 103,78,91Q Contract Income a5 pET prinina} return 68,96,901 Additional Income derlared durlng Suey 70,51,6Q] Addilinna) [niccxe OMercd During Search 26,BO/ 48 349,06,656 414,86,202 B15,34,[8 1107,15,93 956,05,476 278,24,555 3994,49,752 251,55,33} 261,Z8, {Dga 513,13,890 1104,49,592 51,73,503 29,07,203 321,92,392 1022,48,063 686," 14,524 216,65,435 2356,81,648 APpEL? HS; I.T A.Nos.76 & 77[Nag/2016 I.T,A Nos-270 & 271/Nag/Z016 12 IIS7 Contract Income Declared 74,29,950 652,95,572 705,21,973 TBSZ,#,COU 2129,63.097 16+3,Q0,000 494,90,ODC 7451,79,992 Addrtitonal Income In Cases of Indtutdual 10,42,553 1Z,G3. 97 9( 93.26/ 139,7942 243,18,352 12.4 From the statement Of Shri Mitesh Bhangdiya, it is apparent that the diary found and seized belongs to the assessee group ad the assessee group did not disown these diaries even though in the subsequent statement recorded on 27/07/2013 Shri Mitesh Bhangdiva stated that these diaries were primarily maintained by his father Gotumal Bhangdiya. The 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 officersfofficials which are recorded along with their names , dates Of payment ad 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 thee 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 ad receipt with the entries in the regular bopks of account Of Bhangdiya Graup. The Assessing Officer came to the conclusion 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 & elLA/p Sum of Rs,361 crores towards the sub-contract payment against 0 the grosS receipts aggregating to Rs.579 crores It was found by him after verifying from 21 contractors that & 3 Sum Of Rs.54.40 crore [5 attributable to the amount deposited in the bank account of te sub-contractor by account pavee cheques by various concerns Of Bhangdiya Group, which was withdrawn subsequently in cash ad Is reflected on the receipt side of the seized diaries: The total amount 50 reflected in the diaries 0n the receipt side was computed at Rs.182.52 Crore_ Assessing The Officer added the said unaccounted amount Of Rs. 182.50 crore In the income of the assessee group concern. 4 sum Of R5,54.40 crore was added in proportion to the amount of cheque credited by respective group concern in the hands of 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 concemn in the respective assessment years to the total turnover of the group concern in that year Now the question before u5 arises 1158 Hse E.T,A.Nos.270 & ANGNos7f & 77/Nag/2016 271/Nag/Z016 13 whether the said suni of Rs, (82.52 diaries found during thle crores, found recorded in the withdrawal cOurse from Of search the bailk account of the as receipt being 35 from the bank accouit Of the group concern as weii to be the unaccounted sub-contractor can be regarded level, if we Iook into income Of the assessee: the nature Of the At the micro the Revenue that the receipt has receipt; it is not denied by the assessee group come from the bank account Of come out of the ushcoithdra 'and part %f the receipt and has the assessee wvithdrawn br the sub-contractort ta group concern had made whom assessment has been made the payment The te case Of the assessee by the Assessing Officer ufs 153Ate Proceedings have also nSimvell a assessee $ group concern: the case Of been initiated by the the Assessing bub-contractor Us 153C of thesscc Officer In contractor has submitted the return in The Sub- 153C The sub-contractor response to the notice Ufs has shown contract receipt being the income from the The said income has amount paid to them by assessee duly been accepted by the group: On substantive basis In the hands of Assessing Officer Assessing Officer the thus has Sub-contractor: duly The #ssessment of the sub-contractor accepted while framing that the the Sub-contractor from the the payment received by group concern were not assessee a5 bogus well as the assessee by performing the but were the payment received them under the ~Cblifation for < consideratiorheettusteei of the ldessee SGtcortract This denotes that the On as well a5 assessee relationship Oonitractor; as genuine; has Juey group concern with the sub- Officer. Once the been accepted by the_ Assessing income hasr Gulytheeuaccopted