A,C.I.T. CENTRAL CIR.- 2(1), NAGPUR vs. SHRI DWARKADAS M BHUTADA, NAGPUR

Eiheu 1T'.A. Nos.130} {0 135/N2g/2016 R73 Asstt, Yrs:06-07 t0 10-]1 & 12-13 IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P K. BANSAL; VICE PRESIDENT AND SHRI AMARJIT SINGH; JUDICIAL MEMBER LLA Nos.130t0 135/Nag/2016 Asstt_Yrs_2006-07 to_2010-1L& 2012-13 ACIT, Central Circle-2(1}, Nagpur. Vs. Shri Dwarkadas M. Bhutada, 705 Shriram Palace; Wardha Road Dhantoli; Nagpur. PAN:AGYPB 4791P (Respondent (Appellant) Appellant by Respondent by_ Date of hearing Date of pronouncement Shri A. R Ninave Shri K. P Dewani 20/06/2017 22/06/2017 @RDER PERP KBANSAL__VPR: AII these appeals have been filed by the Revenue against the order of CIT(A) dated 18/01/2016 by taking the following common common grounds of appeal except change in the figure: Whether on the facts ad in the circumstances of the case; the Id. CIT(A) was right in deleting the addition of Rs.48,00,000/- made on protective basis ? Whether on the facts ad in the circumstances of the case; the Id. CIT(A) was justified In deleting the addition of R5.48,00,000/- without appreciating the fact that the assessee has not executed ay sub contract work ad was only name lender ? (iii) On the facts and in the circumstances of the case and in law; the Id. CIT(A) erred in ignoring the evidences found in the incriminating diaries which conclusively R7h 1.'1A4.N0s.130 to 135/Nag/z010 Asstt Yrs:oo-07 t 10-11 2 12-134, proved that the Cash withdrawals made fram the bank accounts Of the a5sessee 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. CITIA) 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 a5 evident from the incriminating diaries &d n expenses were incurred for executing the contract; (v) On the facts and in the circumstances af the case and in law; the Id, CIT(A) erred in thwarting the very purpose of search and seizure provisions of the Act by ignoring seized incriminating documents, 2 The figures in assessment years 2007-08, 2008-09, 200g-10, 2010- 11 and 2012-13 be read as Rs.89,30,000/-, Rs.1,96,04,000/-, Rs.1,20,30,000/-, Rs.43,25,000/ - and Rs.70,00,000}- in place of Rs.48,00,000/- Since the issues as well a5 the facts involved in all these appeals are common therefore, bpth the parties agreed that all these appeals be disposed of by this common order on the basis of facts relating to assessment year 2006-07 ad whatever view this Tribunal may take in assessment year 2006-07 , the same view may be taken in all the assessment years: In brief; the assessment year-wise details; 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 , No. JAY Date of filling Df Returned Return Income Assessed Income Secticn Additions disputed 2006-07 04.09.2013 208530 5530050 153C 48Q0Q0Q 2007-08 04,09.2013 131280 9620486 153C 8930000 2008-09 04,09.2013 217730 20470850 153C 196040Q0 1,F.AN0s,130 to 135/Nag/2016 Asstt Yrs-(6-WJ to 10-11 & 12-13 275 2009.IQ 04,09,2013 4913270 12943270 153C 12030000 2010-11 04.09.2013 1151690 5476690 153C 432500Q 2012-13 01.11.2013 171030 7171030 143 (3} zoqoQod 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 Bhangdiva Group of cases n 19/07/2011. During the course of search conducted at residential and office premises of Shri Mitesh Bhangdiya, certain incriminating papers and documents belonging ta the assessee Shri Dwarkadas M. Bhutada were found and seized, Therefore, notice dated 16/07/2013 us. 153C of the IT. Act; 1961 was issued and served on the assessee an 18/07/2013 requesting him to file the return of income within 30 days from the receipt of notice. The assessee vide letter dated 04/09/2013 has raised an objection to the notice issued u/s 153C which is reproduced in para 2 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. 13201) was conducted in the case of Bhangdiya group but there is sufficient evidence available in the seized material which is incriminating ad relates to the assessee. The assessee had filed the returns of income In response to notice ufs: 153C for all the years of the block period. Shri Mitesh Gotumal Bhangdiya is the key person Qf 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 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_ Maniyar, widowed sister of Shri Mitesh Bhangdiya who lives with Bhangdiya R7 [.T,4 . Nus.130to 135/Nag/2016 Asstt. Yrs:d6-017 to 10-11& 12-13 family. The main business cancerns Qf the group covered under the search action are as under: 1 Ms