A,C.I.T. CENTRAL CIR.- 2(1) vs. SHRI ATUL S. LOTHE, CHIMUR

Nos[4 to 149/Nag/2016 Asstt, Yrs:2O0-O8to 2012-13 KS? IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P_ K. BANSAL VICE PRESIOENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER LLA Nos144t0 149/Nag/2016 Asstt_Yrs_.2Q07-08to 2012-13 ACIT; Central Circle-2(1); Nagpur. Vs. Shri Atul $. Lothe, Gandhi Ward, Chimur, Distt. Chandrapur. PAN:ACDPL 1427 H (Respondent} (Appellant) Appellant by Respondent by Date of hearing Date of pronouncement Shri A R. Ninave Shri K. P Deiani 20/06/2017 23/06/2017 0 RDER PER PKBANSALVP AII these appeals have been filed by the Revenue against the common order of CIT(A) dated 18/01/2016 by taking the following common grounds of appeal except change in the figure: "(1) Whether 0n the facts a in the circumstances of the case; the Id. CIT(A) was right in deleting the addition of Rs.38,48,000/- made on protective basis ? Whether On the facts &nd in the circumstances of the case; the Id, CIT(A) was justified in deleting the addition of Rs.38,48,000/- without appreciating the fact that the assessee has not executed any sub contract work ad was only name lender ? (Ii)) On the facts and in the circumstances Of the case &d in law, the Id. CITTA) erred in ignoring the evidences found in the incriminating diaries which conclusively 3 9 3jz 1,T',410s.1+44f) 149/Nag/2016 Asstt. Yrs:200)?-08to 2012-13 proved that the cash withdrawals made fram the bank accounts Of the assessee were returned back and credited In the incriminating diaries maintained by Bhangdiya Group (iv} On the facts and in the circumstances Of the case and in Iaw, the Id_ CIT(A} erred in holding that sub contract work was executed by the assessee Ignoring the fact that the contract amount received from the Bhangdiyas was returned to them as evident from the incriminating diaries ad no expenses were incurred for executing the contract: On the facts and in the circumstances af the case and in Iaw, the Id. CIT(A) erred in thwarting the very purpase of search and seizure provisions of the Act by ignoring seized incriminating documents; 2 The figures in assessment years 2008-09, 2009-10, 2010-11, 2011- 12 and 2012-13 be read as Rs.2,50,000/-, Rs.14,82,955/-, Rs.14,83,000/-, Rs.15,00,000/- an Rs.24,00,000/- in place of Rs.38,48,000/- Since the issues 35 well as the facts involved in all these appeals aFe common therefore; both the parties agreed that all these appeals be disposed of by this common order on the basis of facts relating to assessment year 2007- 08 and whatever view this Tribunal may take in assessment year 2007-08, the same view may be taken in all the assessment years; In brief, the assessment vear-wise detalls, date of filing the return, returned income; assessed income; additions made and the section under which the orders were passed are given a5 under: Sr Nolay Date of filing of Returned Return Income Assessed Income Section Additions disputed 2007-08 10.09.2013 11644D 3964440 153C 3848000 2008-09 10.09.2013 149894 399894 153C 250000 RPPE 4 1,T.A, Nos,144 fu 149/N3g/2016 Asstt, Yrs;2007-08 tn 2012.13 ZSk 2009 I0 04.11,2013 305830 1788785 153C 1482955 4 2010-11 01.11.2013 323370 1806370 153C 1483000 5 2011-12 01,11,2013 433570 1933570 153C 15QdQQd 2012-13 01.11.2013 159480 2559480 143 (3} 24000Q0 3 The facts of the case; in brief; are that & search & seizure action u/s 132 of the I.T. Act; 1961 was carried out in the Bhangdiya Group of cases on 19/07/2011, During the couFse of search conducted at residential and office premises of Shri Mitesh Bhangdiya, certain incriminating papers and documents belonging to the assessee Shri Atul $. Lodhe were found and seized Therefore, notice dated 16/07/2013 u/s. 153C of the I.T. Act; 1961 was issued for the assessment year 2007-08 to 2011-12 and served on the assessee on 17/07/2013 requesting him to file the return of income within 30 days from the receipt of notice: The assessee vide letter dated 10/09/2013 has raised an objection to the notice issued ufs 153C which is reproduced in para 3 of the assessment order. The Assessing Officer has dealt with the objection raised by the assessee in para 4 of the assessment order by holding that though the search action u/s. 132(1) was conducted In the case of Bhangdiya group but there is sufficient evidence available in the seized material which is incriminating and relates to the assessee: 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 Bhangdlya is the key person of the group, Shri Mitesh Bhangdiya has two sons namely Shri Kirtikumar M. Bhangdiva and Shri Srikant M. Bhangdiya and one daughter Neha The business f the Bhangdiya group Is being looked after by Shri Mitesh Bhangdiya 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. 