Income Tax Appellate Tribunal - Nagpur
M/S S.S.Patil 7 Co., & ... vs D.C.I.T Central Cir.2)1), Nagpur on 30 June, 2017
Feet & . I.T.4.No05,76 & #7 /Nag/ 27016 T.T.A.Nos. 276 & 271/Nag /2016 oi IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. kK. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER L.T.A. Nos. 76 & 77/Nag/2016 Assessment Years:2007-08 & 2008-09} ACIT CENTRAL CIR ~ 2(1), =) Vs} 5.5. PATIL & M.G. BHANGADIVA a 3°° FLOOR, ROOM NO, 312, 908-909, B-WING, LOKMAT AAYAKAR BHAWAN, BHAVAN TELANGKHEDI ROAD, WARDHA ROAD, NAGPUR -- 440 001. NAGPUR - 440012 PAN: ABIFS3645L ore (Appellant) UewTeit (Respondent) | LT.A. Nos. 270 & 271/Nag/2016 Assessment Years:2007-08 & 2008-09} SS. PATIL& Co. MG. [Vs [DCIT CENTRAL CRT 3D, BHANGADIYA (JV} 908-309, B-WING, LOKMAT BHAVAN WARDHA ROAD, NAGPUR - 440012 PAN: ABIFS3645L AAYAKAR BHAWAN, CIVIL LINES, NAGPUR - 440 001. eT (Appellant) weal (Respondent) l Revenue by : | Shri ALR. Ninawe (DR) | Assessee by :_| Shri K.P. Dewani (AR} | | Date of Hearing | 20.06.2017 7 Date of Pronouncement : 1 30.06.2017 | Teer ORDER
PER P.K. BANSAL, V.P.:
These cross appeais have been filed against the order of the CIT{A) dated 30.12.2015. In its appeai, appeal:
the assessee has taken following grounds of 1.1.A.Nos.76 & 77/Nag/2016 (2 1.7.A.Nos.270 & 271/Nag/2026 Ba:
"i The notice issued under Section 153A of LT. Act, 1961 is itegal, invalid and bad in law and consequent assessment framed thereupon is liable to be cancelled.
2. The Learned CIT(A) ought to have directed to accept the income as shown in return filed pursuance to notice u/s, 153A of £7, Act 1961 and deleted the entire addition as made by the AO. in the assessment framed.
3. The Learned CIT(A) erred in not accepting the prayer of assessee to adopt net receipt for defermining the estimated mcome at the hands of assessee after excluding the recoveries made by the Government Departments on account of material supplied, sales tax and Service tax etc. 4, The addition confirmed by learned CIT(A) by adepting 106% of receipts is unjustified, unwarranted and excessive.
5, The learned CIT(4) erred in upholding the part addition made by A.O. by adopting 16% of receipts.
&. The assessee denies tiability to pay interest under section 234A, 2348 and 234C of LT. Act 1961. Without prejudice, levy of interest under section 2344, 2348 and 234C of LT. Act 1961. is unjustitied, unwarranted and excessive,"
se 2. In its appeal, While the Revenue has taken the following grounds of : 4, appeal except change in figures for the assessment year 2008-09:
"I. Whether on the facts and circumstances of the case and in law the La. CIT(A) was right in thwarting the very purpose of search and seizure provisions of the Act by ignoring sefzed incriminating documents and thereby directing the AO to tax the income on presumed percentage based on surmises.
2 Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in not affording the opportunity to the AO of being heard during appellate proceedings despite AO has: specifically asked of being heard vide his fetter dated 19.02.2015 and thereby passing order in undue haste ignoring Provisions of the Act J Whether on the facts and in the crcumstances of fhe case and in law, the La. CITA) was right in deleting the addition of __L.A.Nos.76 & 77/Nag/2016 I.T.A.Nos.270 & 271/Nag/2016 Ks. 22.47, 136/- made on account of bogus sub-contract Payments?