M,G, Bhangdiya (AERPB 2503 E) (Prop: MGB) converted into a company M/s M.KS. Constro-venture Pvt (AAHCM 0383 T) Ltd. from 01/04/2011 2 Mahendra Construction; Prop. Shri Sanjay Heda (MC) (AADPH 7109J) 3 Ms Mahendra Construction & M.G. Bhangdiya (JV) (AANFMS658B) 4 Ms Kirtikumar M Bhangdiya (Prop. KMB); converted into a company M/s MRS Acme Buildcon Pvt; Ltd. (AAHCMO382R) from 01.04.2011. (AGYPB16S9G) 53 Ms RM: Bhangdiya Mahendra Construction (IV) (AARFR182OC) 6 Ms Shrikant M Bhangdiya (Prop. SMB} (ATCPB1337]) 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. (AADCB5273C) The Bhangdiya Group has also entered into joint ventures with various other civil contractors. Some of them are a5 under: 1 Ms: M.G. Bhangdiya & Hitbhav Engg: (JV) (AAOFM474SL) Ms, M,G. Bhangdiya & 5.5, Patil & Co: (JV) (ABIFS3645L) Ms. Darshan Construction (JV) (AAHFDO6SAN) 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 far 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 of search operations incriminating documents were found and seized from the residential premises of Shri Mitesh Bhangdiya. Item no_ 1 to 65 of Annexure-B seized from his #add [7,A. Nos.130t0 135/Nag/2016 27F Asstt: Yrs:06.07 t 10)-11 & 12-13 diaries containing ledgers; daily cash books and bank residence are the books maintained by the Bhangdiya group: A statement of Shri Mitesh was recorded on oath on 20.07,2011. In his sworn statement Bhangdiva recorded during the course of search action, Shri Mitesh Bhangdiya was confronted with the entries borne out from the seized diaries marked as B contents Qf these diaries; Shri Mitesh 1 to 8-65 and to explain the in his statement recorded has submitted that the entries in the Bhangdiya the ledger pertain to the business receipts and business diaries and expenditure: The Assessing Officer in the assessment order has recorded a no. 1 to 65 of annexure-B, it is apparent that finding that as per the item the amounts withdrawn from the bank accounts of the subcontractors were credited to the dally cash balance of Bhangdiya group which was confirmed his statement dated 14/09/2011. The by Shri Mitesh G. Bhangdiya in Assessing Officer has reproduced the statement of Shri Mitesh Bhangdiya The Assessing recorded on 14/09/2011 in para 6 of the assessment order: 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 in cash from F.Y. 2006-07 onwards ad expenses the Bhangdiya group incurred through the bank accounts from F.Y. 2009-10 onwards: Thus, the Assessil Officer found that the actual expenses incurred do not match ng 6 been incurred in the books: The Assessing with those shown to have 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 M, Bhutada, the assessee, recorded Diarkadas on statement of Shri of survey conducted at 705, Shreeman 09/07/2011 during the course The Assessing Officer has reproduced the Palace, Dhantoli Nagpur. M, Bhutada in the assessment order. The statement of Shri Dwarkadas basis of the statement of Shri Dwarkadas M. Assessing Officer, On the 8144 LT.A. Nos.130tu 135/Nag/2016 Asstt: Yrs.(6-(17 10 10-11 & 12-137 Bhutada, concluded that the bank accounts of the assessee were being handted by Shri M.G. Bhargdiya group: The Assessing Officer has given 3 summary 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 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 year holding that there were no expenses incurred and no contract work was executed by the assessee who, according to the: Assessing Officer, i5 merely a name lender to the The assessee came in appeal before the CIT(A) Bhangdiya group. chalilenging the notice issued ufs 153C as well as the addition for cash withdrawals from bank on protective basis, The CIT(A) deleted the said addition in all the years; 3.1 At the outset; learned A R made an application before uS under Rule 27 of the I.T.A,T. Rules in each of the assessment year 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 of search: It was stated that the assessments in the case Qf 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 and challenged the validity of the notices issued ufs 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 whlch 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 378 382 1i 17.4.Nos.130t0 135/Nag/20l Asstt Yr5 06-07 [0 10-11 & 12-13 assessment frared 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 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 of the notice issued ujs 153C pefore 