A,C.I.T. CENTRAL CIR.- 2(1), NAGPUR vs. SHRI FIROZKHAN W. PATHAN, CHIMUR

Ms M.G. Bhangdiya Ms M.K.S, Constro-venture Pvt; converted into a company (AAHCM 0383 T) Ltd, from 01/04/2011 Prop: Shri Sanjay Heda (MC) 2 Mahendra Canstruction; (AADPH 7109J) Construction & MG: Bhangdiya (JV) 3 MJs Mahendra MSNKiIBBr M Bhangdiya (Prop: KMBJ; converted into a 4 M/s Kirtikumar Buildcon Pvt. Ltd, (AAHCMO38ZR) company Ms MRS Acme from 01.04,2011. (AGYPB16SIG) & Mahendra Construction (JV) 5 Ms RM, Bhangdiya Ws STrGzcy Bhangdilya (Prog;, SMB) (ATCPB13Z7I) 6 Mitcon Infraproject Pvt Ltd. (MIPL) (AAGCM1868H) 8 MITZ Infraproject Pvt; Ltd. (AAGCM3O4ZA) Sakshi Gruh Nirman Pvt; Lta (SGNPL) (AAOCS7974G) 9 & Infraventure Pvt. Ltd; 10 Balaji Stone Crusher (AADCB5273C) I.".4, Nos.113 & 114/Nag/2016 EAS Asstt, Yrs.ZQ10-11 & 20 11-12 14/ Aipl45 The Bhangdiya Group has also entered inta joint ventures with various other civil contractors, Some of them are as under: 1 Ms. M.G. Bhangdiya Hitbhav Engg: (JV) (AAOFM474SL) Ws: MG. Bhangdiya & S.s. Patil & Co. (JV) (ABIFS3645L) M/s: Darshan Construction (JV) (AAHFDO6S4N) Ms, M.R: Dhoble & R.M. Bhangdiya (JV) (AAPFMO622B) 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 M/s Vidarbha Irrigation Development Corporation &d 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 Mitesh Bhangdiva: 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 diaries 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 pertaln to the business receipts and business expenditure; The Assessing Officer in the assessment order has recorded a finding that as per the item no. 1 to 65 of annexure-B; it is apparent that the amounts withdrawn from the bank accounts of the subcontractors were credited to the daily cash balance of Bhangdiya group which was confirmed by Shri Mitesh G. Bhangdiva in his statement dated 14/09/2011. The Assessing Officer has reproduced the statement of Shrl Mitesh Bhangdiya recorded on 14/09/2011 in para 6 of the assessment order: The Assessing 318 1."T'.A, Nos113 & 114/Nag/2016 3 Asstt Yrs:2O1u-}1 & 20 11-12 F; 2/9 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 Bhangdiya group in cash from F.Y. 2006-07 onwards and expenses the incurred through the bank accounts from F.Y. 2009-10 onwards Thus, the that the actual expenses incurred do not match Assessing Officer found to have been incurred in the books- The Assessing with those shown 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 Firozkhan W, Pathan, the assessee, recarded of Shri on statement 19/07/2011 during the course of survey conducted at Camp Chimur. The the statement of Shri Firozkhan W_ Assessing Officer has reproduced Pathan in the assessment order. The Assessing Officer, on the basis of the statement of Shri Firozkhan W, Pathan, concluded that the bank accounts of the assessee were being handled by Shri MG Bhangdiya group. The Assessing Officer has given & summary of all the bank accounts maintained by the assessee in the tabular form to show that the cheques deposited by in the bank accounts of the assessee were the Bhangdiya group withdrawn in cash which were found credited to daily cash subsequently On this basis the Assessing Officer made the protective book seized: in the hands of the assessee in each of the assessment year addition holding that there were no expenses incurred and no contract work was the assessee who, according to the Assessing Officer, is executed by name lender to the Bhangdiya group: The assessee came in merely 3 appeal before the CIT(A) challenging the notice issued u/s 153C as well as withdrawals from bank On protective basis. The the addition for cash CIT(A) deleted the said addition in all the years, 232 I.T.A. Nos.113 & 114/Nag/2016 Asstt Yrs:ZO10)-[l & 20 11-12 3.1 At the outset, learned A_ R. made an application before uS under Rule 27 of the I,TAT. Rules in each of the assessment year challenging the validity of the notices issued us 153C of the Act as there was no incriminating material belonging to the assessee found in the couFSe of Search. It was stated that the assessments in the case of the assessee were framed u/s 153C read with section 143(3) of the Act; The assessee before the CIT(A) raised ground No, 1 ad challenged the validity of the notices [ssued u/s 153C of the Act. The CITIA) has dismissed the ground challenging the validity of the notices issued u/s 153C ad 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 