A,C.I.T. CENTRAL CIR.- 2(1) vs. SHRI KESHARSINGH G. ROTELE, NAGPUR

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ITA 138/NAG/2016Status: DisposedITAT Nagpur23 June 2017AY 2008-0920 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) was justified in deleting the protective additions. The Tribunal noted that the assessee had declared income from sub-contract work in his regular returns, and these returns, including the profit and loss account and balance sheet, were not discredited by the AO. The cash withdrawals from the bank account were reflected in the assessee's books of account, on the basis of which income was returned. Since these withdrawals had already been considered for determining the income declared, they could not separately constitute assessable income in the hands of the assessee. The Tribunal further observed that the AO had made disallowances for sub-contract expenses paid to the assessee while determining the income of the Bhangdiya Group. As these payments were already considered as business receipts in the hands of the assessee and reflected in his returned income, adding them again on a protective basis was illogical and unsustainable. The Tribunal found no illegality or infirmity in the CIT(A)'s order and confirmed it. The appeals filed by the Revenue were dismissed.

What were the facts?

The Revenue filed appeals against the common order of the CIT(A) for assessment years 2006-07 to 2008-09. The appeals arose from a search and seizure action under Section 132 of the Income Tax Act, 1961, conducted in the Bhangdiya Group on July 19, 2011. During the search, incriminating documents belonging to the assessee, Shri Kesarsingh G. Rotele, were seized. Consequently, notices under Section 153C were issued. The Assessing Officer (AO) made protective additions of Rs. 22,22,000 for AY 2006-07, Rs. 65,90,000 for AY 2007-08, and Rs. 1,56,54,000 for AY 2008-09, holding that the assessee was merely a name lender and had not executed sub-contract work, with cash withdrawals from his bank accounts being returned to the Bhangdiya Group. The CIT(A) deleted these additions.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned CIT(A) was right in deleting the addition of Rs. 22,22,000 made on a protective basis? 2. Whether, on the facts and in the circumstances of the case, the learned CIT(A) was justified in deleting the addition of Rs. 22,22,000 without appreciating that the assessee had not executed any sub-contract work and was only a name lender? 3. Whether, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in ignoring the evidence found in incriminating diaries which conclusively showed that cash withdrawals made from the bank were returned back and accounts of the assessee were credited in the incriminating diaries maintained by the Bhangdiya Group? 4. Whether, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that sub-contract work was executed by the assessee, ignoring the fact that the exact amount received from the Bhangdias was returned to them as evidenced from the incriminating diaries and no expenses were incurred for executing the contract? 5. Whether, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in thwarting the provisions of the Act by ignoring the evidence of search and seizure and seized incriminating documents? Assessee's Contentions (as inferred from the CIT(A)'s order and the Tribunal's reasoning): The assessee argued that the withdrawals from the bank account were reflected in his books of account, which were used to declare income. These withdrawals had already been considered for determining the income declared in the return. The AO had made disallowances for sub-contract expenses paid to the assessee in the hands of the Bhangdiya Group, and adding these amounts again on a protective basis in the assessee's hands defied logic. The profit and loss account and balance sheet submitted with the return of income were not discredited. The income returned was accepted without adverse inference. Revenue's Contentions (as inferred from the grounds of appeal): The Revenue contended that the CIT(A) erred in deleting the protective addition, arguing that the assessee had not executed sub-contract work and was merely a name lender. They also argued that the CIT(A) ignored evidence from seized diaries showing cash withdrawals were returned and that the assessee's bank accounts were used by the Bhangdiya Group. The Revenue believed the CIT(A) thwarted the provisions of the Act by ignoring seized documents.

Which sections of the Income-tax Act were involved?