br has been aSsesSe8 And Seig Revenue; accepted by the On the basis of the Revenue; in Our view, the assessee, cannot take the same facts in the case of the sub-contractor were viewv that the payment made to the bogus: Revenue that the Revenue Further it is not the case Of the the Sub-contractor It is has disallowed the payment madette the impugned 3 case where the Revenue has receipt from the sub-contractor added diaries found and seized during entered into the the analysis of these the course Of the Search. diaries; the From categorically given the finding Assessing Officer has receipt being the withdrawal that the diaries consist of thg 35 the withdrawal made hade by the Sub-contractor & wee of the group. The by the assessee from the bank diary also consists of the account which relate to the site payment expenses; some Of books of account; investment expenses recorded in In the personal the immovable expenses, expenses for the Jewellenv property; 25 well a5 money 45+ IIs9 I,T.A.Nos.76 & I.T.A.Nos,270 & 77/Nagf= 2016 271/Nag/2016 IAr transferred ad the amount paid the case of the Revenue to various persons. that the assessee It is not amount paid to has debited the account Jdd clalmedarhoudeDersons Into his regulaebooks the deduction so that Of be disallowed these by applying the explanation expenses can Act: In fact the assessee has to section 37 of the expenses The not caimed deduction of these amount wvithdraiwn Ageheing Officer added the receipt The receiptharaact by Coeicontractor %5 income of the being is coming out of the Sub assessee: the sub-contractor a5 seli a5 contract receipt of which has already been assessee and group concerns; Officer; The source of assessed t2 income tax by the therefore, Assessing the nature anouourcf Ohethecfipt I5 apparent Where be added to the income fhheeceipt stands explained {t canot Our view; of the assessee 'ho addition in On this view of the basis itself; in bank account Of the group cash withdrawn from the are duly disclosed to cOncern and the Sub-contractor Whice income of the aseessee the department; can be added in the 12.5 This I5 not the case withdrawals are from Of Revenue that these cash disclosed t the Revenue O/ ba whichount which have not been the cash outside Or in which the assessee has the books of account deposited receipt is concerned So for it Is not the source of the assessee i5 executing the denied that the business of the receipts in the benkngccount Govenament contract and all the through the Of the assessee is generated contract receipt from the contracts only State Government No cogent material taken from the to Our knowledge which Or evidence was brought has made the toaxherove that the State Governmuent account payment to the assessee On this basis itself; outside the books of the addition cannot be ine confirm the Order of CIT(A) that found recorded sustained on Out Of the cash the basis of cash withdrawal receipt the contractor from their bank by the assessee Or Assessing account Officer has not We also noted that the diaries but has also only analyzed the receipt side &f the found from the nealyzedethe payment side of the diariest Pavment side that a sum Of Rs.24.05 and been invested in the immovable crore ha5 account and similarly,, a sumaofe Rsroperty outside the books of a5 expenses Rs.8.47 crore has been Outside the books of utilized Observation Of outgoings observed account; As by the regards to hespect %f seized document; Assessing Officer in has mainly it i5 noted that the Grawn adverse inference withoue Assessing Officer material evidence on record for such there being conclusion. any Even before €1 W 186 t+2 IT.ANO8.76 & 77/Nag/2016 I.T.A.Nos.270 & 271/Nag/2016 JS US, no corroborative evidence were referred to &nd brought on record Thus, the Outgoing/investment to the extent of Rs.32.52 crore can be regarded to have been incurred by the assessee outside the books Of account but the same are spent out of money withdrawn from Dank, the source thereof cannot be regarded to be unexplained We noted that in this case the assessee a5 Well a5 assessee group concern, during the course of search, surrendered a sum of Rs.26 crore ad