355 LT. Nos,d44 t( ] 49/N2p/2016 Asstt, Yrs;20nz-O8 to 2012-13 Maniyar, widowed sister of Shri Mitesh Bhangdiya who lives with Bhangdiya 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.K.S. Constro-venture Pvt; (AAHCM 0383 T} Ltd. from 01/04/2011 Mahendra Construction, Prop: Shri Sanjay Heda (MC) (AADPH 7109]) 3 Ms Mahendra Construction MG. Bhangdiya (JV) (AANFM56S8B) 4 Ms Kirtikumar M Bhangdiya (Prop. KMB}; converted into a company Mfs MRS Acre Buildcon Pvt. Ltd. (AAHCMO3BZR) from 01.04.2011, (AGYPBI659G) 5 Ms R.M: Bhangdiya & Mahendra Constructian (JV) (AARFR18ZOC) 6 Ms Shrikant M Bhangdiya (Prop. SMB) (ATCPB1337J) 7 Mitcon Infraproject Pvt: Ltd. (MIPL) (AAGCM1868H) 8 MITZ Infraproject Pvt. Ltd, (AAGCM304ZA) 9 Sakshi Gruh Nirman Pvt Ltd (SGNPL) (AAOCS7974G) 10_ Balaji Stone Crusher Infraventure Pvt. Ltd. (AADCBS273C) 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 & S.s. Patil & Co. (JV) (ABIFS3645L) Ms, Darshan Construction (JV) (AAHFDO6SAN) Ms, M.R. Dhoble & RM. Bhangdiya (JV) (AAPFMO6ZZB) 2 3 4 The nature of the business 0f the Bhangdiya group primarily is executing civil contracts, The group works mainly for Government departments like Ms 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 of search operations incriminating documents were found and seized from the residential premises of Shri Qhapps 1.T.

Nos [M ta [49/Nag/2016 Asstt Yrs-20n7-07to 2012-13 Mitesh Blangdiya; Item no_ 1 to 65 of Annexure-B seized fram his residence are the diaries containing ledgers, dally cash books and bank books maintained by the Bhangdiya grOup_ A statement of Shri Mitesh Bhangdiva was recorded on oath on 20.07.2011. In his sworn statement recorded during the course 0f search action, Shri Mitesh Bhangdiva was confronted with the entries borne out from the selzed diaries marked as B- 1 to B-65 and to explain the contents of these diaries, Shri Mitesh Bhangdiva 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 3 finding that as per the item no. 1 to 65 of annexure-B; it is apparent that 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 0 14/09/2011 in para 6 of the assessment order. The Assessing Officer in the assessment arder has also recorded a finding that the seized documents being B-I to B-65 contain entries Of all expenses incurred by the Bhangdiva 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 of account of Shri M.G. Bhangdiya maintained for income-tax purpose do not reflect the true business affairs and are not at all reliable The Assessing Officer has also referred to the statement of Shri Atul 5. Lodhe, the assessee, recorded during the action. The Assessing Officer has reproduced the statement of Shri Atul $. Lodhe in the assessment order. The Assessing Officer , On the basis of the statement of Shri Atul S. Lodhe, conciuded that the bank accounts of the AP rES # 356 L'RA Nos_Idfto 149/Nag/Z0l6 Asstt. Yrs 2007-7to 2012-13 assessee were being handled by Shri M,G. Bhangdiya group: The Assessing Officer has given a suummary of all the bank accounts maintained by the assessee in the tabular form to show that the cheques deposited by the Bhangdiya group in the bank accounts Qf the assessee were subsequently withdrawn in cash which were found credited to daily cash book seized, On this pasis the Assessing Officer made the protective addition in the hands of the assessee in each of the assessment year 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 the addition for cash withdrawals from bank Qn protective basis. The CIT(A) deleted the said addition in all the years; 3.1 A: tik Xcl "Ti..:~lv" b.eigie Lic muel Rule 27 of the L.T.A.T. Rules far each of the assessment year 2007-08 to 2011-12 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 course pf search; It was stated that the assessments in the case of the assessee were framed ufs 153C read with section 143(3) of the Act; The assessee before the CIT(A) raised ground No. 1 and challenged the validity of the notices issued u/s 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 o 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 Ws 153C of the Act; It was contended that there is no incriminating material found and seized for the assessment year 2006-07 to 2011-12 belonging to the assessee in the m 357 1T.