Section 132,Section 153C

AI-generated summary — verify with the full judgment below

HS5o ITA.Nos.136 @ 138/Nag/2016 Asstt, Yrs:2006-07 to 2008-0g IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH; JUDICIAL MEMBER ILTA Nos.136 to 138/Nag/2016 Asstt. Yrs:2006-07 to 2008-09 ACIT, Central Circle-2(1), Nagpur. Vs. Shri Kesharsingh G. Rotele; 1 Khushal Vihar, Zenda Chowk, 2nd Bus Stop, Gopal Nagar, Nagpur: PAN:ADAPR_1792 D Respondent) (Appellant) Appellant by Respondent by Date Of hearing_ Date @f pronouncement Shri A, R. Ninave Shri K P, Dewani 20/06/2017 23/06/2017 @RQER PER P K, BANSAL_VB AII these appeals have been fifed by the Revenue against the common order of CIT(A) dated 18/01/2016 by taking the foliowing common grounds of appeal except change in the figure: Whether on the facts ad in the circumstances of the case; the Id. CITIA) was right in deleting the addition of Rs.22,22,000/- made on protective basis ? Whether on the facts and in the circumstances of the case; the Id CIT(A) was justified in deleting the addition of Rs.22,22,000/- without appreciating the fact that the assessee has not executed any sub contract work ad was Only name lender ? (iif) On the facts and in the circumstances of the case and in Iaw, the Id. CIT(A) erred in ignoring the evidences found in the incriminating diaries which conclusively [T,A. Nus136t0 138/ 'Nag/2016 Asstt; Yrs:2006-07 to 2008.09 4SV_ that the cash withdrawals made from the bank proved were returned back and accounts pf the assessee diaries maintained by credited in the incriminating Bhangdiya Group: the circumstances of the case ad it (iv) On the facts and in in holding that Sub contract the Id. CITIA) erred law; the fact Iaork Was executed by the assessee ignoeirh 'soexeactamount received from the Bhangdias that the evident from the incriminating was returned to them as executing the Niaries and no expenses were incurred for contract the circumstances of the Case and in (v On the facts and in the very purpose Iaw; the Id. CIT(A) erred in thwarting provisions of the Act by ignoring Of search ad seizure seized incriminating documents: 2007-08 ad 2008-09 be read a5 in assessment years 2 The figures Since the 000/- and Rs.1,56,54,000/- in place of Rs.22,22,000 - Rs.65,90,C all these appeals are common the facts involved in issues as well as that all these appeals be disposed of by both the parties agreed therefore, facts relating to assessment year 2076: this common order on the basis of take in assessment year 2006-07 07 and whatever view this Tribunal may In briel the may be taken in all the assessment years: the same view date of filing the return; returned income, assessment year-wise details, which the orders additions made ad the section under assessed income, were passed are given aS under: Assessed Section Additions AY Date of [Returned S0 . Inconz Idisputed filling of Incone No, Return 2396470 153C [2222000 2006-07 01.11,2013 2007-08 03.03.2014 3 2008-09 [03.03.2014 174470 7215920 153C 6590q0Q [625920 16870390 153C 15654000 11216390 45A _ L"T.A. Nos,136 to 138/Nag/2016 Asstt Yrs.2006-07ra 2008-09 3 The facts of the case; in brief, are that a search & seizure action U/s 132 of the I.T. Act; 1961 was carried out in the Bhangdiya Graup of cases on 19/07/2011. During the course of search conducted at residential and office premises of Shri Mitesh Bhangdiya, certain incriminating papers and documents belonging to the assessee Shri Kesarsingh G Rotele Were found and seized. Therefore; notice dated 06/05/2013 u/s 153C of the LT, Act, 1961 was issued for assessment year 2007-08 ad 2008-09 and served on the assessee on 17/07/2013 requesting him to file the return of income within 30 days from the receipt Qf notice. The assessee had filed the returns of income In response to notice U/s 153C for all the years of the block period. Shri Mitesh Gotumal Bhangdiya is the key person of the group: Shri Mitesh Bhangdiya has two sons namely Shri Kirtikumar M. Bhangdiya and Shri Srikant M Bhangdiya and one daughter Neha, The business of the Bhangdiya group is being looked after by Shri Mitesh Bhangdiva and his two sons: The other key persons associated with the group are Shri Sanjay Rameshchandra Heda; husband of Mitesh Bhangdiya's sister, Smt: Pradnya, resident of Amravati and Smt, Manisha 0. Maniyar, widowed sister of Shri Mitesh Bhangdiya who lives with Bhangdliya family. The main business concerns of the group covered under the search action are a5 under: 1 Ms M.G. Bhangdiya (AERPB 2503 E) (Prop: MGB) converted into a company Ms M.KS. Constro-venture Pvt; (AAHCM 0383 T) Ltd. from 01/04/2011 Mahendra Construction; Prop. Shri Sanjay Heda (MC) (AADPH 7109J) Ms Mahendra Construction & M.G. Bhangdiya (JV) (AANFMS6588) Ms Kirtikumar M Bhangdiya (Prop. KMB); converted into a company MJs MRS Acme Buildcon Pvt Ltd. (AAHCMOB8ZR) from 01.04.2011. (AGYPB1659G) Ms RM. Bhangdiya & Mahendra Construction (JV) (AARFR18ZOC) 2 3 4 5 1T.A. Nus.136 to 138/Nag/2016 @4 Asstt, Yrs;2006-07t0 2008-09 6 7. 8. 9 10_ Ms Shrikant M Bhangdiya (Prop. SMB) (ATCPB1337J) Mitcon Infraproject Pvt: Ltd. (MIPL) (AAGCM1868H) MITZ Infraproject Pvt: Ltd. (AAGCM304ZA) Sakshi Gruh Nirman Pvt. Ltd, (SGNPL) (AAOCS7974G) Balaji Stone Crusher & Infraventure Pvt (AADCBS273C) Ltd_ The Bhangdiya Group has also entered into joint ventures with various other civil contractors; Some of them are as under: 1 Ms. M.G. Bhangdiya Hitbhav Engg, (JV) (AAOFM474SL) Ms. M.G. Bhangdiya & 5. 