u/s 153C of the Act; It was contended that there is no incriminating material found and seized for the assessment year 2007-08 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_ 28 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 I.TANos: 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 is bad in law and consequent assessment framed Is bad in law. [LT,. Nus,]l3&114_ /Nag/2016 Asstt, Yrs;201O-11 & 2011-12 221 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 submissions were made for which our attention was drawn towards page No, 21 para 12 Qf the order of CIT(A): Even otherwise an 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: 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 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 suppott the conclusion of the CIT(A) by taking &y 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 of the notice issued us 153C 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 as the assessee neither filed any submission nor pressed this ground during the appellate proceedings. Whatever may 233 IT.

Nas.113 & 114/Nag/Z016 Asstt Yrs.2010)-11 R 2[} 11.12 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 our opinion; the assessee complied with the condition as stipulated 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 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 prlor to the amendment made by the Finance Act; 2015 with effect from 01/06/2015 states as under: "Nottvilhstaning anything Cqntamod {{} Sertion 139, Section 147, section 1+8, section 149, Sition 151 a1r Section 153, where the Assessing Officer is satisfied that any money; bullion; jewellery ar other valuable article Or thing, or books Of account Or documents; seized Or requisitioned, belongs Or belong to 2 person othier than the person referred to in Section 153A, then the baoks of accOunt Of documents Or assets Seized Of requisitioned shali be handed Over to the Assessing Officer having jurisdiction over such Other person. This Sclioi- has slbsrjurritly been alie;nkeal #' Ciiizc- Act, 2015 ivith effec: fron) 01/06;?(15. [la' amendeti Si_clio;: reads 2 _idan. "153C Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and 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 pertain to; or any information contained therein, relates to, 1.".A Nos_[l3 & Il#/Nag/2016 Asstt Yrs:2010-11 & Z0 1j-12 9 223 person other than the person referred to in section 153A 7 then, the books of account Or documents Or assets, seized ar requisitioned shall be handled Over to the Assessing Officer having jurisdiction over such other person. I'_I Vh' iWPJo 0; which Tti: Fivan: t: Fil' , ?.#5.n7 eL5 17121T0' this Arenchnenl was made reads &S Ui:l2i "Section 1536 of tlie ict Iulate [0 #S9SSMkt . f Wcoine Of The existirg prvisions contned in Sub- 2n) other Derson. the said Slon 153C proWje tnaf sxlion (J) Of anything coflaied I} s1lion {35, #Lition nolwrhstading 149, section 151 and se"Crion 1353, 147, sermun 145 section Assessing Officer {5 satished ti)at 2uy MiJlcy; Wlere tlIc bullion, Jewellery or olher valuable article or thing &r books of 0r requisitianed beltz tcf pr documcnts seized any aCcoul the person 'efu- 221 {0 "1 :Uo 'S_A pzrso} Olmr [{n tne;; "n bloOf ancount Q Rrmants & dsx0 seizd Or {x [' IX '~ (fa requisitiwxi shaM pe handai NJVinog Juisdiztion Qver such Olter /'exxn &r tincl AsSc >"W Officer snall pOceed against ech sch othu: A3on aWJd {SSuc 0, reajs2s; in"C J2 Uf 5un Qlicr prrson notiue an Jyps; sch Quer perjni in accordance Wth te provxiw f sulon 1534. arisen; {35 tJ the i'terpwetztion 0;} !hr Disputy haVe {r) rspect of a documnen J> f1r ilStnce mor- "Dph"s Lo' When a given cocument seizex] from < person # 3 cY 4 {he Originat document Accordingly '[ 1n propos! to -meti ihe {0 prvide that fOtwilhsta lirg anylhig aforesaid Srlion in sectin 139, section 147, sertin#! 1J8 SEi-tion cfiainc {49, Stion 151 a section {53, wi)an Ine {issessig Onficer i5 satisfied that any muney, bullon. JewcllerY & Qtile: valuata belongs to, Or any books : ZCOUiil 01 article Of thing seized Or requisitioned pertain t, Or any documents relates to; any person, other inforniation contairied therein, than the person referred to in section 1534 then the books of account &r dociuments r" assets scized or requisitioned shall Uve Assessing Officer having jurisdiction be handed OVer t0 aand that Assessing Officer Shali (ver Such ather Person procued against each slch Other persun arid iSsue such other LTA Nos.113 & 114/Nag/2016 Asstt, Yrs:2010-11 & 20 11-12 1l, person notice and assess or reassess income of 5uch other person in accordance with the provisions Of section 153A. Subsequently, the CBDT has brought out Circular Np, 19 of 2015 dated 27/11/2015 by which explainatory note to the provision of Finance Act; 2015 were discussed. The explainatory note In the circular relating to the amended provision of section 153C read as under: '