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 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 and also the validity of the consequent assessment frared 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 gorie through the provisions of section 153C and noted that this section priar to the amendment made by the Finance Act; 2015 with effect from 01/06/2015 states a5 under: 1,'T.A. Nos.130to 135/Nag/2016 Assl, Yrs;(l6-{)7 t) 10-11 & 12-13 38 "Notwithstanding anything containe in section 139, scction 147, section 148, section 149, scction 151 and secilon 153, #here the Assessing Officer {: qitisfinn tikar any money; bullon, jewellery 0r" other valuabl- aficle Or thing: Or books Of DCCOunt Or documents; s2i7ed Qf requisitianed, belongs Or belong to 7 persin Qlhver tian! lixl' pevGjm nferrad [0 in} section 1534, then the books of ecroun[ Or docurents Or assets seized Or requisitioned S/1a1 be handed Over to the Assessing Officer having jurisdiction aver such other person This szcticn has subsequgity {Juz 0:Iell: #Y Fini;c- Act; 2015 with effeci frcn 0)1/05/2015_ Thz am:edl:chmnu; 39 (aien: "153C Notwithstanding anything contained In section 139, section 147, section 148, section 149, section 151 ad section 153, where the Assessing Officer I5 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, 2 person other than the person referred to in section 153A, then, the boaks of account &r documents or assets, seized Or requisitioned shall be handled over to the Assessing Officer having jurisdiction over Such other person Thc? Fi wncc Bili_ 20205 i its fcmnnanu:i onlamm?; i1 DuIpOse for which this amerlrrent wes marle reads aS!nyv: 'Snon 1530 Qf n Ac { ar ;v} "ronxe Qf a} QUai pereom T710 ersmwn {n isk"w} €nLm2L: M! SUb- Sfcli {1) Jf tHJc} scx/ X{' :5 J"-wJe thal notwithstarding cythving CoBawed i{> e-cliu: 159, Sccton J47, section 148, section 149, Sxttian 151 &nd Srcon 153, where tnet Issessing Omfcer XS Scal/sfie Lhat auy mcney; bullion jewellery Ur other valuable article Or tlng Or books Of aCCOtnt Or documents seized or regiisitioned belong to any person; Other than the person rferrewi to In Scctiomn 153A, then the books 0f accOUIt Or Uocumenls 0f asrels seized Or requisitioried shall De' {anded ov/ t8 rne A<sersing Officer having jurisdiction Over stich Otltr?t pzrsoin a/k1 Ihat Asszssing L.TANos.130 t0 135/Nag/2016 Asstt; Yrs:06-07 t0 10-11& 12-1 Officer shall proceed against each such other person and issue such pther person notice an assess Or reasse5s incone of Such other person in accordance wilh Ihz proviwinns Qf section [534. Disputes have arisen; 35 tp the interpretation 0f" the words "belongs to" in respect Of & documenl as for instance when a given document seizexd frum} & person i5 & copY of the original document Accordingly, il is proposed to amend the aforesaid section to provide that notithstanding anything cantained in section 139, section 147 section 148 section 149, section 151 and section 153, where the Ass2ssing Officer is satisfied that any money , bullion, jewellery or other Valuable article Qr thing belongs to; Or any bppks of account Or documents seized Or requisitioned pertzin to; Or any information contained therein; relates to, any person; other than the person referred to in section 1534 then the books of account or documents or assets seized or requisitioned shall be handed Qver to he Assessing Offices having jurisdiction over such other person and that Asse'ssing Officer shall proceed against each such other person and issue such other person notice and a55255 O reassess income 0f such other person In accordance with the pravisions cf section 153A. Subsequently , the CBDT has brought out Circular No. 19 of 2015 dated 27/11/2015 by which explainatory note to the provision 0f Finance Act; 2015 were discussed;, The explairatory note in the circular relating to the amended provision of section 153C read as Under: '39, Assessment of income of & person other than the person in whose case search has been initiated or books Of account; other documents 0r assets have been requisitioned 39.1 Section 153C Of the Incona-tix Act relates to assessment of income af any person other than the person in whose Cas2 search has been conducted Or requisition has been made; The provisions contained In sub-section (1) 0f the section 153C, before amendment made by the Act; provided that notwithstanding anything contained In section 139, Section 