Nos.14 to 149/N2g/2016 Asstt; Yrs.20n7-Ofto 2012-13 352 course of the searrh at the premises of Shri M,G. Bhangdiya. Attention was drawn towards the satisfaction note which refers to item No. 54 and 8 0f Annexure-B and item No, 27 of Annexure-Bl. Et was submitted that in the case Qf 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 Iaw Reliance was placed in this regard on the decision of ITAT Nagpur Bench in the case of Mansi Commodities Ltd, in ITANos: 146 to 148/Nag/2014 in which the Tribunal vide order dated 19/12/2016 held that satisfaction for issuance of notice uls 153C Is to be recorded by the Assessing Officer of the person searched and in the absence thereof the notice issued u/s 153C i5 bad in law and consequent assessment framed is bad in Iaw, 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 no submissians were made for which our attention was drawn towards page No. 2I 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 Wham the cash has been received noted in the diary. Therefore; it cannot be said that incriminating material belonging to the assessee was not found. m 5 We have heard the rival submissions, 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 359 L'F.A Nus.144t0 149/Nag/2016 Assll, Yrs:2Z007-017 ta 2012-13 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 as under: "The respondent; though he may not have appealed, may support the order appealed against on ay 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 CITA) by taking ay ground which has been decided against him From the facts before US, it Is apparent that the assessee has ground regarding the validity of the notice issued ufs 153C taken the before the CIT(A) and 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 s the assessee neither filed ay 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 and also the validity of the consequent assessment framed thereupon stands dismissed by the CIT(A) Therefore, in opinion, the assessee complied with the condition a5 stipulated our under Rule 27 of the ITAT Rules and the assessee can always raise this ground in view of Rule 27 before the Tribunal. The Tribunal has the pawer to adjudicate the ground taken under Rule 27. We accordingly admit the said ground. PE 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: I.'T.A.Nos144tu 149/Nag/2016 Asstt Yrs;20u7-( to 2012-13 3/e "Nutwuiranding anything contained in Sectin 139, scction 147 #tlfcwn} 148, sectijn [49, secli n 151 anj section 153, w}i &' Ut Assessing Officzr '5 slisfjed In3l any monCy; Dullion, jewellery pr Other Valuatye article or thing, or bocks of eZCCC{ Or docuimvts; scized Qr requisitioned, belongs Qr brlnly [O 4 person nther tiw:" {le person referred {{} Ffv section 1534 then the books of account Or docurments OF asscts Seized Or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such cther person. This sectioii ha, $uDsvently bex;i E1Kis:Wy if}en & 40,. 21i5 with: effect irom) (]/c:;2015. Txaenale ston:wds QsVne: "153C Notwithstanding aything contained in section 139, section 147, section 148, section 149, section 151 ad section 153, where the Assessing Officer is satisfied that (a) Any money, bullion jewellery or other valuable article Or thing: seized or requisitioned, belongs to; Or (b) Any books of account Or documents; seized Or requisitioned, pertains or pertaini to, Or any information contained therein, relates to, Talap PE 4 9 a person other than the person referred to in section 1534, then, the books 0f account Or documents or assets, seized Or requisitioned shall be handled over to the Assessing Officer having jurisdiction over such other person. The F.n?nc' F 205 ils menorancluni expknining] te FW-pos? {~ which this ITIlclren w0; Medetend; A2"{ks: SCzlz' I0n j Uja A naty I:SStssmewi j; {RCzm" O/ 2ny Ouer Urjcn. Tiia cxistimc provsions Cont: mn S8- Sectinn (Y) cf {{ie sai Section 153C preii de Uwa rtw lh stamita &ny'thing Cce whw { scrmaa:} XXV Srticn 147, Sx8{"W: 14o3 ATi0] 145 Jcklin: 151 and s&2i"; J53 [V34; 6 Rj ~v s}4 O;rer 1 sovnw tljt #:X {pXa bn0: Kxww } 1" Ql'c; Valann ? ank 0tm"boksaf {rcoln i/ :Jcwtizkws qm 1* ruuswiner henn] t 4 pCrsmn: Other than the {rsn rxtcrred 0 in secton 153A, then Iie buuks 0F aCcOlnt (r" (ucu}enis Ji zSSets S2z-d Or 2 LTA Nos,144 t0 149 /Nag/2016 Asstt Yrs:2007-08 to 2012-13 Ii rctjii-'ved shall be handed Qvr to the Assessing Officer Imavingj jiisdiction Over such other person ad that Assessing (fno shall proceed against eadh such other person and issue such other person notice &d assess or reassess income 0f Such other person in accordance with the provisions of section 1534. Disputes have arisen; a5 to the interpretation Of the words "belongs to fn respect of a document a5 for instance when & given