ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, PANAJI, PANAJI, GOA vs. BAGKIYA CONSTRUCTIONS PVT. LTD, GOA

3.4 From the verification & analysis of impounded IMs the Ld. AO observed that, the assessee company for the year under consideration had suppressed the taxable income by resorting to; ITAT-Panaji Page 5 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 (i) booking/debiting bogus labour payment / site expenses (ii) booking/debiting bogus sub-contracts payment and (iii) booking/debiting bogus Un- Registered Dealer [‘URD’]. The IMs supplemented by statements, in addition to above it also revealed to the Ld. AO that, the assessee company was generating cash from business activities which were kept outside the books with closely associated parties for meeting out business necessities and exigencies etc. These findings were notified to the assessee and explanation & submission on thereaccount were called for and taken on record.

3.5 On the basis of such impounded material & statements recorded in the course of survey proceedings etc., the Ld. AO vide order dt. 25/08/2021 framed assessment u/s 147 wherein twin additions were made viz; (i) ₹2,53,73,433/- ITAT-Panaji Page 6 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 being difference of profit computed @ 12% of total turnover of ₹60,88,36,488/- as against ₹3,11,00,552 being profit computed @8% of reported turnover by the assessee company and (ii) ₹11,81,03,855/- being amount of cash generated from business activities which was kept outside the books including the additional income of ₹1,18,49,855/- declared by the managing director of the assessee company.

3.6 Aggrieved by former twin additions and the assessment as such, assessee company preferred an appeal u/s 246A r.w.s. 249 of the Act before the Ld. CIT(A) on 24/09/2021 which was allowed by the Ld. CIT(A) by an order dt. 29/05/2023.

3.7 Aggrieved by the first appellate order passed u/s 250 of the Act [‘impugned order’], the appellant Revenue came in present appeal on the following grounds thus seeking reversal of twin deletions; ITAT-Panaji Page 7 of 39. ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO by adopting 12% as the operating profit, without appreciating the fact that the AO has made the addition by corroborating and substantiating the relevant impounded material and declaration made by the MD of the assessee Co. in t1re statement recorded under oath. ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to allow deduction of interest paid to banks and other lenders. The Ld. CIT(A) has failed to appreciate that the AO did not al1ow deduction on interest payment to the bank and other lenders separately in view of the adoption of overall 12% operating profit on the gross receipts as income of the assessee as admitted by the assessee during the course of survey proceeding. iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.10,62,54,000/- made by the AO on account of unexplained cash entries. The Ld. CIT(A) has failed to appreciate that the AO has made this ITAT-Panaji Page 8 of 39. ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 addition on the basis of the incriminating material found in the premises of the assessee during the course of survey action and as per the provision of Section 292C of the Act, such material is presumed to belong to the person in whose possession or control the same was found. Moreover, Shri K. Bagkiya Durai himself has offered the amount of Rs.10,62,54,000/- to tax voluntarily in the statement recorded during the course of survey. iv) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,18,49,855/- made by the AO on account of cash payments allegedly made towards labour expenses. The Ld. CIT(A) has failed to appreciate that the AO has made this addition on the basis of the incriminating material found in the premises of the assessee during the course of survey action and the assessee could not offer any satisfactory explanation for the same. Moreover, in the statement recorded under oath Shri K. Bagkiya Durai has himself voluntarily offered the amount of Rs.1,18,49,855/- to tax for A.Y 2017-18 on this account.

ITAT-Panaji Page 9 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 4. We note that the respondent assessee furnished a paper book dt. 13/12/2024 containing 94 pages and case law compilation separately. The appellant Revenue equally filed a paper book containing 100 pages, both were referred/adverted in the course of hearing by the Ld. DR. In the absence of respondent assessee u/r 25 (supra) we have heard the appellant and subject to rule 18 of ITAT-Rules, 1963 perused aforestated material placed on records and considered the facts of the case in the light of settled position of law and which are forewarned to the party present. After the conclusion of hearing but before finalisation of dictation/draft order, the registry brought to our notice that, the respondent furnished written submission on 09/02/2026, in the larger interest of justice & completeness of adjudication same was perused, thoughtfully considered, and dealt therewith in accordance with law. ITAT-Panaji Page 10 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 Ground No. 01 & Ground No. 2; 5. By this ground the Revenue alleges that the Ld. CIT(A) action in deleting the addition of ₹2,53,73,433/- made by the Ld. AO on account of difference of profit computed @ 12% of total turnover of ₹60,88,36,488/- as against the profit declared by the respondent assessee. The case of the Revenue is that; while directing the deletion of impugned addition the Ld. CIT(A) turn blind eye to the IMs impounded and supplementary confirmation in the form of statements recorded of; (i) bogus sub- contractor (ii) cashier, (iii) accountant and (iv) director of the assessee company recorded etc.