147, section 148, section 149, section 151 and sextion 153 of the Incame-tax Act; where the Assessing Officer is satisfied that any money, bullion, jewellry or other valuable article pr thing Or books Of account Qr documents seized or LTANos,130t0 135/Nag/2016 Asstt. Xrs:06-07t0 10-11& 12-13 requisitioned belong t any person, Other than the person referred to in section 1534 of the Income-tax Act; ther the books af arcount Or documents 0;" assets seized Or requisitioned shall be handed Over [u Lie Asse'ssing Omicer having jurisdiction over such other person and that Assessing Officer shall proceed against each such Othzr Person &nd issue notice and assess ar reassess income Of such other person in accordance with the provisions of section 1534, 39.2 Disputes have arisen &5 to the interpretation of the words "belong to in respect Of a dorument 35 for instance' when a given document seized from & person is & copy af the original document; Accordingly , section 153C has bzen amended So as to provide that notwithstanding anything contained in section 139, section 147, sectian 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 belongs to, 0r any books Of account or documents seized Or requisitioned pertain to; Or anv infarmatian contained therein, relates too; any person; Other than the person referred to in section 1534 of the Income-tax Act; then the books Df account or documents or assets seized Or requisitioned shall be handed aver to the Assessing Officer having jurisdiction over such other persar and thial Assessing Officer shall proceed against each such other person and issue notice ad assess Or reassess income of Such other person in accardance with the provisions pf section 1534. 39.3 Applicability: This amendment has taken effect from the Ist day Of June; 2015 In view pf this; it i5 apparent that the amended section 153C are not retrospective and are appiicable with effect from 01/06/2015 and not prior to that: In the case of the assessee, search as well as notice us 153C has been issued prior to 01/06/2015, Since in the case of the assessee action us 153C has been taken by issuing the notice dated 16/07/2013 in consequence of the search carried Qut On 19/07/2011 therefore, the amended provisian of section 153C will not apply: As per the provision of section 153C, as was in existence during the impugned period; the ARPEL= Omi I.T:A Nos:130 to 135/Nag/z01 Asstt: Yrs:06-07 t 10-118 12-13 condition precedent for issuing notice us 153C and assessing; Or reassessing the income of 'such ather person' is that the money; bullion; jewellery or otner valuable article Or ting, bpoks Of account or dacument seized or: requisitioned which belong to such person where documents in question recovered during search praceedings did not belong to the assessee; though there was a reference to the assessee therein; issue Qf notice t0 the assessee Uls 153C, in aur opinian; 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 & notice U/s 153C can be issued, the Assessing Officer is required to arrive at a concfusive satisfaction that the document belangs a person other ttan the searched person. Unless until it is estabiished that the documents seized did rot belong to the searched person; the pravision 0f sectlon 153C did not get attracted _ This is nat disputed tat the notice in the case 0f: 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 ta B-65 were found and seized, These diaries belong to the Bhangdiva Group npt to: the assessee; Even though the name' of the assessee Is mentioned in the diary that does not mean that the diary belng to' the assessee: It may be said that the diary contains the Information regarding the assessee In Our opinion, even the amended provisian supports the case of the assessee The Legislation has amended section 153C with effect from 01/06/2015 and widened the scope us 153C by substitutlng in place of word 'belongs or belong' to ward 'pertain Or pertain to or any information contained therein' . Now under the amended provision; even if the material seized does not belong ta the assessee but It contains the information relating to the assessee, the proceedings initiated u/s 153C will be valid But this amended provision; as Is' apparent; is applicable ftom 01/06/2015. Learned D.R before u5 even ttiaugh 1.7. 