4. Whether on the facts and in the CHCOUMSIANCES OF the case and inlaw. the id CITA) was justified in deleting the addition Of Rs. 22,47,136/- made on account Of bogus sub-contract payments without appreciating the fact revealed from the seized materials and statements recorded that the sub-comractors are only name fenders and have not executed any sub-contract?
3. Whether on the facts and cacumstances of the case and in law the Lo. CIT{A) was fight in heiding that the MCHMUNaAG davies seized from residence of the main person of the group cannot be said ta be belonging to particular Concern ignoring the documentary evidence and. the admission of Shri Mitash Bhangdiva himself that the entries iM the diaries pertain to the details of cash Sow of assessea Group's business activity and the entries in the diaties were not completely recorded in the books of account:
b. Whether on the facts and in the CHCUMSEANCES OF the case and in law, the La CITA) was right in deleting the addition of RSs. 22,47, 136/- being unaccounted Hicame?
' Whether on the facts and in ihe circumstances of the case and in law, the Ld. CIT(A) was Justified in deleting the adcition Of Rs. 22.47 136/- being unaccounted income without appreciating the evidences found and seized during the search and seizure action?
&. Whether on the facts and in the CHCLUNSTANCES OF the Case and in law, the La. CIF(A ) was justified in directing AO to adopt total income of the assessee at the rate OF 16% Of gross receipt by ignoring the findings given by the AQ fegarding bogus sup- contractors, unaccounted income and Gtaliication payments?
9. On the fact and circumstance of ihe case and in laur the £0. CIT(A) erred in ACCEPUNG aSsessee's contention thet various SuD-contfactors used to keep deposit of money withdrawn by them from bank with the assessee group for safe custody which Was recorded on the credit side of the incriminating diaries without appreciating that if the contention of the assessea is irue then the credit entries shall be in the faine of the sub-
HE bee E.T.A.Nos.76 & 77/Nag/2016 & L.T.A.No5.270 & 273/Nag/2016 EREet.
contractors but the fact is otherwise as ony names of the banks were found written there, IQ. On the fact and circumstance of the Case and in law the La. CIT(A) erred in accepting assessee's contention that the su contractors kept their money for safe custody with the assessee group and amounts in small quantities were Ister withdrawn By them for meeting the expenses at sites by ignoring the fact that none of the names of the sub contractors appeared on debit side Of the incriminating diaries.
fi, On the fact and circumstance of the Case and in law the ia. CIT(A) erred in not caiculating exact unexplained expenditure and unaccounted investment mentioned jn seized incriminating daries as weil as inflated claim of expenditure if various projects and directing the AO to assume certain percentage.
#2. On the fact and circumstance of the case end in jaw the a. CIT(A) erred in holding that faving been accepted receipts from the assessee for assessing the income in the hands of sub contractors the payments made by aSsSessee group to such sub contractors cannot be treated as non genuine, ignoring the fact that sub contract payments were assessed in the hands of the GSSESSCO GFOUD as BOGUS Sup contract Payments and in the Aands of the sub contractors Protective assessments were made by treating the entire féceipts as income as no contract was execiited.
£3. On the fact and circumstance of fhe case and in jaw the id. CIT(A) erred in observing that unaccounted Payments or inalowable expenses like Gratification paid to various Politicians and government employers have no corroborative evidence on fecord to hold that assassee has made Payments af any iegal gratification, The onus in on the assessee ta prove that the Payments were genuine and incurred legaily. As the cash Payments were not recorded in the regular books of account and as ihe assessee failed to substantiate those Payments, the CIT(A) ought ta have upheld that the entire amoutt of Rs. 47110 crores is unaccounted expenditure.