accordingly, filed the return in response to the notice Ufs 1534. At the most the Assessing Officer could have made the addition in respect of the unaccounted investment provided they are not covered by the amount surrendered by the assessee during the block period In fact in our View, the source of the said expenditure Shown the diary In is also coming out of the cash withdrawal from the banks Of the group concern & well a5 Of sub-contractor which has aready been disciosed to the Revenue and the receipt thereof has already been assessed to income tax: 12.6 We noted that the business income aSsessed by the Assessing Officer in percentage of the gross receipt In the hands of the various group concern varies from 9.34% to 129.92% as Is apparent from the following chart: Partiqlar 4Y 2006- AY 2007- Ky 20q8- AY 2009- AX ZQfC- 07 AY 2011- Ca AY 201z- 1Q 11 12 I3 Ms M.G, Bhangdiya 11.790 41.2706 35,6090 18,6090 27 ,4606 49,500p MKS Canstro Venture P Ltd 9.349 Ns Mahendra Construction I0,7896 43,1390 25.4496 1L.(X9 21,7930 33.0506 27,7396 Ms; Mahendra Const & M, G. Bhangdiya JV 49.5306 73,4490 12, 6990 41,8106 f6.0300 Mf s.K M Bhangdiya 11.978 23.3980 26.76Q 26,2696 15,22D6 13.9406 MKS Aame Bulld PLtd 10,2890 MSM G Bhangdiya and IHitbhav Engg Jv 66.539 11.9890 27 .830& 0.Qo% Ms MG Bhanggiya and SS PATIL Jv 54,8200 129.9280 13.1800 MjS K M Bhangdiya JV Mitcon Infra Project P Lta 25.2890 39.5206 10,0706 10.00% 10.00%6 Consolidated 12.3606 47.019 74 ,3606 18.529U 34,2596 [49.9790 44,590 ++4 1J61 ETANos.76 & 77 / Nag/2016 I.T.A.Nos.270 & 271/Nag/Z016 16 In the case of the assessee been framed for group the assessment u/s 1534 have 2011-12 while Sessessment year 2006-07 to assessment Yeae 14303) Of Assessment for the assessment year 2012-13 the Act; The nature Of the Ws activity government contract being execution Of was the same years; In during assessment all te assessment year 2006-07, executed for Vidarbha the nature of the work Irrigation Development remains the same a5_in the case of the Corporation assessment years The assessee for subsequent sub-contractors, work; are also similar who have executed the in various Assessing Officer; assessment vears; we noted, The in the for the assessment Case of the assessee group year 2006-07, shown by the has accepted the income as assessee group in the return about 129 0f gross receipts. The Assessing the Officer; aforesaid chart; has as is apparent from the the assessed the income On different subsequent footing assessment In circumstances vears under There the had been similar assessee Search The in the case Of the rature of the business of the assessee the same No other business activity remains from where the or:the business were found noting income Is derived or generated in the seized documents Le In various receipt Of the diaries are part of the gross contract receipt Of disputed the group entity; The Assessing Officer, is not while observed that the amount making the addition, for unaccounted withdrawn from the diary is utilized payments which grabification are paid not t0 allowable politician like 6peny However; and the Govemment Assessing officials; Officer does 0 not refer corroborative evidence On record to holas thac to any made payment as illegal the assessee has 3 gratification. observing that He has taken payment made in a view by gratification. cash i5 probable During the course extraneous of search; Mitesh Bhangdiya Was recorded_ statement of Shri On to question No: 30 20/07/2011 and he in answer explained that the details of cash ilow. seized documents are During the assessment Mitesh Bhangdiya has explalned that proceedings Shri the movement of the the diaries are noting for statement Cash in Teply to question No. 23, in the himenene reoursdedfOmh 27/07/2013 It course Of the assessment was aiso explained by contractors on the withdrawal proceedings that the Sub- for safe of the money gave to his father Custody the amount which are found to be notes seized documents In the statement in the clearly explained that the recorded, the assessee has notings made in the seized documents 1162 #IE I.T.A.Nos.76 & 77/Nag/2016 IT,A.Nos.270 & Z71/Nag/Z016 17 has nothing to do