5. Patil Co (JV) (ABIFS364SL) Ms. Darshan Construction (JV) (AAHFDO65AN) Ms. M,R; Dhoble & RM. Bhangdiya (JV) (AAPFMO62ZB) 2. 3, 4 The nature of the business of the Bhangdiya group primarily is executing civil contracts; The group works mainly for Government departments like Mjs Vidarbha Irrigation Development Corporation and has been engaged in executing various contracts pertaining to the irrigation projects in the state of Maharashtra. During the course af search operations incriminating documents were found and seized from the residential premises of Shrf" Mitesh Bhangdiya Item no_ 1 to 65 of Annexure-B seized from his residence are the diaries containing ledgers, daily cash books and bank books maintained by the Bhangdiya group A statement of Shri Mitesh Bhangdiya was recorded on Qath 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 dlaries marked as B- 1 to B-65 and to explain the contents of these diaries, Shri Mitesh Bhangdiya in his statement recorded has submitted that the entries in the diaries and the ledger pertain to the business receipts and business expenditure: The Assessing Officer in the assessment order has recorded a finding that as per the item na. 1 to 65 of annexure-B; it is apparent that H5z NOn ET.A Nos.136to 138/Nag/2u16 Asstt Yrs.2006-07tn 2008-09 5 the amounts withdrawn from the bank accounts of the subcontractors were 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 on 14/09/2011 in para 6 of the assessment order. The Assessing Officer in the assessment order has also recorded a finding that the seized documents being B-1 to B-65 contain entries of all expenses incurred by the Bhangdiya group in cash from F.Y, 2006-07 onwards and expenses incurred through the bank accounts from F,Y, 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 af account of Shri M.G, Bhangdiya maintained for income-tax purpose do not reflect the true business affairs and are rot at all reliable: The Assessing Officer has als referred to the statement of Shri Kesarsingh G Rotele, the assessee, recorded during the action, The Assessing Officer has reproduced the statement of Shri Kesarsingh G. Rotele in the assessment order, The Assessing Officer, on the basis of the statement of Shri Kesarsingh G. Rotele, concluded that the bank accounts of the assessee were being handled by Shri M.G Bhangdiya group. The Assessing Officer has given a summary of all the bank accounts maintained by the assessee in the tabular form ta show that the cheques deposited by the Bhangdiya group In the bank accounts of the assessee were subsequently withdrawn in cash which were found credited to daily cash book seized. On this basis the Assessing Officer made the protective addition In the hands of the assessee in each of the assessment vear holding that there were no expenses incurred and no contract wOrk was executed by the assessee who, according to the Assessing Officer is merely a name lender to the Bhangdiya group. The assessee came in appeal before the CIT(A) challenging the notice issued u/s 153C as well as 1 735 [T'.A.Nos-136t0 138/Nag/2016 Asstt Yrs:2006.07 to 2008-09 the addition for cash withdrawals from bank on protective basis. The CIT(A) deleted the said addition in all the years. 3.1 At ihle OUls:;i, :ed R. nairic' ill) appliciom before L? 'ncler Rule 27 of the I.TAT. Rules for the assessment year 2007-08 and 2008-09 challenging the validity of the notices issued u/s 153C of the Act as there was no incriminating material belonging to the assessee found in the colirse af search; It was stated 'that the assessments in the case of the assessee were framed ujs 153C read with section 143(3) of the Act; The assessee before the CIT(A) raised ground No. 1 and challenged the validlty of the notices issued UJs 153C of the Act; The CIT(A) has dismissed the ground challenging the validity of the notices Issued u/s 153C and decided all the appeals of the assessee on merit due to which protective addition made in the hands of the assessee stand deleted: Under these facts; the assessee did not file any appeal or the Cross Objections taking the ground as regards to the validity of the notice ufs 153C of the Act It was contended that there is no incriminating material found and seized for the assessment vear 2006-07 to 2011-12 belonging to the assessee in the course of the search at the premises of Shri M.G. Bhangdiya: Attention was drawn towards the satisfaction note which refers to item No, 54 and 8 of Annexure-B and item No. 27 of Annexure-Bl. It was submitted that in the case of the assessee no satisfaction of the Assessing Officer of the person searched is recorded before issue of notice U/s 153C, In absence of non recording of the satisfaction by the Assessing Officer of the person searched, the consequent assessment framed is bad in law and the notice issued u/s 153C is bad in law: Reliance Was placed in this regard on the decision of ITAT Nagpur Bench in the case of Mansi Commodities Ltd: in LT.ALNos 146 to 148/Nag/2014 in which the Tribunal vide order dated 19/12/2016 held that satisfaction for issuance of notice U/s 153C Is to be 456 1.".