£4. On the fact and circumstance of the case and in law the Ld. CHYA) erred in relying on the decision of Hon'ble ITAT in Bhangdiya group of cases as at that time the information contained in incriminating diaries was not available either to the --
I.T.A.Nos.76 & 77/Nag/2016 I.T.A:Nos.270 271/Nag/2016 5 AQ or to the appellate authoritias while restricting it to 12%. ihe CITA) ought not have relied on the decision of Hon ble fTAT when seized documents Prove clear concealed income ang unexplained expenditure.
£5. On the fact and arcumstance of the case and jn law the Lil. CITA) ought to have appreciated the fact that in the case of aSSESSEES Group it is not feasible to estimate the net profit at a Patticitat ratio as out of GOSS receipts of 579 crores the @SSESSEE Group Made unaccounted Payments to the tune of Rs. i7l crores and fance Spent only RS. 408 crores towards execution of contract work. Whatever Pont was derived on execution of the contract work by the assessee Group, fo that brohit unexplained / unrecorded CXPENSES Of Rs, 171 crores were fequired to be added to arrive at ie correct taxable come of lie assessee.
£6. On the fact and circumstance of the case and i daw the id. CITA) failed to appreciate that the taxable income feed not be equal to the actual net Profit derived by the assessee as jt May incude addition towards vatious ather provisions fike section 404(3} Faia). 68. 9 69C etc. and in the case of the GSSESSEE OTOUD addition t/s, 69C is applicable, "
At the outset, the asseassea did not press ground Nos. 1 & 2 during the course of hearing therefore, these grounds are dismissed as not pressed.
4. In respect of ground Nos. 3 to 5 taken by the assessee in its appeal and ground No. 1 to 16 taken by the Revenue in its appeal in its appeal, both the parties agreed that the issue involved in assessee's appeal as well as in Revenue's appeal in all these grounds is common and identical to the grounds raised by the Revenue as well as by the assessee for the assessment year 2007-08 to 2011-12 in the case of Mitesh Gotulalji Bhangadiya and whatever view this Tribunal may take in the case of Mitesh Gotulalji Bhangadiya in 1.T.A.Nos. 56 to 61/Nag/2016 and 261 to 265/Nag/2016, the same view may be taken in all these appeals.
{50 pee.
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I.T.A.Nos.76 & 77/Nag/2016 ae fee i.T.A.Nos.270 & 271/MNag/27D16 tag aa Wl
5. We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below as well as the order of this Tribunal dated 29/06/2017 in I.T.A.Nes. 56 to 61/Nag/2016 and 261 to 265/Nag/2016 fn the case of Mitesh Gotulalji Bhangadiya. We noted that the similar issue has arisen in that case. The grounds of appeal taken by the assessee a5 well as by the Revenue in that appeal are similar and identical to the grounds of appea! taken in the case of Mitesh Gotulalj Bhangadiya. In that case the tribunal under para 12 has held as under:
'12. We have heard the rival submissions, carefully considered ihe same along with the orders of the lax authorities below. We noted that the facts and the issue invatved in aif the years under appeal in the case of the assessee are similar and identical, The CITA) has passed a consolidated order, The undisputed facts in ihe case of the assessee arc fhe group concern are that 2 seatth and seizure action u/s 132 of fhe Act was carried out jn the Bhangdiya Group of cases an LVOL/2OL 1. simultaneously, the business and residential premises of the assessee were also searched. During the course of seach conducted, fncriminating Papers and documents were found and seized, Shri Mitesh Gatumal Bhangdiva is the key person of the group. SA Mitesh Bhangdiya has two sons namely Shri Kirtikumar M. Bhangdiya and Shri Srikant M. Bhangdiva 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 Satay Rameshchandra Heda, Ausband of Mitesh Bhangdiva's sister, Smt. Pradn Va, resident of Amravati and Smt. Manisha O. Maniyar, widowed sister of SAY Mitesh Bhangaiva who fives with Bhangdiva family.
i2.1 The main business concerns of the group Gaduding those discovered as 2 result of the S@arch action) are as follows -
i M/s MG. Bhangdiya (AERPB2503F), (Prop. MGB):
converted into a company M/s MKS. Constro-venture Pyt (AAHCMO383T) Lid. from OL,04, 201 1.