with tht' political Ieaders leaders have as much a5 no business political transactions with Even we noted that the Bhangdiya group. recrd Assessing Officer has not brought out on any specific evidence to show that any politician Or the payment is made to Government officerfofficial to gratification whom the payment have been given by the assessee We noted that the Assessing Officer out of the group: crores, added Rs.54.40 sum Of Rs.182.52 crores on the basis of deposition of the sub-contractor for Which when thee assessee hasposked Cross examination the croSS examination for the assessee; which is was not allowed to the Hon'ble contrary to the Principles of natural justice Supreme Court in the case of Andman Timbed VS: Commissioner of Central Excise, Kolkata Industries 4228 Of 2006), (Civil Appeal under the No: similar adjudicating authority did not allilatheircossseaacesn_ when the witnesses; held as under: cross examination Of the "According t u5, not allowing the assessee to examine the witness by the Adjudicating CroSs statements Authority though the of those witness were made impugned order the basis Of the is a serious flaw which makes the order inasmuch nullity as it amounted to violation Of principles justice because Of which the of natural assessee was adversely affected. In view Of the above; we are Of the testimony of these two opinion that if the witness 15 material discredited, with there the Department on was no the basis of which justify its action, it could 35 the statement of the aforesaid was the only basis of issuing the Show two witness Cause Notice: We; thus; setaside the impugned order as passed by the Tribunal and allow this appeal" Following the said decision of Hon'ble statement of the Supreme Court; sub-contractor, the in On_ Our view; Even otherwise cannot be relied also, We noted evidence that being no corroborative brought on record to prove that te Which has been added by the Assessing Officer receipts; the assessee is the undisclosed in the income of the income of the assessee receipts for which In fact the addition has been Assessing Officer represents the part of the made by the assessee &nd assessee gross receipts of the which has group concern ad the sub-contractor, duly been taxed to income tax; earlier; As pointed by uS due to this addition there has been huge variance in the I H6+ 1163 ITA.Nos.76 & I,T.A.Nos.270 & 77 / Nag/2016 271/Nag/2016 income assessed The Cercentage a5 Assessing Officer with the receipts by the the basis Of_ 'making Tthe additiotherefore , was correct in addition by the Assessing Officerr rejecting facts of the present case; it is seen that In the came to be made as net profit regular assessment were also Upheld in percentage Of receipts and which finality: The Ireturrappelata) Dtoceedings and have achieved Us percentage 153A Of have receipts also In been this group filed entities 35 appropriate to determine the It will only as the same are available income 25 percentage of receipts assessee and the Revente autheritid which are accepted by the authorities without dispute 12.7 We may mention that In the survey action was conducted' On case 0f the assessee group, similar situatiom, the 17/02/2009 wherein under te payment ad doubted by ta the sub-contractor was disputed t0 theoustesshenteyAssezo0g_Ofticer; The yeat survey 2006-07 to 2008-09, action relates the block period for the search action which are part Of The Assessing Officer while making conducted on 19/07/2011 profit @14% but when the the assessment applied a net Tribunal Nagpur matter reached to Bench in I the Tribunal, the vide order dated "03C04/2O1JA Moer Zonsids9 and 285/Nagzohe material, directed the after considering Assessing the impounded @12% a5 against the net Officer to adopt the net profit @14%. There are also profit adopted by the Assessing Officer been found in the th1e/ seailar type Of derects found?as have the course af search, (mpugned assessment years made We noted the CIT(A) has in directed the Assessing Officer in consequence Of seardl, not @129. Even t estimate the Profit @16% &nd during the asseEsnrent ough ZOSITIA) wa: furoawee6o &d year group has surrendered 2006-07 to 2009-10, the assessee Tribunal has directed hddisignal income at Rs.li croreaane she the profit @129. Assessing The Officer to estimate the Tribunal in that order under net a5 under; para 4 observed "