Assessment of income of & person other than the person in whose case search has been initiated or books of account other documents or assets have been requisitioned, 39.1 Section 153C 0f the Income-tax Act relates to assessment 0f income of any person other than the person in whase case search has been conducted pr requisition has been made The provisions contained in sub-section (1) of the section 153C, before amendment made by the Act; provided that notwithstanding aything contained in section 139, section 147, section 148, section 149, section 151 and section 153 of the Income-tax Act; where the Assessing Officer Is satisfied that ay money, bullion, jewellery or other valuable article or thing or books of accourt or documents seized or requisitioned belong to any person, other than the person referred to in section 1534 Of the Income-tax Act; then the books of account Or documents Or assets seized 0t requisitioried shall be handed over to the Assessing Officer having jurisdiction over such Other person and that Assessing Officer shall proceed against each such other person and issue notice and assess Qr reassess income of such ather person in accordance with the provisions Of section 1534 39.2 Disputes have arisen 25 to the Interpretation of the words "belong to in respect of a document as for Instance when 3 given document seized from a person is & copy of the original document Accordingly , section 153C has been amended 50 35 to provide that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153 of the Income-tax Act; where the Assessing Officer is satisfied that ay money, bullion jewellery or Other valuable article 0r thing belongs tO, 0r any books Of account or LT,A Nos.l13& 114/Nag/2016 Asstt Yrs-ZO1O-11 & 20 [1-12 11 documents seized Or requisitioned pertain to, Of any information contained therein; relates to, anv person, other than the perSon referred to in section 1534 Jf Uhe Inromg-tax Act; then the books Ol account or docunwenls Qr assets seized Or requisitioned shall bce handed Ovet Is [he Assessing Offcer havitg jurisdiction over such other persn and tat Assessing Officer shall proceed against each such other person and issue notice ad asse55 or reassess income Of such other person in accordance with the provisions of section 1534. 39.3 Applicability: This amendment has taken effect from the Ist day of June, 2015. 5.3 In view of this, it I5 apparent that the amended section 153C are not retrospective and are applicable with effect from 01/06/2015 and not prior to that: In the case of the assessee, search a5 well as notice 4/s 153C has been issued prior to 01/06/2015. Since in the case of the assessee action u/s 153C has been taken bv issuing the notice dated 16/07/2013 in Of the search carried out on 19/07/2011 therefore; the consequence amended provision af 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 notice ufs 153C an assessing Qr reassessing the income of 'such other person' is that the money; 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 praceedings did not belang to the assessee; though there was a reference to the assessee therein, issue of notice to the assessee u/s 153C, in our opinion; cannot be held to be valid: Hon'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 notice u/s 153C can be issued, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs a person other than the searched person; Unless until it is established that the documents 388 2as LT,A. Nos,ll3 & 114/Nag/2016 Asstt; Yr5:2010-11 & Z0 11-12 1 seized did not belong to the searched person, the provision f section 153C did not get attracted_ This iS not disputed that the notice in the case of the assessee uls 153C has been issued in consequence of search seizure action taken U/s 132 in the Bhangdiya Group from whom premises diaries marked B-l to B-65 were found an seized; These diaries belong to the Bhangdiya Group not to the