Z M/s Mahendra Construction, Prop. Shri Samay Heda (M0) (AADPH7109)) L.T.A.NOs.76 & 77/Nag/2016 ia L.7.4.Nos.270 & 271/Nag/2016 Siege 3, M/s Mahendra Construction 85 MG. Bhangdiya CV) (AANFM56588) 4, M/s Kittikumar M. Bhangdiva (Prop. KMB): converted into @ company M/s MKS. Acme Buildcon Pvt. Lt) (AAHCMO382K) from 01.04.2011. (AGYPBIE59G)
5. M/s KM. Bhangdiya & Mahendra Construction (IV) (AAKFRIB20C)
6. M/s Shrikant M, Bhangdiva (Prop. SMB)(ATCPBI337})
7. Mitcon Infrapraject Pvt. Lid. (MIPL) (AAGCMI868H) & Lokshahi Publications Pvt. Ltd, (LPPLHAABCLO673L) 2 MTZ infraproject Pvt. Ltd (AAGCM30474)
10. Sakshi Gru Nirman Pvt. Lid. (SGNPLYAAOCS7974G) if, aaj Stone Crusher & infraventure -- Prvé.
Ltd (AADCB5273C) iz.2 The group fas also entered into joint ventures with various. other civil contractors of the city fo secure some civil contracts. A few of them are fisted belaw:
M/s MG. Bhangdiva & Hitbhav Engg (JV) (AAOFM47451) M/s M.G. Bhangdiya & S. §. Patil & Co. GV ABIFS36451} M/s Darshan Construction (IV) (AAHFDO65S4N) M/s MR Dhoble 8&8 K M Bhangdiva (IV )(AAPFMO6228) Aw Ns i223 The nature of the business of the Bhangdiva group primatily is executing civil contracts. The groug works mainly for Government departments tke M/s Vidarbha irrigation Development Corporation and has been engaged in executing various contracts pertaining to the irrigation projects in the state of Meharashtra. During te course of search operations incriminating documents were found and seized from the residential premises of Shri Mitesh Bhangdiyva. Item no. 1 fo 65 of Annexure-B seized from his residence are the diaries containing fedgers, daily cash books and bank books maintained by the Bhangdiva group. 36 Cash books contained entries for the period from 26/07/2006 to 18/07/2011 and 27 diaries relate to the financial year 2006-07 to 2010-11 whereas the remaining two diaries were maintained for house hold and misceflaneous expenses, A statement of Shri Mitesh Bhangdiya was recorded on oath on 26.07.2011. In his sworn statement recorded during fhe course of search action, Shri Mitesh Bhanodiya was confronted with the eninies borne out from the seized diaries marked as 8-1 fo 8-65 and to explain the contents of these diaries, Shri Mitesh Bhangdiya in his statement recorded has HSS
1.T.A.Nas.270 & 271/Nag/2016 fa submitted that the entries in the Glaties and the ledger Pertain to fhe business receipts anc business expenditure. The ASSESSING Officer in the assessment order has recorded 4 finding that as Per the item no. } fo 65 of aNTOxure-B, it is apparent that the amounts withdrawn from the bank accounts of the sub-
coniractors were credited to the aay cash balsnce of Bhangdiya Group which was confirmed by Shri Mitesh G. Bhangadiva in his statement dated LEOUW2OTT, fhe Assessing Officer Aas reproduced the statement of Shri Mitesh Bhanadiva recorded on L4YOOOLT ip Para 6 of the assessment order fhe ASSESSIFIG Officer in the assessment order has also recorded @ firiding that te seized documents being 8-1 to 8-68 contain enties of aif expenses incurred by the Bhangdiva Group in cash from FY. 2006-07 onwards and expenses incurred through the bank accounts from FY. 2009-10 onwards. TAus, the Assessing Officer found that the actual expenses incurred do not match with those shown to have been incurred in the