4. Nns.13010 135/Mag/2016 Asstt, Yrs;06-07 to 10-11& 12-13 13 vehemently relied 0n 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 Bhangdiva 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 Hlgh 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 we set aside the order of CIT(A) and hold that the notice issued u/s 153C is not valid and in consequence thereupon; the assessment made Is aulled. 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 3S 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 selzed evidences 35 per Annexure-B-l 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 3 R86 ETA.Nos.130to 135/Nag/zol en Asstt Xrs;06-)7to 1O-11 & 12-13 assessment years falling within the block period on prorata basis for want Of proper correlation between the amounts credited to the seized diaries ad 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 af 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 af 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 subcontractors has been found deposited on the credit side of the seized diaries marked a5 Annexure B-1 to B-65 seized fram the premises af 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 and 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 i5 found refected in the diaries was kept with Late Shri Gotulalji Bhangdiva , father of Shri Mitesh Bhangdiya by such sub-contractors which was being issued to various sites for the use of subcontractors 35 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 ad 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, thererore; the corresponding receipts by way of withdrawals from the bank accounts Of the subcontractors 15 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. [.T'..No5130 to 135, /Nag/2016 164 28+ Asstt, Yrs;)6-(7 10 10-1] & 12-13 group Qn 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 @ 12% as 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 and to meet ends of justice; to my considered opinion; it was considered fair and reasonable_ to adopt the net profit @ 169 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 ad 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 undisclased 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 @ 16ck of total turnover was estimated in the appellate orders dated 31/12/2015 in the cases Of Bhangdiya group a5 against net profit of 12% estimated by Hon'ble ITAT; a5 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 On record. It is seen that the appellant i5 3 sub-contractor and executing work for various business entities belonging ta Shri Mitesh Bhangdiya group; The assessee has been regularly assessed to income tax much prior to the date f search on Shri Mitesh Bhangdiya group on 19/07/2011. In the case Of assessee notice has been issued ujs 153C 0f IT Act 1961 after there being search on Shri Mitesh Bhagdiya group 19/07/2011 and assessments have been framed for assessment years 2006-07 to 2010-11 & A,Y. 2012-13 in the month of March, 2014. 288 LT'A. Nos.130] tn 135/Nag/201 Asstt Yrs:06-017 to 10-11 & 12-13 9.2 In the case Of Bhangdiya group, the assessments under section 153A of IT Act 1961 have been framed for assessment years 2006-07 to assessment year 201Z-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 af 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.Q. has observed that the sub contractors in the case Of Bhangdiya group are name lenders and 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 Bhangdiya group. Notices under section 153C Qf IT 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 1.T 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 Bhangdiva group have been accepted. Thus; the AOs 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 &s percentage to receipts by the AO and various infirmities as emanated from the order of the AO, net profit has been estimated 16% Of gross receipts in the hands of 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/201Z dated 03/04/2013. A survey action waS conducted On 17/02/2009 in the Bhangdiya Group of cases; wherein the similar situation a5 payments to sub-contractors was disputed and doubted by the AO. The survey action comprises AY 2006-07 to AY 2008-09 which are alsp forming part of the block periods for the search action conducted on the assessee Sll I."T'.A, Nos.130 to 135/Nag/2016 289 Asstt, Ys,06-017 to 10-11 2 12-13 11}e Zliz 10.1 It i5 seen from the assessment order that the A0. has reproduced the statement recorded ufs 132(4) of Shri Mitesh Bhagdiya &d has referred to seized documents inventorized a5 B-I