4.

Nos.136 tu 138/Nag/2016 Asstt Yrs:zu06-07to 2008-09 recorded by the Assessing Officer of the person searched and in the absence thereof the notice issued u/s 153C is bad in Iaw and consequent assessment Framed Is bad in law. 4 Learned D_ R. on the other hand, vehemently relied on the order of the CIT(A) and contended that the assessee has taken ground No. 1 about the validity of the issuance of notice u/s 153C before the CIT(A) but the assessee did not press this ground before the CIT(A): Even na submissions were made for which our attention was drawn towards page No_ 21 para 12 of the order of CIT(A): Even otherwise on merit the assessee contended that the diary seized during the course of search contains the name of the assessee from whom the cash has been received noted in the diary: Therefore; it cannot be said that incriminating material belonging to the assessee was not found. EL 5 We have heard the rival submissians, carefully considered the same along with the orders of the tax authorities below . Coming to the adjudication and admission of ground taken by the assessee about the validity of the notice issued u/s 153C and consequently cancellation of the assessment framed thereupon; we have gone through Rule 27 of the ITAT Rules. We noted that the said Rule read a5 under: ""The respondent; though he may not have appealted, may support the order appealed against on any of the grounds decided against him: 5.1 On the basis of this Rule, it is apparent that even If the assessee has not filed the appeal against the order of CIT(A); he may support the conclusion of the CIT(A) by taking any ground which has been decided against him: From the facts before US, it is apparent that the assessee has taken the ground regarding the validity f the notice issued Us 153C IT.A, Nos136 to 138/Nag/2016 Asstt Yrs.20(6-07 ta 2008-09 before the CIT(A) a also validity of consequent assessment framed thereupon: We noted that CIT(A) under para 12 of its order dismissed the said ground of the assessee 5 the assessee neither filed any submission nor pressed this ground during the appellate proceedings. Whatever may be the reason, the fact remains that the ground taken by the assessee about the validity Of the notice U/s 153C ad alsa the validity of the consequent assessment framed thereupon stands dismissed by the CIT(A). Therefore; in our opinion, the assessee complied with the condition as stipulated under Rule 27 of the ITAT Rules ad the assessee can always raise this ground in view of Rule 27 before the Tribunal. The Tribunal has the power to adjudicate the ground taken under Rule 27. We accordingly admit the said ground, 5.2 Now coming to the submissions made by both the parties on merit on this ground: We have gone through the provisions of section 153C and noted that this section prior to the amendment made by the Finance Act; 2015 with effect from 01/06/2015 states as under: "Notwithstanding anytlng contained {{7 Seclion 139, section 147, section 148, section 149, section 151 and section 153, where tl1e Assessing Officer is satisfied lhat any money; bullion, jewellery or other valuable article Or thing; or books Of account Or documents, seized or requisitioned, belongs Or belong to 5 person other than the person referred to in section 153A, then the books Of account 0r documents Or assets seized Or requisitioned shall be handed aver to the Assessing Officer having jurisdiction over such other person. This section hnas subsequenlly bezn amencled by Finance Act; 2015 with effect from 01/06/2015. The anended sectior; reads az under; '153C Notwithstanding anything contained in section 139, section [47, section 148, section 149, section 151 and section 153, where the Assessing Officer Is satisfied that KSz 453 !7,4. Nus.136t0 138/Nag/2016 Asstt, Yrs.2006-0}7 Lo 2008-09 (a) Any money, bullion, jewellery or other valuable article or thing, Seized or requisitioned, belongs to; Or (b) Any bppks OF account Or documents, seized Or requisitioned , pertains Or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A then, the books Of account Or documents or assets, seized Or requisitioned shall be handled over to the Assessing Officer having jurisdiction over such other person. The Finance Bill, 2005 i? its nleemaranduri expljining tne Furpose ior which this ameridmenit 1vas made reads a5 under: "Seclicn 153C of the Acl relates t0 as5Ssmenl of iconie of any othei pvrsin, The existing provisions contained in Sub- sectic) (1} Qf the said sxctic J53C prcvide tat {Jols winsunmg divmhing cortanev i; setn} 1.78 stion 147, sc-ction 1 *0, seclijn ]49, Seclon Zo1 &)1 s-ction 153, Where? tx "R2SMnN (fices 1 &lsfion Ha! any {oncy bullion, jexz"ery Cr (Uict Valaty arficc Or Hng Z [cus of GCrOunt C "Tume;s seized & nequisiro einn) to ar; person cther thar the pArso} 'efented {0 in srtikW: 1.534, then tie Jiy c{ nx(Qint JX dnzmeiM Or r}ssel ~iz_d 05 reguisls"Jl 9kn I1? hnndled Over {0 tlie [ssesvinn ('fficer havng Jwrisxictiw (Ter Sch Other Derson aid tnal Assessiny Officer shall procred against each SUCh Olhay persun and Ssue Such Other pizrson notice &and ds585s Or reSSess irCoril Of such Ollier person in accordance with tha provisions Cf secbon 153A, 6 Dispenles hav:' ariscn; aS t0 Le inlerpretalion Df the words "belongs to int respect of a docurnent &5 fvr instance when & given document seized {rom & person is a cOpy Of the originai document; Accordingly , it i5 proposer [0 amerd the aforesaid section t provide Fat nolwithstanding anything contained in1 Sezton} 139, sctiun 147, Section 148, Strtion 149, section 1S1 &rd SEction 153, where the Assessing Officer i5 satislied Wlict any money, bullion, jewellery U olhzr valuable article Ur thirg bclongs to O &ny bpoks Of aCcount Or documents Seized Or requisitioned pertain I0, Or any 4ss Er 1,A, Nos.136 to 138/Nay2016 1419 Asstt: Yrs.2006-07 tr 20108-09 infom;ri' 1tan l tyrn, rplams t, a; Denson; orhe' thon th? pns ninndd [ M Sntiy 1534 {en thgboks of a-couiw 0 i.h ikFWs ir SSiis sv !M .rfihond shaW Oe i3: '. nJ t? Acessno Qnxr X*J /vsrton Ovcr s/C; 4l8 p'CrSin aJ 0wl niS573 {Wficv Sp; prorect -o25. cx: Suci} OUi: Pety"} &iis2-lch) Vti: person noti? and as5e55 Of reassess "xcone Ol Such Other prrson im acrindange with the provisions O;. Se3rtion ]534, Subsequen: Y, thc (BDI hls tyoujght olt { Irrula: NVo 19 &r 2015 dated 27/11/2015 by wich explainatory nute to the pravision cf Finance Act; 2015 were dlscussed, Thie explainatory note In} lhe circular relating to the amended provision cf section 153C read 35 under:

"

39.

Assessrient &l mcme 0f & person Other than thC person X) W{1os? Cdse Seurch} {}a5 been iilated Or book: Cf account other doCunents Qr assets have Deew} requisitin 1et 39.1 Secticn) 153C of ttyc {ncomz-ta3x Act relates to assessment O inCome Of any person other thxn thc pcrson in wliOsa Cixsn_ sard) {WS bi} ccwxuctlr} {J: rckjuvsition has been {bii?, 7112 {oksiM ConlaW}-binsi-ocliw: (!} flhe section 1536 before amendmierl ilale' by tive Acl, provided that notwvithstanding anything connaner {{j SeClion 139, 5C_tian |47 Scton {40, Sectiun 149, seclon 1S1 and section 153 cf the Jmome-tax Act Where tna Assssing Officcr 15 sutisfed that Any Mney, blliion jewellery 0r Otner Kaluable arbch Or txig Tr [3onks Of acrimt &r docimnents seizrd or requisilione} beigng to any person; other than the erson referred t W} SCctionn 1534 Qf flc Incomle-tax Acl Lhen the books Of rClOlni Or documents Or asspts scized Ot requisitioned Shall be handed ov2i to thc Assessing Qificer having jurisdiction Over Such othier person and that Assessing Officer shall proceed against each such other persori and issux notice and JSSiSs Dr raSSess income Of such pther person in accurdance wilh Uie' provisians Of section 153A. 39.2 Disputes hAYE driscT} J5 tJ the interpretation Of the words "Delong [0 {; rexpect pf & documt 26 for instance When 4 given dlocument Jed from 2 persin i3 : COPY Of the original document Accordinaly, section 153C has tzen amended So a5 ITA Nos,136 to 138/Nag/2016 Asstt; Yrs;2006-07 to 2008-09 460 II to provide that notwithstanding anythirg cortained i section 139, section 147, Section 148, section 149, Seclion ISi &nd sertion 153 Or t/a Iricome-tz: Act; wnen thc Assessing Officer i5 Saiistied tnat &ny mnofey, buliton; jebileny or omer valuable artiie Qi Viwg belongs {6, Or Jfy [YCnks &f sunn Qi documents seized Of requsitioned pertzin to, Or any information contained therein, reiates to, anv persun other than the person referrerd to in section 153A af the Income-tax Act; then the buoks 0f account Qr documerts 0 aSsets seized or requisitioned shall be handed over to te Assessing Officer having jurisdictiun Ovar such Oliier person and that Assessing Officer shal proceed against each such other person and iSsue noticc and 2S1055 Or rcassess incoine Of such othzr person in accordance with the provisions of section 153A, 39.3 Applicability: This amendment has laken effect from the Ist day Of June 2015. 5,3 In view Qf this; it iS apparent thal tie amended section 153C are not retrospective and are appiicable with effect fron 01/06/2015 ad not prior tothat: In the Czse of Ehe assessee, search as well as notice u/s 153C has been issued prirl to 01/06/2015. Since in the case of the assessee action uls 153C has been taken by issuing the notice dated 16/07/2013 in consequence Of the search carried out on 19/07/2011 therefore, the amerded provision of section 153C will not apply: As per the provision of section 153C, as was in existence during the impugned period, the condition precedent for issuing natice ujs 153C and assessing Or reassessing the income of 'such other person' is that the moey; bullion, jewellery or other valuable article or thing, books of account or document seized Or requisitioned which belong to such person where documents in question recovered during search proceedings did not belong to the assessee, though there was a reference to the assessee therein; issue of notice to the assessee U/s 153C, in our cpinion, cannot be held to be valid, Kon'ble Delhi High Court in the case of Pepsi Foods Pvt; Ltd. vs, ACIT 52 Taxman.com 220 (Del); we noted has also categorically held that before a LTF.A. Nos.136to 138/Nag/2016 Asstt Yrs:2006-47 ra 2008-09 44 46] notice u/s 153C can be issued, the Assessing Officer is required to arrive at 2 conclusive satisfaction that the document belongs a person other than the searched person; Unless until it is established that the documents seized did not belong to the searched person; the provision of section 153C did not get attracted; This is not disputed that the notice in the case of the assessee u/s 153C has been issued in consequence of search seizure action taken U/s 132 in the Bhangdiya Group from whom premises diaries marked B-1 to B-65 were found and seized: These diaries belong ta the Bhangdiva Group not to the assessee_ Even though the name of the assessee [S mentioned in the diary that does not mean that the diary belong to the assessee_ It may be said that the diary contains the information regarding the assessee_ It; our opiron, even tie amended provison SWQforts th? {ase of the asse55ee. Thie [erisiation has amended secticn 1.53C wlth clfcx; fron 01/06/2315 and widened ir Score Ws 153C by substituting In Piace Qf word 'belcngs Or beloi g' t? wo"d pertain Or pertain to or ay Infurmati cortclec: therein' , Now Urder the anended provision, even) if th ILerial seized does FE beelorig to thc ass2Sse0 but it contains the information relating to the assessee, the proceedinigs initiated uls 153C will be val:d. But this anierded provision; as i5 apparent; i5 applicable From 0i/06/2015. Learned DR before uS even though vehemently relied an the order of the Assessing Officer but could not adduce any cogent material or evidence which may prave that the diaries found and selzed during the course of search in Bhangdiva Group belong to the assessee. Since during the course of search in Bhangdiya Group no material relating to the addition made belonging to the assessee was found therefore; the notice issued u/s 153C, in our opinlon; cannot be regarded to be valid one: Same_view_has _been _taken by Hon'ble Bombay High Court in the case of Bharti Vidyapeeth in ITA Na: 923 of 2012 vide Its order dated 11/09/2014. This fact also finds support as the Revenue has made the 1.T,4. Nos 136 t0 138/Nag/2016 Asstt; Yrs:2006-07 to 2008-09 13 addition in the hands of the assessee in each of the assessment year only on protective basis which proves that the Revenue was also not satisfied with the incriminating material in fact belong to the assessee. On this basis we set aside the order of CIT(A) and hold that the notice issued u/s 153C i5 not valid and in consequence thereupon; the assessments made for assessment years 2007-08 a 2008-09 are annulled; Thus, the ground taken by the assessee under Rule 27 is allawed. 6_ Now coming to the ground taken by the Revenue in all the appeals. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We noted that the Assessing Officer has made the addition in each of the assessment year in the case of the assessee On protective basis in respect of the cash being shown as receipt in the diary seized during the course of search in Bhangdiya Group. When the matter went before the CIT(A); the CIT(A) deleted the said addition in all the assessment years by observing as under: "9.1 Before adjudicating the isSue in hand; it would be relevant to briefly discuss the background of additions made in the case Of Shri Mitesh G. Bhangdiya & Group concerns on the basis of seized evidences as per Annexure-B-1 to B-65 The Ld. AO has made the total addition of Rs.182.52 Crs in the hands Of various concerns of Bhangdiya group in various assessment years falling within the block period on prorata basis for want Of proper correlation between the amounts credited to the seized diaries and the withdrawals made from the bank accounts Of the sub-Contractors; Out pf the total addition 0f Rs.182.52 crores; an addition Of Rs.54.40 Crs. has been made On account Of entries of withdrawals from the bank account of sub-contractors recorded in the seized diaries in proportion to the cheque payments made to the sub- contractors by various entities 0f the Bhangdiya group: The various concerns of the Bhangdiya group had made the payments by account payee cheques to the sub-contractors. The Ld; AO after analyzing the bank accounts Of 21 sub- M I.'T.A. Nos.136t0 138/Nag/2016 Asstt; Yrs.20(6-07 to 2008-09 14 contractors out of total more than 100 sub-contractors has arrived at the conclusion that the cash withdrawn from the accounts Of the subcontractors has been found deposited on the credit side Of the seized diaries marked as Annexure B-1 to 8-65 seized from the premises of Shri Mitesh G. Bhangdiya Thus, the Ld AO had inferred that the Bhangdiya group by adopting such modus-operandi had inflated the expenditure by making cheque Payments ad subsequently withdrawing the cash from the bank accounts of the sub- contractors who; according to the AO, are merely name lenders: The contention of Shri Mitesh Bhangdiya was that the cash withdrawn from the account of the subcontractors which 15 found reflected in the diaries was kept with Late Shri Gotulalji Bhangdiya, father of Shri Mitesh Bhangdiya by such Sub-contractors which was being issued to various sites for the use af subcontractors as per the requirements at the site, Flirther that the money kept by sub-contractors waS returned to them or through any of the intermediaries in the course of handling of cash. The Assessing Officer however; dedlined to agree with the explanation filed by the appellant and has held that all the 21 Sub-contractors examined by him are merely name lenders and the amounts paid to them under the head sub-contracts are bogus payments, therefore; the corresponding receipts by way of withdrawals from the bank accounts Of the subcontractors i5 liable to be added a5 unaccounted income in the hands Of various concerns of Bhangdiya group in various assessment years of the block period in proportion to the cheque payments made by such group concerns: 9.2 In the case of Bhangdiya group; the assessments under section I534 of IT Act 1961 have been framed for assessment years 2006-07 to assessment year 2012-13. The nature of activity being execution of government contracts was the same during all the assessment years In assessment year 2006-07, the nature Of Work executed for Vidarbha Irrigation Development Corporation remains the same a5 in the case Of assessee for subsequent assessment years: The Sub contractors who have executed the works are als0 similar in the various assessment years. 9.3 The A.O, has Observed that the sub contractors in the case of Bhangdiya group are name lenders and bogus. In this A63 41 LT.A.Nos.136to 138/Nag/2016 51 Asstt Yrs:2006-07 Lo 2008-09 444 H6, regard, it i5 significant to mention that the sub contractors inciuding the appellant have been assessed by the ACIT, Central Circle-2 (1), Nagpur who i5 also the A.O. of Bhangdiya group. Notices under section 153C pf [T Act 1961 were issued to subcontractors and returns were submitted by such sub contractors pursuance to receipt of notice under section 153C of IT Act 1961. The assessments have been framed under section 153C of LT: Act 1961 by the same A.O. wherein the income returned In respect of business income shown arising to such sub-contractors out of receipt received from the Bhangdiya group have been accepted. Thus, the A.O. having accepted the business receipts in the hands of sub- contractors including the appellant for determining the income in the cases Of sub-contractors could not have concluded that the payments made by Bhangdiya group to Such sub contractors are bogus 9,4 In view Of the huge variance in the income assessed a5 percentage t0 receipts by the AO and various infirmities a5 emanated from the order of the AO; net profit has been estimated @ 16% Of gross receipts in the hands %f various concerns of the Bhangdiya group in view of the decision of the Hon'ble ITAT, Nagpur Bench; Nagpur in the case of the Bhangdiya group entities in ITA No.268, 269 & 285/Nag/2012 dated 03/04/2013. A sunvey action was conducted On 17/02/2009 in the Bhangdiya Group of cases, wherein the similar situation 35 payments to sub-contractors was disputed and doubted by the AO. The survey action comprises AY 2006-07 to AY 2008-09 which are also forming part of the block periods for the search action conducted on the assessee group On 19,07.2011, The Hon 'ble ITAT; Nagpur Bench; Nagpur after having considered the similar activity of business and deficiencies in subcontract payments found during the survey action conducted On 17.02.2009 has decided the appeals for AY 2006-07 to 2008-09. The Hon'ble ITAT, Nagpur Bench, Nagpur after considering the impounded material has directed the AO to adopt the net profit @ 129 a5 against net profit adopted by AO @ 14%. 