books. The Assessing Officer thus concluded that the books of account of Siti M.G. Bhangdiva maintained for income-tax purpose do not reflect the true business affairs and are not at aif reliable. The Assessing Officer analyzed the entries in the diaries and took the view that on receipt side Various feceipts inchioing the withdrawal from the bank of the aSSESSEE OFOUP CONCeMNS were recorded and on payment side entries of EXPENSES HE interest Payment repayment of loan, deposit into bank aCcounE fousehotd EXPENSES, Personal expenses, Payment fo various POrsOns i7 Cash and investment in Properties are found recorded it was also noted by the Assessing Officer that some of fhe entries made in the seized diaries were found reflected in fhe books of account maintained by the Bhangdiya Group. slatement of Mitesh Bhangdiva was recorded on LYOF/ 204 1, furing the course of seach, Mitesh Bhanediva was confronted witht the entries borne out from the seized Gaties marked B-t to 8-65. In reply to question No. 30 of fis statement, Mitesh Ghangdiva submitted that the entnes int the diaries and ledgers pertain fo the business receipts and business expenditure but at Present if {5 very oalfficult for Aim to state whether the antrias recorded in the seized diaries and accounted in the regular DOOkKS Of account and Same can be explained only after verification of the entries of fhe diaries with rhe regular books of account maintained by the Bhangdiva Group. Shri Mitesh Bhangdiva, reply to question No. 38 we noted voluntarily offered additional unaccounted income of Rs.26 crores for the HOCK period including the current financiat year over and above.
ILT.A.N6S.76 & 77 /Nags2016 na ae HA) tae
1.T.A.Nos.76 & 77/Nag/2016 §
1.T-A.Nos.270 & 271/Nag/2016 Fim the regular income dectarec! i the return filed for the aSSESSHEM year faiing within the block period. The income so declared are summarized as winder:
BHANGOI TA GROUP Particular.
AY 06-07 AY 2OD-O8 4Y 2008-09 Mis MG, Bhangths AY 2009-100) AY 2OLU | AY.2061 12 Contract Income ag Per original return 22,00.540 24,56.131 18,61,653 $5,490,712 Addibenal Incivme declared during Survey 24,97, 36] 194,009 27,004,312 1,50,.336 G43,1H,327 Graad Total (Rs) F148 oF 1383,99, 275 66,46, (18 Additional [neers Offered During S@arch $,04,560 #¥, E952 576,848 78 255,14,293 Contract [noone Declared 45,97,90) | 439,00, 00K) 45,66,175 | 5,00, 00H) | 10 AG, BO ce 864,27, 783 | 970,07,000 2314,04,076 MES Fonsina Yenure F Lid Contract Jncome as Per onginal return Addticeal Income derated daring _ Survey Additional Income Offered During _ Seach % Contract Income Declared Contract Income as per orginal return 36,77, 656 125, 20054 26,48, 924 Additloaal Incame declared dunng Sunaey 40.4165 49,1707 ALA 20,60,666 ¥1j13,224 -
73 3a074 | F626, 315 1R2, 75,373 182, 75,373 5 Lit, 74,697 184,744,627 | 347, 50,000 i 347, 50,000 708,488 366, 2th 174 TO7,86, 304 Additional Income 26,80, 445 BY 72,873 18,36, 964 104,00,00K) 712,000,004 Se, 0G, Hit 8,26, 610 12061, 926 40,00, 000 202, 0KF OKI | 1 78,.00,600 | 01, 73.685 20,41,517 34,000,000 Mis, Mahendra Const, & MG, Bhanodiya lv Contract Income as fer orginal return 15} ,47,756 31693743 FAS T4142 458,75.420 347,53518 820.010 74,7736 Additional Incame declared during Survey 157,19,964 195,98.115 492 65,039 1617,07,902 HARA? 12 EF WES LT.A.Nos.76.& 77/Nag/2016. ae I.T.A.Nos.270 8 271/Nag/2016 1 Additional Incorie | ss, | | | Offered During 257,18,820 | ig0.seeeu | 072,23.660 | 13,64,164 see" || |__| a || tit tact