assessee_ Even though the name pf the assessee is 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, [a our cpinion , evel the arnended provis Qn suppOrts lhe case Qf the ZS8esse0 The Legisatio; has amended sectior 153C with erf_ct from 0l1/0ii/2{ls ald vlidene thic' SCOpe U/s 153C by subslituting Ti Flacee cf word 'belorg: cr belong' L0 #ord 'pertain or penain f} or ariv intcrn tio cortained rirein' , Vow Ucler v+2 dlitended prcvisioni; ever: |' th:: Taieria! seizcd Ir ?C belcic !n:ne 2s39e but it conlans thiz Infuri ition relating &c liie J SeSSCe, tne proceedwigs initiated u/s 153C wil: be valid. Bli tnis Zmenxl provision; 7i5 i5 pparent; i5 applizable {romt: 01/06/2015. Learned DR_ before u5 even though vehemently relied on the order Of the Assessing Officer but could not adduce any cogent material or evidence which may prove that the diaries found and seized during the course of search in Bhangdiya Group belong to the assessee_ Since during the course of search in Bhangdiya Group no material relating to addition made belonging to the assessee was found therefore; the notice issued u/s 153C, in our opinion; 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 No_ 923 of 2012 vide its order dated 11/09/2014, This fact also finds support as the Revenue has made the 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 1.7. 4. Nos./13 114/Nag/2016 313; 227 Asstt Yrs201Q-}l & 20 11-12 we set aside the order of CIT(A) and hold that the notice issued uJs 153C is not valid and in consequence thereupon; the assessment made is annulled. Thus, the ground taken by the assessee under Rule 27 is allowed, 6_ Now coming to the ground taken by the Revenue: 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 a5 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-I to B-65, The Ld AO has made the total addition of Rs.182.52 Crs in the hands af various concerns of Bhangdiya group in various assessment years falling within the block period 0n prarata 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 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 cancerns 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- contractors out of total more than 100 sub-contractors has arrived at the conclusion that the cash withdrawn from the accounts of the subcontractoars has been found deposited on the credit side 0f the seized diaries marked 2s Annexure B-1 to B-65 seized from the premises of Shri Mitesh G. Bhangdiya. Thus, the Ld AO had inferred that the Bhangdiya group by 34 1.T,4.Nos.113 & 1A/Nag/2016 #ild Asstt Yrs;2010-]I & 20 11-12 24zt 232 such modus-operandi had inflated the adopting 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 found reflected in the diaries was kept with Late Shri i5 Gotulalji Bhangdiya, father of Shri Mitesh Bhangdiya by such sub-contractors which was being issued to various sites for the use Of subcontractors a5 per the requirements at the site Further that the money kept by sub-contractors Wa5 returned to them or through ay Of the intermediaries in the course of handling of cash. The Assessing Officer however, declined to agree with the explanation flled by the appellant and has held that all the 21 sub-contractors examined by him are merely name Ienders &nd the amounts paid to them under the head Sub-contracts are bogus payments, therefore, the corresponding receipts by way of withdrawals from the bank pf the subcontractors is liable to be added accounts 35 income in the hands Of various concerns Of unaccounted in various assessment vears of the block Bhangdiya group 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 execution of government contracts was the same during all the assessment years In assessment 2006-07, the nature of WOrk executed for Vidarbha year Irrigation Devetopment Corporation remains the same as 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.0. has observed that the sub contractors in the case of Bhangdiya group are name lenders ad bogus In this regard, it is significant to mention that the Sub contractors including the appellant have been assessed by the ACIT, Central Circle-2 (1), Nagpur Who is also the A.O: Of Bhangdiva group. Notices under section 153C of I.T: Act 1961 were iSSued to subcontractors and returns were submitted by Such Sub contractors pursuance to receipt 0f notice under section I."A, Nos.l13 & 114/Nag/2016 #15 334 Asstt Yrs:2010-[1 & 20 11-12 Act 1961. The assessments have been framed 153C Of LT; under section 153C of LT Act 1961 by the same A.O. wherein income returned in respect af business income shown the arising to such Sub-contractors out of recelpt_recelved from have been accepted: Thus; the A.O, the Bhangdiya group business receipts in the hands of sub- having accepted the 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 a the order Of the AQ; net prafit 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 Qf the Hon'ble ITAT, Nagpur Bhangdiya group entities in TTA No.268, 269 & 285/Nag/2012 dated 03/04/2013. 