9.5 In view of the above facts and circumstances and keeping in view Of various infirmities and various judicial decisions relied upon by the appellant ad to meet ends of justice; to my considered opinion, it was considered fair and I.TA. Nos.136t0 138/Nag/2016 Asstt Yrs;2006-07t0 2Q08-09 reasonable to adopt the net profit 16% On the gross receipts of Rs.579 Crs:; being the turnover Of the various Bhangdiya group concerns for the block period from AY 2007- 08 to AY 2012-13 in the respective years of the block and bring the same to the taxation on the guidelines determined by the Hon ITAT, Nagpur Bench, Nagpur in ITA No. 268, 269 & 285/Nag/2012 vide order dated 07/03/2013 on the similar activities pf business under the Similar circumstances: However; in order to cover up the undisclosed investment Of Rs: 26 crores in immovable properties and the undisclosed investment in jewellery to the tune of Rs. 2.37 crores; enhanced net prafit @ 16% Of total turnover was estimated In the appellate orders dated 31/12/2015 1n the Cases Of Bhangdiya group a5 against net profit Of 12% estimated by Hon 'ble ITAT, 35 the issue Of undisclosed investment in assets was not there before the Hon ble ITAT in the survey appeals; 10. Thus, I have considered the submissions made by the appellant and evidence 0n record. It is seen that the appellant {5 2 sub-contractor &nd executing work for various business entities belonging tp Shri Mitesh Bhangdiya group. The assessee has been regularly assessed: to income tar much prior to the date of search on Shri Mitesh Bhangdiya group On 19/07/2011. In the case of assessee notice has been issued ufs 153C of IT Act 1961 after there being seardh 0n Shri Mitesh Bhagdiya group 19/07/2011 and assessments have been framed for assessment years 2006-07 to 201O-1l & AY. 2012-13 in the month of March, 2014. 10.1 It is seen from the assessment order that the A.O has repraduced the statement recorded u/s 132(4) of Shri Mitesh Bhagdiya ad has referred t0 seized documents inventorized as 8-1 to 65. In the case of Shri Mitesh Bhagdiya , the 4Q has found that the withdrawals made from the bank account of assessee are matching with the credits appearing in the seized documents found at the premises Of Shri Mitesh Bhagdiya. The A.O. has concluded that appellant i5 only name lender of Shri Mitesh Bhagdiya. The A.O, accordingly observed that Shri Mitesh Bhangdiya Is the ultimate beneficiary of the bogus contract payment which laundered through appellant and i disallowed and added in the respective assessments framed in Bhangdiya group. The A.O. further observed that the cash withdrawn from the bank is added as income On H65 1.T.A. Nos.136 to 138/Nag/2016 Asstt. Yrs;2006-07to 2008-09 17 46s protective basis a5 there was no expenses as no contract work was really executed 10.2 The appellant submitted return declaring income from sub-contract work in his regular return as well aS in the return submitted in response to notice issued ufs 153C of I.T. Act 1961. In the return of income assessee has shown income arising out of receipts being amount received from the various business entities of Shri Mitesh Bhagdiya group The perusal Of the assessment order does not indicate any adverse observation with regard to 'regular books of account on the basis Of which income was declared in the return f appellant It i5 seen that the profit and loss account ad balance sheet submitted along with the return of income have not been discredited in the assessment framed in the Case Of the appellant The A.o in fact has assessed income returned without inviting any adverse observation a5 to income declared from sub-contract work: 10.3 It is seen that the withdrawals from the bank account are reflected in the books of account on the basis of which income has been returned: The withdrawals from the bank having already been considered for the purpose of determining income at the hands of appellant 35 shown in the return cannot separately constitute income liable to be assessed In the hands of appellant; The addition made by A.O. is thus unjustified and unsustainable 1 10.4 It is further seen that the A.O. has made abservation in the assessment order to the effect that in the case of Shri Mitesh Bhagdiya group disallowance has been made for various expenses claimed On account Of sub-contract expenses which includes payment to appellant It is settled proposition Of law that the substantive assessment must precede framing of protective assessment: In the facts and circumstances of the case; it is difiicult to rationalize how withdrawals from the bank account cn constitute assessable income much less On protective basis in the Case of the appellant: The AO, has made disallowance of sub-contract expenses being amount paid to appellant while determining the income of business entities of Shri Mitesh Bhagdiya group. Such payments are already considered for income shown in the return ad assessed a5 business receipt in the hands of Hbt LTA Nus.136 to 138/Nag/2016 Asstt: Yrs:2006-07 lo} 2008-09 Touo the appellant Addition of such amount again on protective basis defies logic: do not find any rationale to make Such protective assessment Of the withdrawals made from bank account of assessee in the hands 0f assessee himself The income assessed on protective basis therefore, is held to be unjustified and unsustainable on this count a5 well: 10.5 The gross receipts In the case Of the appellant a5 well as returned income along with the percentage of income has been tabulated by the appellant for various assessment years and the same is reproduced herein under: Shri Kesarsingh G. Rotele TURNOVER RETURNED INCOME AND ASSESSED INCOME AY 2006-07 to 2008-09 ASSESSMENT YCAR JCOj-(7 7037-(x 20n8-09 GROSS RFCEID S 25,75,537 35,47,499 1,75,28,960 RFTURNFD} INCOM: 1,74,47c 6,25,920 17,16,390 w; OF GKQSS RLCEIPTS 773 6.5890 6.4440 ADDIIONS UJNDER S1-CTICN 1532 22,22,Q00 65,51},Q0 (56,54,000 ASSESSED} TNCOMF 23,36,4/0 12,15,970 1,68,70,300 "0F GoSS RFCEDI; 93,054 75.58"_ 25.2494 10.6 It is seen from the above that the income returned has been accepted in the case Of appellant without inviting ay adverse Inference ad considering the addition made in the hands of assessee; the income assessed a5 percentage of gross receipt clearly reflected absurdity in the action Of the Id, A.0,, while determining the income in the hands of assessee The addition made by Id A,O. thus, i5 unsustainable for the aforesaid reason also. Therefore; the protective addition made in the hands Of the appellant is directed to be deleted in all the years of the block period 6.f We noted that the CIT(A) has given the finding of fact This is a fact that the substantive addition has been made in the hands of the assessee L.T.