Brief facts Of te case Income Tax Act; 1961 are that a survey U/s; 133A of the of the assesses was carried out in the business and his associates on 17.02_ premises course Of survey operations it 2009 During the vouchers ad other was found that most of the ieidence in support of the entries bills; books of account like labour charges; in the 'machine hire charges, site material purchases, and lubricants, repairs expenses; sub contract expenses;s Oil A.Y. Were rot avallable Btatenaintenance etc: pertaining Ses this Statement of Sri Mitesh Bhangadiya was 3 Mi APPe II64 ET.ANos-76 & 77 / Nag/2016 IT.A.Nos.270 & 271/Nag/2016 19 recorded under Section 133A and u/s. of the assesses 131 of the Act on behalf In the statement dt.24. in response to 02.2009 and 13.03.2009, various questions the relating to the genuineness Of payments to third party sub contractors ad other deficiencies; the in respect to assessee admitted additional income in group cases Of Rs. 11 between ali crore ad proportionately were allocated the assessment years assessee; relating to these four For the year under consideration year 2006-07 in Le for assessment case Of Sri Mithesh income Bhangadlya, the additional was offered at Rs.23,97,361/- shown besides originally the income at Rs.23,63,910/- Due the issuance of notice tax was paid before in 2 under Section 148 a5 admitted by the AO para of his order The important recorded On 24-02-2009 contents of submission and 13-3-2009 Of Bhangadiva are incorporated in Sri Mithesh the question order Of the AQ No: In 1l it query Of was answered that sutvey, during the course it was noticed that there Of are certain omissions and to discrepancies &nd cover up ali such discrepancies We have out mind to offer additional income made income We are under over and above the regular the process to determine Such additional incame to avoid litigation and, to buy in response to peace of mind. Thereafter on question Nos. 18 & 19 of the statement 13-3-2009, it recorded was answered that the awarded the Sub contract Sub contractors were work by notes ad the our firms a per contract nature of sub contractors has been that labour charges ad machine hire charges: The sub large illiterate and therefore, their contractors by and incomplete , without books Of accounts found to be maintenance Of any bills and vouchers, expenses The ncurred by our firm has been On the basis Of the theled ouchers raised by them and therefore; 50 the discrepancies there in the appears expenses claimed stated that the It was further recorded assessee has admitted In his previous statemert during the course of survey discrepancies &d aomalies in that there are certain the their books Of accounts, sub contract expenses non in the availability of bills and vouchers for Past three assessment years Accordinglyv, that there it were certain was submitted discrepancies and anomalies in the sub contract accounts, 2006-07 in books Of accounts for assessment to 2009-10, The years assessee income of Rs; declared the additional 11 Crore in their 1n the firm ad the five sister concerns assessment year 2006-07 to 2009-10, additional income of Rs, The working of the 11 crores will be done the same will be shown. accordingly and These part of the statements have been incorporated in the Order of the AO as state ebeve Thereafter He 1165 L.TIA NoNos,76 & 77 / Nag/2016 T.A,Nos.270 & 271/Nag/2016 20' the AO started scrutiny of the case assessee has shown The AQ noted various expenses that the wages, machine hire charges; under the head labour expenses etc: on very higher 'site expenses and sub contract valid vouchers Neither side; which are not supported by also observved any further evidence was by the AO filed: that It since was deficiencies In accounts there of sub are various has offered a Sum of _ contracts Rs. 23, and 97,361/- on account of _ the assessee in respect to sub contract; discrepancies make further addition therefore; On he proceeded to in absence Or bills