ITAT-Panaji Page 12 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 7. The records revealed that, during the course of survey certain IMs were impounded and analysed by the survey party and in the evince recorded statements of various employees and the managing director of the assessee company. The account assistant Smt Pallavi V Pednekar [‘E1’]whose statement was recorded in the course of survey proceedings (Pg 1-4 of P/b filed by Revenue). who was responsible for recording all financial and incidental transaction in the books of account of assessee company maintained in ‘Tally accounting software’ [‘TAS’] vide answer to question 7 confirmed to have deleted the books/records intentionally and reconfirming the same vide answer to question 10 accepted to face consequences. This statement was neither retracted nor dislodged either by the deponent or by the assessee company including the managing director thereof. Admittedly, in the ITAT-Panaji Page 13 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 absence of books of account produced on survey date and subsequently in the assessment proceedings. Therefore the Ld. AO had no occasion to reject them without being produced because for rejection in our considered view the provision of section 145(3) of the Act requires him to underline the defects.

ITAT-Panaji Page 14 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 9. In view of forestated facts, the action of the Ld. AO in not accepting the audited financial results and thus the income from business returned by the respondent assessee finds merits without any error. In such situation, the Ld. AO had to no choice but to proceed to estimate to the best of judgement and determine the business income/profit to be taxed u/s 28 of the Act. This approach of the Ld. AO had no striking error in view of the decision rendered in the case of ‘PCIT Vs Janson Investment (P) Ltd.’ [2021, 112 CCH 319 (Kar)] and ‘CIT Vs Gowri Gopal Textile Processing (P) Ltd.’ [2011, 15 Taxmann.com 394 (Kar)], wherein their hon’ble lordship approved the assessing authority’s action to compute undisclosed income on estimation basis where books are not available or books are destroyed after taking into consideration totality of circumstances without there being any rejection. ITAT-Panaji Page 15 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 10. Similarly, when books found destroyed for any reasons, the action of tax authorities to proceed to estimate to the best of judgment finds legal support in view of decisions of Hon’ble High Court in the case of ‘Shri Kishan Dhanpat Rai Vs CST(UP)’ [1980 Taxmann.com 889 (All)], ‘Jeevan Ram & Sons Vs CST’ [2001, Taxmann.com 2011 (All)].

ITAT-Panaji Page 18 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 14. Now coming to rationale applied in estimating the business profit/income @12% as against @8% of turnover of the assessee; 14.1 During the course of survey on the basis of IMs statement of Mr Arjunan a salaried employee and site supervisor [‘E2’] was recorded who was responsible for hiring labour for site & making wage payment to them. The assessee granted a sub- contracting work to E1 and payment of ₹45Lakhs was made through cheque by debiting ‘sub- contracting expenses. The said cheque was deposited by assessee in E1’s saving bank a/c 01642041001548 maintained with OBC Bank. The said amount as soon credited in E1’s bank a/c was withdrawn in cash and returned to assessee company as per the direction of director. The sub- contracting expenses so debited/claimed in arriving the book result thus explained to have been bogus in light of IMs pg 73 of Annexure-‘A/BCPL/01-05’. ITAT-Panaji Page 19 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 14.2 On the basis of IMs, a statement of one more salaried employee viz; Mr Ravikumar an account assistant [‘E3’] was recorded who was co-ordinating with banks for receipt & payments and chartered accountant of the assessee company. It is not surprise that, E2 was also awarded a sub-contract on paper and an amount of ₹40Lakhs was paid by cheque in the year under consideration, which upon credit into bank a/c was withdrawn in cash and returned to Mr Bagkiya the managing director of the assessee company. Like in the earlier case, the E2 did not undertook any sub-contracting work in actual but merely on paper to withdraw cash for out of books spendings. Like former case, this arrangement was also done for booking bogus sub- contracting expense in the books, which ultimately remained to be produced in the course of proceedings before the tax authorities below. ITAT-Panaji Page 20 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 14.3 Further on the basis of such IMs a statement of Mr Senthilkumar a salaried employee and cashier [‘E4’] was also recorded on 25/10/2018 who was responsible for cash handling and was also given sub-contract on paper like others. The E3 confirmed the noting of IMs as actual transactions executed and therefore noted by him for the assessee company and only upon the direction of the managing director of the company Mr Bagkiya. The modus-operandi narrated while answering question no 11 of his statement clearly explains that the assessee company was indulged in to booking a bogus sub- contracting expense by awarding them various employees & relative in the range of 45-55 lakhs/each, so has to enable immediate cash withdrawal from banks for the purpose of out of books spending or gratification to secure business/contracts from government department. ITAT-Panaji Page 21 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd.