4.

Nos,136 tu 138/Nag/2O16 19 Kee Asstt: Yrs;2006-07 to 2008-09 in respect of the income received by the assessee as sub-contractor in each of the assessment years. The withdrawal made by the assessee from his bank account in which the deposit of the sub-contract receipts has been accepted arises out of the said deposit; Such withdrawal, in our opinion; by no stretch of imagination can constitute assessable income in the hands of the assessee. The Assessing Officer while determining the taxable Of the business entities of the Bhangdiva Group made the income Of sub-contract expenses being the amount paid to the disallowance assessee but these payments were already considered in income shown in the return and receipt a5 business receipt in the hands of the assessee_ Addition of such amount again on protective basis in the hands of the does have any leg to stand: We, therefore, do not find assessee any illegality Or infirmity in the order of the CIT(A) which warrants our Interference The CIT(A) has rightly deleted the addition in each of the assessment vear. We accordingly confirm the Order of CIT(A) Thus, the by the Revenue in each of the assessment year stand appeal flled dismtssed: 7 In the result; all the appeals of the Revenue stand dismissed: (Order pronounced in the open court on 23/06/2017 _ (AMARJIT SINGH) P. K, BANSAL Judicial Member Vice President Dated:23/06/2017 *Singh Copy of_theorder forwarded tq : 1 2 3 4 5_ The Appellant The Respondent Concerned CIT The CIT(A) D.R,, 6vn7le BAZIO #EMett INCO tETNGSI-Regiatr@ IJUMRL NASrUR Belver, MAUUr, 0

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