and acoct of various deficiencies i.e machinery vouchers; hire charges; excess claim towards Of Section 194C and erfication %f applicabilitv 0r prowisiots denial of the sub contract 'alleged sub contractors given by the assessee regarding are noted by the AO in his order: AH these discrepancies has observed that after having Thereafter in para 7, the AQ the assessee under Section Fejected the books af account Of assessee has {0 de EScirtiared reagoratthe Act the profit of the reasonably. that te assessee has declared The AO also Observed the total turnover in net profit ratio of 6% and 7% of After assessment offering years additional 2006-07 income & 2007-08 assessment year Of 2006-07, the results in Rs.23,97, 360/- for to 12,87% of the contract revised net profit comes found by the AO Ofrert sideeipthe However; this net profit was group Case namely, side; The AQ noted that in one Of M/s. Mahendra the Bhangadia (JV) Construction who had declared & M.G 1,57,47, 760/- in the Assessment additional income of Rs; RPPEL: Year net profit ratio of 13.84% Of the 2007-08, Which gives 5 these facts the AO adopted net contract receipts: In view of 2 completed the asseaoo1nd 143det Drofit Thereafter the AO 30,12,722/- and 7 against made addition Of Rs; at Rs; 23,97, 360/-, addticnal recore Shown Di oe assessre which Rs.6,15,362/- resulted further addition Of and ultimately under para 7 as reproduced net profit @12%: hereunder, estimated "7, After considering the on record, we fsnaertiat the Sbseission &nd perusing the material appeal In part: We noced for theessee deserves to succeed in his assessment the year under year 2006-07, consideration the assessee's ie: for 12.879, for NP assessment year 2007-08, rate comes to comes to 10._ 53%, the respectively. We assessee*s NP rate af all the concerns also are taken into noted that if the NP rate consideration , then it is seen 1(66 Hzd ITANos,76 & 77/Nag/2016 [IT.A.Nos.270 & 271/Nag/2016 21 that ali the assesses have shown government R5.258,55,37,850/- and receipt at income on these contracts have been shown by these assessee at Rs.6,49,57,111/- which rate Of 6.389. The gives & NP assessee declared has offered additional income during the survey at Rs. 11, 03,85, ,877/-, NP rate of 4.2796 which gives a and the total NP rate comes to 10.65%. in all these concerns Of course; the additional Crore income of Rs. or odd was 11 segregated proportionately contract On the basis Of receipts in the hands of each concern: In Case of Mjs Mahendra Construction & MG Bhangadiac(JN) the comes to 13.84% L.e. NP rate for assessment year 2007-08 ad this rate has been adopted by the AO ad has applied the NP rate Of 14%6 in all the years in case of all these was condtcted assesses on whom & Survey In view; this approach Of the AO was not correct approach. In case Of MG Bhangadiya, the NP rate vears come to 9.87% Of three whereas in case of other Sanjay Heda, assesses i.e MJs Mahendra Construction (JV) the NP rate & M.G Bhangadiya comes to 9,50% and in case of MJs Mahendra Construction & MG Bhangadiya (JV) three the average NP rate of years comes to 11.289 and in case 0f Mfs BfrtikumarBhangadiya, the NP rate comes to 8.729sand in cass of MG, Bhangadiya and M/s Mahendra Bhangadiya (JV) theavf rate; comaeendr3.{OnstTuctiose & M.G In case Of M.G Bhangadiva &nd 5.55Patil & MG Bhangadiya, the Case Of' three years comes to 1L.5S%. As stated above,; the all the assesses average NP rate Of for ali the three vears Therefore; comes to in 10.6596, our view, 7 rational approach should have been adopted by the AO or bY the leamed CIT (A) For Ms Mahendra Construction & M.G one case |e Bhangadia (JV), the NP rate was 13.84% and if this rate i5 applied in all other cases, which in OUr view; Is not justified. However, there is also there were So many no dispute that Sub discrepancies in maintaining vouchers, bills; contracts accounts and other heads, which were cefefable; therefore the assessee and hig group cairte forerard not offer an additional income of Rs. to 11 crore and the offered &d due tax has been paid. same has also are certain Since &5 stated above; there discrepancies, we are Of the 129 view, that if NP