AY: 2017-18 14.4 It shall be worthy to note that, E2 to E4 on a statement recorded in the course of survey invariably confirmed the names of employees of the assessee company and the names of relatives of directors to whom the assessee company given sub-contracting work merely on paper without there being any actual work. These deponents also confirmed that, sub- contracting expenses are debited in the books, and these sub-contractors were paid by cheque. The cheques/payment were deposited in their respective bank account and cash therefrom was immediately withdrawn and handed over either in assessee company or to the director Mr Bagkiya.

14.5 When IMs viz; A/BCPL/01 to A/BCPL/05 along-with statements of employees/relative were confronted to Mr Bagkiya, who confirmed that for the business exigencies & liaising payment cash was ITAT-Panaji Page 22 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 needed hence the assessee used two methods (i) direct cash withdrawal and (ii) by bogus sub- contracting where cash withdrawals reached the assessee. In addition to bogus sub-contracting the assessee company also confirmed to have booked inflated fuel expenses whereby differential cash was returned to assessee for out of books spending. Since these transactions were very large in volume and in the absence of books the director could not quantify, nor the Ld. AO could undertake to compute actual dot figures for addition. It the director best-known person who estimated around 4% to 5% of total turnover spent towards liaisoning expenses which were out of books for securing business contracts. Eventually, the Ld. AO conservatively adopted margin @12% i.e., 4% above declared 8% margin for making impugned addition which was unfoundedly and without basis entirely stuck down by Ld. CIT(A). ITAT-Panaji Page 23 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 14.6 As we note that, the rationale behind coming to conclusion in computing the net margin of 12% as against 8% claimed to have been declared by the respondent assessee, the Ld. AO was displaced with the books in first placed as the same intentionally & rather on the direction of assessee were destroyed by the employee E1. The retraction by the director came not immediately or soon after recording of statement but after the lapse of almost 33-34 months (approx.). It shall also be pertinent to note that, none of the employee who deposed on statement confirming the grant of bogus sub- contracting to them, consequential cheque payments, and their cash withdrawal for return to the assessee company or to the director Mr Bagkiya were retracted. Therefore, retraction by director could hardly disprove the facts inscribed in the IMs impounded which were confirmed by its employees. ITAT-Panaji Page 24 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd.

AY: 2017-18 14.7 Although it is well accepted and true that an admission made by an assessee constitutes a relevant piece of evidence but if the assessee do not contend or effectively show that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts, such an admission can be relied upon in the light of IMs and admission/statement of other deponent. This view finds strength in the decisions of Hon’ble Courts rendered in ‘Satinder Kumar (HUF) Vs CIT’ [1976 44 CCH 29 (HP)], ‘Pullangode Rubber Produce Co. Ltd. Vs State of Kerala’ [1973, 91 ITR 18 (SC)], ‘Avadh Kishore Das Vs Ram Gopal’ [AIR 1979 SC 861]. Since in the present case, the facts penned in IMs and confirmed by other employees of the assessee company goes to contrary to director’s retraction, therefore such withdrawal of admission was rightly turn down by the Ld. AO. ITAT-Panaji Page 25 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd.