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Contract Inoomns | Is | Peclared Wea? 730 | oss | $04, 3,858 | 1465, Of, coo | 543-00 Oo i 247, 00,005 080, 5B, 578 Mis, £. M. Bhangdiya | | 7 a ft fp ro Contract Income as | Per original require 10,78 709 32,806,795 27020, 404 | 20,08, 406. G1 2b, Vee 6AD 4 32, mm 1 | tf | seo 2 a = _ Contract Incgme as Per Original return 7 54 Addtlonai In Income dedared during Survey | --_ Additonal ficome | | :
declared dung :
"sine 14,412,344 35.22,385 355 | senor [soos | _ ot B56 712 Addiponal ticome ~T 7 | | L fered Curing 2 | 8.50.850 | 10,7029 | 28,41,084 m tos 330 2 33,00, 786 139,36,276 Contract Income | | Declared 24,31,043 ) 7.00,009 57.00.0005, 57,006,000 |e [20.00.000 66,00, 6,00,008 --[e 391,41 131,049 Contract Income as Ber orginal return Additlanal Income dedared during Survey ~-Addilional Income Offered Guring Search 2,20, 187 | 4,03, 997 Contract Inname Declared 5,00, 000 | 4,83,997 l at,48, 340 Contract Incore as Per original rete __ - | | 9.43,467 ~ Atiditienal Inconne -- --_ Poth 4 ee deciared duelag OLszs | . | en tne NS€ LT.A.Nas.76 & ?7/Nag/2016 ET.A.NOS.270 & 271/Mag/2016 < Additional Income | | | Offered Dung |. . | soon | | | 40,000 4 a ee | -- +f -- | ------ L -- i . > | é Contract tneome | | | | | Declared tthe? Wao | 13,15,130 | 40.0001 | . - | a aoe Top ee! | a aap MiS KM Bhanodiva ) ee Contract Income as Per onginal ratarr Addon Tnteme @eclared Gurdriey aura .
Additional tncome ¢ Guriny Search Contract Tneame poeta afd | 5,414,554 | o32463 | | | I | | 44,00 toe | 22,00,000 a --
ee Oe ae ee Mitcan Infra Protect F Lig a Contract Income a5 Pe? orldinal retry ms Additonal dcome Geared during Survey Additienat Income Off ed During sarc [------ aE a | | s2aic00 | 121.01,571 | gagaga 182,82, 520 oe i a er tie ae _|3 | | [LP 30G000 _| 155.000 240m 75,00, 008 | t338,8 ig i2 = Be Mo? | 80,93,260 | Contract: Income a5 'Ber originat return Additional Theme 69,596,990) 414,86: 202 as 34,078 | 1107, 15 934 1 556/05 )476 278,24,585 | FOR) 759 Seat during 7852601 | 351,55 333 261,286.06 | Sla1ase0 | | | | 1104,48,503 "Additional Income Ns ee | mm lan. b TTT po--4fa- = itsted Drsring 26.8044 | 51,73,583 | 29.07.2003 | 323,92, 493 | 1222.48.63 | 885,14,824 | 216.05.435 | 2356,41.648 i He nc Contract Income Creclared L.7.4.Nos.76 & 77/Nag/2016 & ee
1.T.A.Nos.270 & 271/Nag/2016 ERE ee:
T?4,.28,950 | 652,435,572 Addtitenal Incoane In cases of Tndeadual :
£2.4 From the statement of Shri Mitesh Bhangdiva, it is apparent that the diary found and seized belongs io the a55eS5€ Group and the assessee group did not disawn these diaries even though in the subsequent statement recorded on L7/O7/2013 Shri Mitesh Bhangdiva stated that these ciaries were brimariiy maintained by 'his father Gotumal Bhangdiva, The Assessing Officer, we noted. has also observed that these seized diaries also contain the Payment made in cash for probable extraneous gratification to various Persons including politicians, government officersfofticials which are recorded along with therr Names, dates of payment and amount Daid. We noted that the Assessing Officer has not examined thease Persons