riocument seized from a person is a COPY of the ariginal document Accordingly it is proposed to amend the aforesaid section to provide that notwithstanding anything contained in section 139, Section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer i5 Satisfied that any money; bullion; jewellery or other valuable thing belongs to, Or any books of account Qr article Or documents Seized Or requisitioned pertain to; Or any information contained therein relates to, any person, other than the person referred to in section 153A, then tte books of account or documents or assets seized or requisitioned shall PE be handed over to the Assessing Officer having jurisdiction Such other person and that Assessing Officer shali over proceed against each such other person ad issue such other person notice and assess Or reassess income of such pther person in accordance with the provisions of section 153A. the CBDT has brought out Circular No: 19 of 2015 dated Subsequently , which explainatory note to the provision af Finance Act, 27/11/2015 by 2015 were discussed. The explainatory note in the circular relating to the amended provision of section 153C read as under: '

Assessment of income of a person other than the person in whose case search has been initiated or books Of account other documents or assets have been requisitioned. 1; Section 153C Of the Income-tax Act relates to 39.1 assessment of income of any person other than the person In case search has been conducted 0r requisition has whase been made. The provisions contained in sub-section (1) of the section 153C, before amendment made by the Act; provided natwithstanding anything contained in section 139 that LT,A, Nos.144 t0 149/Nag/2016 Asstt Yrs.2007-Q8 to 2012-13 762 section 148, section 149, section 150 and section be Income-tax Act; where tiie Assessing Officer 15 { 5x" thjt any money, bulliori; jewellcry %r other valuable artici= Q1" thing or books Of account or dlocumenls s2ized 0 requisitioned belong to any person; other ttan the person in Siction! 1534 of the Incomne-tax Act; them the referec ta af account Or documents Or assets seized Or bpoks requisitioned shall be handed over to the Assessing Ofcer having jurisdiction over such other person and that Assessing Officer shal proceed against each such other person and issue notice and asse55 Or reasseSs incOme Qf such other person in accordance with tha' provisions Of section 1534. 39.2 Disputes have arisen &s to the interpretation of the words If} respect of a document as for instance when 9 "belong to given gocument Seized from a perSon is & COpY Of the Original document: Accordingly, section 153C has been amended so 35 to providz that notwithstanding aything contained in sectior section 147, section 148, section 149, section 151 ad 139, 153 pf tiz Inconie-tax Act; whlera [he Asscssing section Officer is 5atisfied thal any money, bullion jewellery Or other valuable article or thing belongs to, 0r any books cf account O docurents selzed Or requisitioned pertain tO, QF any information cuntained therein, relates to, an Verson; other than thc' person referred t0 in sectian 1534 f the Inconie-tax Act, then the books Of accounl or documents Or assets seized Or requisitioncd shail be handed over to the Assessing Oficer having jurisdiction over Such other person and Hiat Assessing Officer shall proceed against each such other person and issue notice and 3SS2S5 &r reassess income Of such other person in accordance with the provisions Of section 153A 39,3 Applicability:_This amendment has taken effect from the Ist day of June, 2015. 5.,3 In view of this, it {s apparent that the amended section 153C are not applicable with effect from 01/06/2015 ad not prior retraspective and are to that "In thie case of the assessee, search as well 35 notice u/s 153C has been issued prior to 01/06/2015, Since in the case 0f the assessee action by issuing the notice dated 16/07/2013 in u/s 153C has been taken IT.A.Nos.144 to 149 '/Nag/z016 Asstt: Yrs:2007-08 to 2012-13 out On} 19/07/2011 therefore, the consequence of the search carried As per the provision of amended provision of section 153C will not apply: existence during the impugned period, the section 153C, as was in notice uls 153C and assessing Or condition precedent for issuing incore of 'such other person' is that the money, bullion, reassessing the other valuable article or thing; books of account or document jewellery or seized or requisitioned which belong to such person where documents in search proceedings did not belong to the question recovered during there was a refererice to the assessee therein; issue of assessee, though u/s 153C, in our opinion; cannot be held to be valid: notice to the assessee Court in the case