4 Survey action was conducted On 17/02/2009 In the Bhangdiya Group Of cases; wherein the similar situation aS payments to sub-contractors Was disputed the AO, The survey action comprises AY and doubted by 2006-07 to AY 2008-09 which are also forming part of the block periods for the search action conducted on the assessee 19.07,2011, The Hon ble ITAT, Nagpur Bench, group Qn Nagpur after having considered the similar activity of business and deficiencies in Subcontract payments found during the conducted on 17.02.2009 has decided the survey action 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%. view Of the above facts ad circumstances and 9.5 In of various infirmities and various judicial keeping in view decisions relied upon by the appellant and to meet eds %f justice; to my considered opinion, it was considered fair ad to adopt the net prorit @ 169k On the gross reasonable the turnover of the various receipts of Rs.579 Crs ; being Bhangdiya group concerns for the block period from AY 20071 08 to AY 2012-13 in the respective years Of the block and bring the Same to the taxation 0n the guidelines determined by the Hon. ITAT, Nagpur Bench , Nagpur in ITA No. 268, 269 332 [.".

Nos-113 & 114/Nag/2016 Asst Yrs:2010-11 & Z0 11-12 16 285/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 26 crores In immovable properties and the undisclosed Rs. in jewellery to the tune Of Rs. 2.37 investment crores; enhanced net pront @ 169 of total turnover was estimated in orders dated 31/12/2015 in the cases Qf the appellate Bhangdiya group as against net profit of I29 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: 1O. Thus; I have considered the submissions made by the appellant and evidence on record It is seen that the appellant sub-contractor and executing work for various business is 3 to Shri Mitesh Bhangdiya group, The entities belonging has been regularly assessed to income tax much assessee prior to the date of search on Shri Mitesh Bhangdiya group on 19/07/2011. In the case of assessee notice has been issued Act 1961 after there being search on Shri ufs 153C of IT Mitesh Bhagdiya group 19/07/2011 and assessments have been framed for assessment years 2006-07 to 201O-1l & A.Y, 2012-13 in the month of March, 2014. It Is seen from the assessment order that the AO. has 10,1 reproduced the statement recorded us 132(4) Of Shri Mitesh Bhagdiya and has referred to seized documents inventorized In the case of Shri Mitesh Bhagdiya, the AO as B-1 to 65. has found that the withdrawals made from the bank account matching with the credits appearing in the Of assessee are Found at the premises of Shri Mitesh seized documents Bhagdiya. The A.O. has concluded that appellant is only name tender 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 Is disallowed ad added in the respective assessments framed in Bhangdiya group: The A.O. further observed that cash withdrawn from the bank is added a5 income On the protective basis as 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 25 in the return submitted in response to notice issued ufs 153C of IT Act #ujft [TA Nos.113 & 114/Nag/2016 12 2/ AsstE Ys.2010-11 & 20 11-12 Iaitt 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 order does not indicate any adverse Of the assessment Observation with regard to regular books Of account Ol the basis Of which income WBS declared in the return of appellant It is seen that the profit and loss account ad balance sheet with the return Of income have not been submitted along the assessment framed in the case Of the discredited in The A0. in fact has assessed income returned appellant adverse observation a5 tp income without inviting any declared fram sub-contract work; 10.3 It i5 seen that the withdrawals from the bank account are reflected in the books of account on the basis of which been returned, The