for bringing fhe corroborative evidence on record in support of his finding that the cash has been paid by the assessee group for Probable extraneous gratification, We noted that the Assessing Officer Made aft exercise to match the entries of the fay payment and receipt with the entries in the regilar books of account of Bhangdiva Group, The Assessing Officer came to the conctusion that the receipts are Predominantly withdrawals from the bank account by way of creating bogus sub-contract expenditure, The Assessing Officer found that the assessee group fasdeducted 2 SUM OF RS.261 crores towards the sub-contract Payment against the gross receipts aggregating f0 R8.579 crores. It was found by him aiter verifying from 21 contractors that & Su OF Rs. 54.40 crore ts attributable to the amount deposited in the bank account of the sub-contractor by account payee cheques by various concems of Bhangdiya Group, which was subsequently withdrawn in cash and is reflected on the receipt side of the seized diaries. The total amount so reflected in fhe diaries on the receipt side was computed at Rs.182.52 crore The Assessing Officer added the said "inaccounted amount of Rs.182.50 crore in the income of the assessea group concern. A sum Of RS.54.40 crore was added in Proportion to the amount of cheque credited by respective Group concern in the hands of the respectiv@ group concerns. For the balance amount of RS.1278.1? crore. the Assessing Officer added the same in Proportion to the contract receipt shown b y fhe group concern in the respective assessment years to the total turnaver of tha Group concen in that year. Now the question before us arises .
705,201,473 Te$z, 40000) | 21226 R07 1643,00, 000 | 14, 99,006 | 7451,79,992 ! | . | 10,492,559 1R02097 | s oe Fass . | VTS | 243,18, 352 whether tha sairf SHY OF RS, (82.52 crores, found recorded in the daries found awing the course Of search as receipt being withdrawal from the bark account Of tre GWOUP CONCErn as waif as from the hank acoutit Of the svO-contractor can 58 tegarded fo be tha unaccounted income Of the assessee At the micro CF subStatitive basic # the hands of fie SuD-contractor. fhe Assessing Officer thus has Til accented wile Framing the Officer. Once the SHD-Contractor fas been aSSES88E0 and their feceipt being the Withdrawal made by He sub-contractor as wel 8S the withdrawal Made by the aS505S8€8 from the bank account P Lise SY Ps ON fist Nok ie "fal ! w | Bi aap = ney oat"
I.T.A: Nox;
L.T.A.Nos,27 768 77/Na 0& 2371/Ns 9/2016 Perea 9/2016 we LF.A.Nos.76 & 77/Nag/2016 & T.T.A.Nos.270 & 272/Nag/2016 | US, HO corroborative evidence were referred to and brought on fecord. Thus, the outgoing/investment to the extent of Rs. 32. 52 crore can be regarded to have been incurred by the assessee outside the books of account but the same ate spent out of money withdrawn from bank, the source theréof cannot be regarded to be unexplained. We noted that in ts case the GS5SOSSEE &S well as assessae Of search, surrendered @ sun fled the return in response to the Assessing Officer could ha fhe unaccounted investment provided they are no GOP concern, during the course 1 OF RS.26 crore and accordingly, fhe notice u/s 153A. Af the most V8 made the addition in respect of t covered by the amount surrendered by the assessee during the block period.