to 65. In the case Of Shri Mitesh Bhagdiya , the AO ha5 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 is 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 ad 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 as income On protective basis a5 there was nO expenses aS no contract work was really executed 10.2 The apellant submitted return declaring income from sub-contract work in his regular return a5 well 35 in the return submitted in response to notice issued u/s 153C of IT 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 of appellant It is seen that the profit and lss account ad balance sheet submitted along with the return of income have not been discredited in the assessment framed in the Case or the appellant: The A.O, in Fact ha5 assessed income returned without in viting any adverse abservation 35 to income declared from 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 income has been returned The withdrawals from the bank having already been considered for the purpose of determining income at the hands of appellant a5 shown in the return cannot separately constitute income liable to be assessed in the hands of appellant The addition made by A,0. is thus unjustified and unsustainable 340 [T.A Nos.130 to 135/Nag/201 Asstt. Xrs:d6-07 t 10-11 & 12-13 10.4 It is further seen that the AQ. has made observation in the asse5sment 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 {s settled proposition pf Iaw that the substantive assessment must precede framing Of protective assessment: In the facts and circumstances of the case; it is difficult to rationalize how withdrawals from the bank account can constitute assessable income much less on protective basis in the Case Of the appellant The A,0. 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 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 of assessee himselc The income assessed on protective basis therefore; is held to be unjustified and unsustainable 0n this count 35 well 10.5 The gross receipts in the case of the appellant 35 well a5 returned income along with the percentage af income has been tabulated by the appellant for various assessment years and the ame is reproduced herein under: Shri Dwarkadas M. Bhutada TURNOVER, RETURNED INCOME AND ASSESSED INCOME AY 2006-07 TO 20II-12 Assessment Yearl2006-07 2007-08 2008-09 2009-10 ZD1o-11 201213 GROSS RECEIPTS 9082919 9152692 12037410 16865323 25971319 Np RECEIPT RETURNED INCOME 208630 131280 217730 913270 1151690 171030 Dp OF GROSS RECEIPTS 2.3096 1,4390 2,0096 5.4296 4.4301 No receipt ADDITION US 4800000 893000 19604000 153C 12030000 4325000 7qdo0o0 #ei LT.A, Nos.130t0 135/Nag/2016 4449, 341 Asstt: Yrs:06-007 t0 10-]1 & 12-13 ASSESSED INCOME 9620486 20470850 12943270 5476690 7171030 5530050 %a OF GROSS RECEIPTS 60,809 105.11%k 170.06% 76,7450 21.09% No receipt 10.,6 It is seen from the above that the Income retumed haS been accepted in the case of appellant without inviting any adverse inference and 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.Ow, while determining the Income In the hands of assessee The addition made bY Id. A.O. thus, is unsustainable for the aforesaid reason also. Therefore, the protective addition made in te hands of the appellant is directed to be deleted in all the years Of the block period. We noted that the CIT(A) has given the finding of fact; This is a fact 6.1 that the substantive addition has been made in the hands of the assessee in respect of the income received by the assessee a5 sub-contractor In each of the assessment vear. The withdrawal made by the assessee from his bark 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 na stretch of imagination can constitute assessable income in the hands The Assessing Officer while determining the taxable of the assessee; business entities of the Bhangdiya Group made the income of the of sub-contract expenses being the amount paid to the disallowance assessee but these payments were already considered in income shown in the return ad receipt as business receipt in the hands of the assessee Addition of such amount again Qn protective basis in the hands of the does have any leg to stand: We; therefore, do not find assessee any infirmity in the order of the CIT(A) which warrants our illegality Or interference. The CITIA) has rightly deleted the addition in each of the We accordingly confirm the order of CIT(A) Thus, the assessment year. QMi