of Pepsi Foods Pvt Ltd vs ACIT 52 Hon'ble Delhi High we noted has also categoricaliy held that before a Taxman,com 220 (Del); be issued; the Assessing Officer is required to arrive at notice Ws 153C can satisfaction that the document belongs a person other than a conclusive person: Unless until it is estabiished that the documents the searched did not belong to the searched person, the provision of section 153C seized This is not disputed that the notice in the case of the Idid not get attracted; us 153C has been issued in consequence of search & seizure assessee taken u/s 132 in the Bhangdiya Group from whom premises diaries. action B-65 were found and seized. These diaries belong to the marked B-1 to Even though the name cf the Bhangdiya Group not to the assessee_ the diary that does not Mean that the diary assessee is mentioned in It be said that the diary contains the belong to the assessee; may In our opinion, even the amended information regarding the assessee: the case of lhe assessee The Legislation has amended provision supports J53Cwith effect from 01/06/2015 and widened the scope Us 153C section- or belong' to word 'pertain or by substituting in place of word 'belongs information contained therein' . Now under the amended pertain to or any material seized does not belong to the assessee but it provision, even if the P 1,TA Nos.l44to 149/Nag/2016 13 Zsk Assit Yrs:2007-08 to 2012-13 virmation relating to the assessee; the proceedings initlated conEzmm; Iu: i this amended provision, as is apparent; is u/s 1530 Wil be valid: But Learned DR before us even though appiicab ble From 01/06/2015 the Assessing Officer but could not vehemently relied on the order of adduce ay cogent material Or evidence which may prove that the diaries found and seized during the course of search in Bhangdiya Group belong to Since during the course af search in Bhangdiva Group no the assessee; to the addition made belonging to the assessee was found material relating the notice issued us 153C, in our opinion, cannot be regarded to therefore, Same view_has_been_taken by Hon'ble Bombay High Court in be valid one: the case of Bharti Vidyapeeth in ITA No. 923 of 2012 vide its order dated 11/09/2014. This fact also finds support &s the Revenue has made the in the hands of the assessee in each of the assessment year only additian which proves that the Revenue was also not satisfied on protective basis material in fact belong to the assessee: On this basis with the incriminating order of CIT(A) and hold that the notice issued U/s 153C is we set aside the thereupon, the assessments made for not valid and in consequence APpE to 2011-12 are anfulled: Thus; the ground assessment vears 2007-08 taken by the assessee under Rule 27 is allowed ground taken by the Revenue in ali the appeals: 6. Now coming to the heard the rival submissions, carefully considered the same along We have orders of the tax authorities below: We nated that the Assessing with the Officer has made the addition in each of the assessment year in the case of protective basis In respect of the cash being shown as the assessee on in the diary seized during the course of search in Bhangdiya Group: receipt went before the CIT(A) the CIT(A) deleted the said When the matter addition in all the assessment years by observing a5 under; 1,.A4. Nos,14410 149/Nag/2016 Asstt. Yrs.2007-08 to 2012-13 265 59.1 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 0n the basis of seized evidences &5 per Annexure-B-1 to B-65. The Ld, AQ 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 0n prorata basis for want f proper correlation between the amounts credited to the seized diarles and the withdrawals made from the bank accounts 0r the Sub-contractors. Out of the total addition of 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 Of the Bhangdiya group: The various concerns of the Bhangdiya group had made the payments by account payee cheques to the sub-contractors, The Ld AQ after analyzing the bank accounts of 21 sub - contractors out f 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-l to B-65 seized fram the premises of Shri Mitesh G. Bhangdiya. Thus, the Ld, AO had inferred that the Bhangdiya group by adopting Such modus-pperandi had inflated the expenditure by making cheque payments & 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 subcantractors which is 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 0f subcontractors as per the requirements at the site Further 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, declined 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 Iiable t be added 35 PPEL: LZ.A, Nns.144 to 149/Nag/20j6 Asstt Yrs;2007-08 to 2012-13 (366 in the hands Of various concerns Of unaccounted