AY: 2017-18 14.8 In result we vacate the action of the Ld. CIT(A) on this score. Having done that or holding so we however are afraid to approve the computation of net profit @12% for two reasons viz; (i) in adopting 12% of net profit, the Ld. AO blind folded with director’s estimation or admission of % of liaisoning expenses without corroborating the same with the actual figures of paper sub-contracting and their cash withdrawals and (ii) the computation of 12% is ad-hoc and without any rationale for the given facts & circumstances of the case and the construction industry as a whole. We therefore restrict the addition only to the extent of figures noted in IMs and confirmed by aforestated E2 & E4 to ₹85Lakhs (₹45Lakhs + ₹40Lakhs) to meet the end of justice. In view thereof, the ground no 1 stands party allowed. Since the former adjudication rendered the ground no 2 as infructuous, therefore stands dismissed. ITAT-Panaji Page 26 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 Ground No. 03 15. Next comes to ground no. 3 whereby the Revenue alleges that the Ld. CIT(A) has erred in deleting the addition of ₹10,62,54,000/- made by the Ld. AO on account of unexplained cash entries without appreciating the facts. The Ld. CIT(A) has failed to appreciate that the AO has made this addition on the basis of the incriminating material found at the survey premises and as per section 292C of the Act, such incriminating material is presumed to belong to the person in whose possession or control the same was found, moreover, when the same was supplemented by admission. And to drive home the reversal of impugned deletion the Revenue relied heavily on the decision in the case of ‘Seasons Catering Services (P) Ltd. Vs DCIT’ [2010, 117 ITD 50 (Del-ITAT)] and ‘Bannalal Jat Construction (P) Ltd. Vs ACIT’ [2019, 106 Taxmann.com 128 (SC)]. ITAT-Panaji Page 27 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 16. Per contra the respondent assessee vide its written submission dt. 09/02/2026 reiterated its contentions & arguments as were laid before the Ld. CIT(A) that, (i) the diary from which impugned addition was made does not belong to the assessee company & but to the employee who made the rough notings (ii) the admission made by the director of the assessee company in the course of survey proceedings was under mental duress and pressure and therefore same was retracted in the course of assessment. The respondent assessee equally relied upon the judicial precedents as were relied before first appellate authority viz; ‘ACIT Vs BS Yediyurappa’ [ITA No. 14/Bang/2029 dt. 07/04/2022], ‘CIT Vs Harjeev Agrawal’ [2016 290 CTR 263 (Del)], ‘PCIT Vs Best Infrastructure (India) Pvt Ltd. [2017, 397 ITR 82(Del)] and ‘Common Cause Vs UOI [ 2017, 77 taxmann.com 245 (SC)]. ITAT-Panaji Page 28 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 17. As noted earlier during the course of survey proceedings certain IMs in the form of three diaries inventorised as ‘A/BCPL/01, 02 & 03 were found and impugned under s/s (4) of section 133A of the Act. These IMs were confronted and various statements were recorded. As stated earlier hereinbefore statement of four employees E1 to E4 (as placed on record by the Revenue) were recorded who deposed confirming the transaction from the IMs confronted. The E2, Mr Arjunan in addition to confirming the bogus sub-contracting also deposed to have dealt with cash handing for the assessee company. In particular when confronted Pg-03, 27 and 60 of IMs annexure A/BCPL/02, the E2 confirmed to have received a sum of ₹10Lakhs, ₹15Lakhs(₹10+₹5Lakhs) from cashier and ₹80Lakhs from associated parties and handed over either to Mr Bagkiya or on his direction to other parties, respectively. ITAT-Panaji Page 29 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 18. From Pg 31 of IMs annexure marked as ‘A/BCPL/01 the E2 also confirmed that on 15/11/2016 received a cash of ₹215.50Lakhs from associated parties and handed over to other on the direction of Mr Bagkiya. Confirming from Pg 32 of with IMs annexure marked as ‘A/BCPL/01, E2 also deposed on statement that he received a cash of ₹75Lakhs from different parties which was paid on the like direction of Mr Bagkiya. We note that, in all the E2 for the year under consideration had been dealing with total cash ₹395.50Lakhs out of which ₹25Lakhs were received by him from cashier and balance from associated parties. The said total cash were either paid to other parties on the direction of assessee company’s director Mr Bagkiya or handed over to him in connection with business activities by the E2. These statements of these employees remained unretracted anytime until now. ITAT-Panaji Page 30 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 19. Even statement of Mr Bagkiya was also recorded who first confirmed the transaction from Pg-28 of IM marked as ‘A/BCPL/01 relating cash of ₹563.04Lakhs received from one single party (anonymous) which was maintained prior to demonetisation. These cash confirmed to have been utilized for business purpose which inter-alia (i) securing government contracts, (ii) clearing bills from such govt