rate of I5 adopted instead of 14%, that will justice We meet the end of made it clear that where NP rate shown by the assessee in any year is more than 1296 then the more NP shown by the assessee has to be taken rate himself and in other 35 assessee has declared Years Where NP rate shown bV the assessee i5 lower than 12%, then 1Z% NP rate has to be taken . will recomputed the The AQ income accordingly. For the sake Of 67 HTANos.76 & 77 /Nag/2016 I.T.A Nos.270 & Z71/Nag/2016 22 clarification in case of assessee for assessment the NP year 2006-07, rate comes to 12.879 after showing the additional income, therefore, the income shown by the assessee has to be accepted However , for assessment years 2007-08 the NP 2008-09, rate shown by the assessee after additional comes to 10.69% ad 10.53%. income The AO will 12 and will adopt the rate of campute the income accordingly: 12.8 We noted that the CIT(A) even though followed the order of the Tribunal in the Case of the assessee for the assessment vear 2006-07 to 2009-10 but estimate directed the Assessing Officer to the net profit during the block period @16% ad for that he has given the reasons that there is materia) difference in the ears under appeal Le search action has also resulted into detection of the unaccounted assets to the tuna of R526 crores and unaccounted jewellery of Rs.2.37 crores Which disclosed by the assessee has not been nor the group in their respective returns filed Source of such acquisition of such explained assets could satisfactorily. be We do not agree CIT(A) a with such finding Of we noted that during the block period, the assessee has Surrendered Rs.1l crore during the course Of _ Survey for the assessment year 2006-07 to 2008-09 Sum Of Rs.26 and further during search & crore was surrendered Thus, a Sum Of Rs.37 crore was available with the assessee which utilized for investment assessee could have in the assets a5 well 25 for the purchase Of jewellery. The unaccounted assets aS well jewellery is only Rs.28.37 a5 unaccounted crore_which is much less and is duly covered by the disclosure 0f Rs.37 crore during the block made by the assessee; Rs.Il crore period during the Crore during the sutvey and Rs.26 block period Even otherwise Assessing Officer ; also, the we noted; has gathered the information of unaccounted assets and unaccounted jewellery documents found Out of during the the course Of search which shOws utilization Of the amount which the assessee has the of withdrawal from the bank received by way wel account of the group concern 35 from the bank 35 account of the sub-contractor which cannot be regarded to be undisclosed We; therefore, do not agree with the reasoning of the CIT(A) @16% in adopting the net profit of the gross receipts. In our Opinion; no addition On account Of unaccounted assets t0 the extent of R5.26 unaccounted jewellery Of Rs.2.37 crores and crores could be made. We; teiervaot casted considering the acts Of theurasoe Daadeistone, relevant case laws and nature of the activities carriea assessee, are Of the View that the On by the estimation of the income by Mi Iee He IT ANos.76 & 77/Nag/2016 I.T,A Nos,270 & 271/Nag/2016 23 the CIT(A) is at & higher side and is not justified. Therefore, we set aside the order of CIT(A) to the extent f directing the Assessing Officer to estimate the net profit @16% of the gross receipts and direct the Assessing Officer to estimate the net profit on the gross receipt @12% a5 has been estimated and returned by the assessee group in their respective returns filed in response to the notice issued uls 153A ad ujs 139 of the Income Tax Act 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 ujs 234A, 234B 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 U/s 234A, 2348 and 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, (Order pronounced in the open court on 30/06/2017 Sd] _ Sd}_ (AMARJIT SINGH) P. K BANSAL ) Judicial Member Vice President Dated:30/06/2017 #Singh #oat Iey ITA.Nas.76 & 77 /Nag/2016 IT.A.No5,270 & 271/Nag/2016 24 Copy of the order fonwarded to 1_ The Appellant 2. The Respondent 3 Concerned CIT 4. The CIT(A) 5, D.R; buknt Hlr #-Reqistar #T4 Incom: #TTT? 4M Jlr b6-