income 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 153A Of IT Act 1961 have been framed for section assessment years 2006-07 to assessment year 2012-13. The nature of activity being executian of government contracts was the Same during all the assessment years In assessment the nature Of work executed for Vidarbha year 2006-07, '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 also 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 regard, it i5 significant to mention that the Sub contractors appellant have been assessed by the ACHT; including the Central Circle-Z (1), Nagpur who is also the A.O, of Bhangdiva Notices under section 153C of I.T Act 1961 were SsQud tNotutcontracorseand returns were submitted by such Sub contractors pursuance to receipt of notice under section Act 1961. The assessments have been framed 153C Of IT under Section 153C of LT. Act 1961 bv the same A.O. wherein income returned in respect of business income shown the arising to Such Sub-contractors out of receipt received from have been accepted. Thus; the A.0. the Bhangdiya group 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 made by Bhangdiya group to such sub the payments contractors are bogus 9.4 In view of the huge Variance In the income assessed a5 percentage to receipts by the AO ad various infirmities a5 the order of the AO, net profit has been emanated from estimated @ 16% of gross receipts in the hands of various concerns of the Bhangdiya group in view of the decision of the Bench; Nagpur in the case of the Hon ble ITAT; Nagpur Bhangdiya group entities in ITA No.268, 269 & 285/Nag/2012 dated 03/04/2013. A Survey action was conducted On 3 # #TANos,144 to 149/Nag/2016 Asstt. Yrs-2010)7-08 tq 2042-13 cje 17/02/2009 in the Bhangdiya Group of cases; wherein the similar situation aS 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 pf the biock 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 %f business and deficiencies in subcontract payments found during the action conducted On 17.02.2009 has decided the Survey 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 @ 12% a5 against net profit adopted by AO @ 14%. 9.5 In view Of the above facts ad 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 reasonable to adopt the net profit @ 1626 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 of 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 profit @ 16% of total turnover was estimated in the appellate orders dated 31/12/2015 in the cases Of Bhangdiya group 25 against net profit of 12% estimated by Hon ble ITAT, as the issue of undisclosed investment In assets was not there before the Honble ITAT in the Survey appeals; 10. Thus, 1 have considered the submissions made by the appellant and evidence On record It Is seen that the appellant is a sub-contractor ad executing work for various business entities belonging to Shri Mitesh Bhangdiya group. The assessee ha5 been regularly assessed to income tax 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 search 0n Shri 361 3 LT.A.Nos,144 to 144/Nag/2016 07 Asstt Yrs:2007-08to 2012-13 368 732k4k Mitesh Bhagdiya group 19/07/2011 ad_assessments have been framed for assessment years 2006-07 to 201O-1L & A.Y 2012-13 in the month of March, 2014. 10.1 It is seen from the assessment order that the AO: has reproduced the statement recorded u/s 13204) of Shri Mitesh Bhagdiya and has referred to seized documents inventorized 35 B-] to 65. In the case of Shri Mitesh Bhagdiya , the AO has found that the withdrawals made from the bank account of assessee are matching with the credits appearing in the documents found at the premises of Shri Mitesh seized Bhagdiya. The A.O. has concluded that appellant Is only name {ender of Shri Mitesh Bhagdiya. The A.0. accordingly observed that Shri Mitesh Bhangdiya is the ultimate beneficiary of the bogus contract payment Which laundered through appellant and is disallowed ad added in the respective assessments framed in Bhangdiya group, The A.O. further observed that the cash withdrawn from the bank is added 35 income Ox} protective basis 35 there Was no expenses &5 no contract work was really executed: 10.2 The appellant submitted return declaring Income from Sub-contract work in his regular return 25 well a5 in the return to notice issued ujs 153C 0f IT; Act submitted in response 1961. In the return of income assessee has shown income arising out of receipts being amount received from tte 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 retumn of appellant: It I5 seen that the profit and IoSS account ad balance sheet submitted along with the return af income have not been discredited in the assessment framed in the case of the The A.O. in fact has assessed income