departments (iii) liaisoning expenses, (iv) for creation of new assets and (v) other expenditure in connection therewith etc. and relating to cash confirmed the aforestated transaction being done for the business in his statement. In addition to above further from the notings of Pg 31 the director also confirmed to have received a sum of ₹499.50Lakhs received from one more anonymous party which was kept before demonetisation and the said cash was also used for the aforestated purpose. ITAT-Panaji Page 31 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 20. As we note that, the admission (& retraction ) of the director is not mere simpliciter but supplement to the IMs found & impounded in the course of survey. The further verification of these findings in the light of IMS either by inquiry, analysis and investigation could have only be done from the books of accounts, which the assessee company intentionally destroyed (as confirmed by E1). Since the books and records were destroyed by the assessee company therefore the Revenue impeded from conducting verification, analysis & investigation of investment into assets/property (as listed in answer to question 7 of the statement of Mr Bagkiya) expenditure incurred in connection with business out of afforested cash notings. Therefore, the respondent claim that, addition was made solitarily on the basis of admission is factually incorrect and devoid of merits, thus the adjudication of Ld. CIT(A). ITAT-Panaji Page 32 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 21. Mere retraction of the admission on later date would not be sanctified for reversal of impugned addition. The admission by the director was supported by IMs found in the course of survey and in of course in the facts that books/tally records were intentionally destroyed by the respondent assessee. Therefore, in view of this clear findings the case laws relied upon the respondent and accepted by the Ld. CIT(A) in first appellate proceedings could have no application as the present case is highly distinguishable on facts. We find that the similar facts where admission/statement was retracted came for consideration before the Hon’ble Supreme Court in the case of ‘Bannalal Jat Constructions (P) Ltd. Vs ACIT’ [2019, 106 taxmann.com 128 (SC)] wherein their hon’ble lordship dismissed the SLP filed by assessee confirming the order of Hon’ble Rajasthan High Court. ITAT-Panaji Page 33 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 22. As we already noted from the IMs, confirmation statements of employee and initial admission of director (although later on after almost three years same being retracted) that the assessee company was indulged into booking (i) booking/debiting bogus labour payment & site expenses (ii) booking/debiting bogus sub-contracts payment and (iii) booking/debiting bogus Un-Registered Dealer etc. and corroborative incrementing material in the form of diary impounded could have verified from books for their second level confirmation but for the intentional destructive act of assessee company failed. Therefore, the Revenue’s action in bringing the same to tax cannot complete be faulted with. However, we are not unmindful to the facts that, total amount of cash kept out of books for business exigencies confirmed by employees do not match with that admitted by the director originally. The ITAT-Panaji Page 34 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 possibilities of double noting of figures and their confirmation by the director could not totally be disbelieved or rejected. Therefore, the impugned addition of ₹1062.54Lakhs in view of the first stage confirmation by the employees would amount to double addition. In view thereof, giving the benefit of doubt to the assessee the impugned addition to meet the end of justice necessarily be restricted to the figures confirmed by the employees to ₹395.50Lakhs. The balance impugned reversal of addition is thus vacated. The ground no 3 thus stands partly allowed.

Ground No. 04 23. We note that, during survey proceedings the survey party called upon the director of assessee company to explain the quantum of labour payments made in cash and the reasons thereof. The appellant submitted before them and the Ld. AO, owing to ITAT-Panaji Page 35 of 39 ACIT Vs M/s Bagkiya Construction Pvt. Ltd. AY: 2017-18 peculiar feature of construction industry the labour turnover is more and predominately operates on day-2-day basis thus on cash payment. Therefore, such labour expenses so incurred are mostly paid in cash beside engaging contractors/employees to whom cheque is given for withdrawal to meet the payment obligation. Since reconciliation, such figure are not readily available therefore an additional income of ₹1,18,49,855/- was offered to tax. Since the books were destroyed by the assessee’s employee and thus not could be verified for actual figure, the Ld. AO made the addition in the basis of admission.

-S/d- -S/d- PAVAN KUMAR GADALE G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER Panaji/Dt: 27th February, 2026. Copy of the Order forwarded to :

1. 1. The Appellant.

2. The Respondent.