withdrawals from the bank income has considered for the purpose Of having already been determining income at the hands of appellant &s shown in the constitute income liable to be return separately Gannhe hends Oe appediantuthe addition made by AO. assessed is thus unjustified and unsustainable 10.4 It is further seen that the A.O: has made observation in the effect that in the case of Shri the assessment order to disallowance has been made for Mitesh Bhagdiya group claimed On account of sub-contract various expenses expenses which includes Payment t2 appellant It is settled that the substantive assessment must proposition Of Iaw In the facts and precede framing of protective assessment circumstances of the case; it is difficult to rationalize how withdrawals from the bank account can constitute assessable protective basis in the case of the income much less On The A.Q. has made disallowance of sub-contract appellant: expenses being amount paid to appellant while determining the fincome Of business entities of Shri Mitesh Bhagdive group: Such payments are already considered for income showa i the return ad assessed &s business receipt in the hands of again On protective the appellant: Addition of such amount basis defies logic [do not find any rationale to make such withdrawals made from bank protective assessment &f the in the hands of assessee himself_ The account of assessee assessed on protective basis therefore; is held to be income unjustified and unsustainable on this count 35 well LTA Nos.113 & 14/N?g/2016 AsStE Yrs;2010-11 &20 11-12 appellant 35 well 10.5 The gross receipts in the Case of the with the percentage of income has 35 returned income along appellant for various assessment years been tabulated by the and the same is reproduced herein under: Firozkhan Pathan INCOME AND ASSESSED INCOME TURNOVER, RETURNED A,Y. 2010-11 & 2011-12: [010-11 ZQ1l-12 (Assessment Year 38,96,521 40,59,687 [GROSs RECEIPTS 4,28,620 4,59,130 RETURNED TNCOME I7.0QGo 11.3196 @o OF GROSS RECEIFTS 31,82,00Q 37,48,0QQ ADDITION UJS 153C 36,10,62Q 42,07,13Q (ASSESSED INCOME 92,661 103.630 % OF GROSS RECEIPTS It is seen from the above that the Income returned has 10.6 in the case of appellant without inviting any been accepted the adition made in the adverse inference ad considering the income assessed as percentage of hands of assessee; receipt clearly reflected absurdity in the actionf of the Id. grass determining the income In the hands of-assessee A.O , while Id. A.O. thus 15 unsustainable for the The addition made by aforeSaid reason also. Therefore the protective addition made I5 directed to be deleted in ali in the hands Of the appellant the years of the block periad. the finding of fact This is a fact 6.1 We noted that the CIT(A) has given has been made in the hands of the assessee that the substantive addition received by the assessee as sub-contractor in each in respect of the income The withdrawal made by the assessee fram his of the assessment year . of the sub-contract receipts has been bank account in which the deposit of the said deposit; Such withdrawal, in our opinion; accepted arises out [.I,A. Nos.] J 3 & 14/Nay/2016 t FTs.2O10-11 & 2011-12 333 #sstt. assessable income in the hands by no stretch of imagination can constitute while determining the taxable The Assessing Officer of the assessee: Group made the entities of the Bhangdiya incore of the business the amount paid to the of sub-contract expenses being disallowance income shown in were already considered in assessee but these payments hands of the assessee business receipt in the the return and receipt as in the hands of the again on protective basis Addition of such amount therefore; do not find any any leg ta stand. We; assessee does have the CIT(A) which warrants our in the order of illegality Qr infirmity deleted the addition in each of the interference The CIT(A) has rightly Thus; the confirm the order of CIT(A): vear. We accordingly assessment years stand dismissed. filed by the Revenue in both the assessment appeal of the Revenue stand dismissed. In the result; both the appeals 7 pronounced in the open court on 22/06/2017 (Order P. K, BANSAL ) Vice President (AMARJIT SINGH) Judicial Member Dated:22/06/2017 #Singh Copy of_the order_forwarded _te 1 The Appellant 2. The Respondent 3 Concerned CIT 4 The CIT(A) 5 DR;, Guced #le s4llE TOMMeA ~~nsetARegistrere TerunA, NAGPUA Beln~h Jeavr,