retumed appellant without inviting any adverse observation 35 to income declared from sub-contract work Ap?E_ 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 been considered for the purpose of having already determining income at the hands of appellant a5 Shown in the cannot separately constitute income liable to be return L."I.A. Nos./4440 149/Nag/2016 Asstt Yrs.2007-08 to 2012-13 Jai the hands of appellant _ The addition made by A,O. assessed in i5 thus unjustified and unsustainable further seen that the A.O. has made observation in 10.4 It Is the effect that in the case of Shri the assessment order ta disallowance has been made for Mitesh Bhagdiya group claimed On account Qf sub-contract variOus expenses appellant. It is settled expenses which Includes payment to the substantive assessment must proposition Of law that assessment; In the facts and precede framing of protective it is difficult to rationalize how circumstances of the case; ciithdrawaigefrom the bank account can constitute assessabie in the case Of the income much less On protective . basis has made disallowance of sub-contract appellant The A.0. paid to appellant while determining expenses being amount entities of Shri Mitesh Bhagdiya group: the income of business for income shown In Such payments are already considered in the hands of the retum and assessed as business receipt Addition of such amount again an protective the appellant; I do not find any rationale t make such basis defies logic: withdrawals made from bank protective assessment of the in the hands of assessee himself: The account of assessee basis therefore; is held to be income assessed on protective unjustified and unsustainable on this count a5 Well appellant as well 10.5 The gross receipts in the case of the 35 returned income along with the percentage of income has appellant for various assessment years been tabulated by the and the same is reproduced herein under: Shri Atul S. Lodhe TURNOVER, RETURNED INCOME AND ASSESSED INCOME AY 2006-07 TO 2011-12, 2008-09 2009.10 2010-11 2011-12 2012-13 ASSESSMENT YEAR 2007-08 38,95,547 49,45,440 NO RECEIPT 50,45,378 40,22,5 920 /37,46,892 [GROSS RECEIPTS 3,23,370 4,33,570 1,59,480 1, 16, 440 1,49,892 73,05,830 RETURNED INCOME [8.305 8.770 NO RECEIPT 2.319 3.7306 8.169 06 OF GROSS RECEIPTS LTA, Nus.144 to 149/Nag/2016 Asstt Yrs.2007.08 to 2012-13 3e 14,83,0Q0 15,00,000 24,00,000 38,48,QQ 2,50,0Q0 14,82,955 ADDITIONS UNDER SECTION 153C 18,06,370 19,33,570 25,59,480 39,E 64,440 3,99,892 17,88,785 ASSESSED IMCOME 46,3790 39.109: NQ RECEIPT 78.58"0 9,9490 47.7400 96 OF GROSS RECEIPTS 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 and considering the addition made in the the income assessed a5 percentage of hands Of assessee; receipt clearly reflected absurdity in the action of the Id, gross while determining the income in the hands of assessee Ahe additior eteder byg_d.eA.6. thus, is unsustainable for the The aforesaid reason a/s0. Therefore, the protective addition made in the hands Of the appellant is directed to be deleted in all the years of the block period: that the CIT(A) has given the finding 0f fact: This is a fact 6.1 We noted that the substantive addition has been made in the hands of the assessee of the income received by the assessee as sub-contractor in each in respect The withdrawal made by the assessee from his of the assessment years: in which the deposit of the sub-contract receipts has been bank account Such withdrawal, in our opinion; eccepted arises out of the said deposit: can constitute assessable income in the hands no stretch of imagination The Assessing Officer while determining the taxable of the assessee; of the Bhangdiya Group made the income of the business entities the amount paid to the disallowance of sub-contract expenses being assessee but these payments were already considered in income shown in and receipt &s business receipt in the hands of the assessee: the return of such amount again on protective basis in the hands of the Addition to stand: We; therefore, do not find any assessee does have any leg of the CIT(A) which warrarts our illegality Or infirmity in the order AP 1 37 0 I.1*A.Nos.144{0 149/Nag/2u16 Asstt Yrs;2007 08to 20lz-13 643 #u4 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 appeal filed by the Revenue in each of the assessment year stand dismissed: 7 In the result, all the appeals of the Revenue stand dismissed. (Order pronounced in the open court 0n 23/06/2017 Sd/_ Sd]_ (AMARJIT SINGH) Judicial Member P_K BANSAL ) Vice President Dated:23/06/2017 Singh PEL Copyofthe order forwarded to 1 2 3 4 5 The Appellant The Respondent Concerned CIT The CIT(A) D,R,, (14044 Gte 017S ~JEi- G} Mimaea ~ASs06 Repistar _ AIBUNRI #A3PVA: Dmi