in fact, in our View, the source of the said fhe diary is also coming out of the cash banks of the group concern as well as of expenditure show in witharawal from file sub-contractor which fas atready been disclosed to the Reventa and the receipt thereof has already been assessed to MICOME fay, 42.6 We noted that the business income assessed by the Assessing Officer in percentage of the gross receipt in the hands of the various group concern varies from 9.34% to 129. 97% ag is apparent from the folowing chart:
HE +e Partiqular |AY 2006- TAY 2007. lay 200g: Tay 2009- JAY 20f0- [AY 2011- [AY 3012 oF Ga g9 ig ii al 13 M/s M.G, Bhangdiya 11.79% = (44.27% --135.60%. "T18.60% |27 4ngq 49.50% MES Constro Venture F 9.34, , Ltd . Bi M/s. Mahendra 10.78% (43.13% [25.44% T1ba% [31.75% 33.05% 127.73% Construction M/s. Mahendra Const. & 43.53% (73.44% 117, 69% [41 Br Ite O35 MG. Bhangdiva JV Mis. K.M.Bhangdiye [11.97% [33390 [>B7aaq 76.26% [15.2204 [139404 MKS Acme Bulld P Ltd 10.28% M/S.M G Bhangdiya and 66.53% {11.98% 27 Bim looou Hitbhay Enoq Jv M/s MG Bhangdiya and 54.82% |139.99%, "173.7304 SS PATIL Iv M/S KM Bhanodiya JY 25.28% {39.52% Mitcon Infra Project P Lte 1G.OF% 110.00% [10.00% {Ponsolidated 36% 47.01% [74 36% [18.52% pa4.55%% 49.97%, 44.5954 I.T.A.Nos.76 & 77/Nag/2016 3 government contract was the Same during aif the ASSESSMENT Years. in assessment year 2006-07, the nature of the work executed for Vidarbha irrigation Deverooment Corporation remains lhe same as in the CASE OF the asseascas far SUDSeEQuErt Shown by the assesseea Group in the retum about 12% Of the GOSS receipts. The ASSESSING Officer, as is apparent from the aforesaid chart, has assessed the income on differant footing in ihe subsequent assessment = years -- under the -- similar cucumstances. There had been search jn {he case of the observed that the ainount withdrawn from the Wary is utilized for unaccounted Payments which are not allowable fike . Fratification paid to Poktician and Goverment Onficials, However, the Assessing Officer does not refer to any corroborative evidence on fecord to hold that the ASSCSSCE fas Made payment as Hegal gratification Ae has taken 3 view by' observing that Payment Made in cash is Probable extraneous Gratification. During the COUrSE OF Search statement of Shri Mitesh Bhangdiva was recorded on 20/07/2011 and he i answer (0 question No. 30 explained that the seized documents are details of cash flow. Puring the assessment Proceedings Shri Mitesh Bhangdiva has explained that the diaries are noting for E.T.A.Nos.270 & 27i/Nag/20tKR ee /f€2 T.T.A.Nos.76 & 77/Nag/2016 ve ca ie LT.A.Nos.270 & 271/Nag/ 2016.
Aas nothing to de with the bottical leaders as much as otitical feaders fave no busi es88S fransactions with Bhangdiva Group, Even we noted that the Assessing Officer has not Drought out on fecord ary specific evidence fa show that payment is made ta any politician or the Government officerfofticial to whom tfie gratification payment have been given by the assessee Group. We noted that the Assessing Officer out of ihe sum Of RS. 182.5) crores, added Rs, 54.40 crores on the basis of deposition of the sub-contractor for which when the assessee fas asked for the Cross examination, the cross cxamination was nat afowed to the aSsessee, Which is contrary to the principles of natural justice, Hon bie Supreme Court in the case of Andman limber industries Vs. Commissioner of Cantraf Excise, Kofkata (Civ? Appeal No, 4228 Of 2006) under fhe similar cYCcuMstances, when the adjudicating authority did not allow the cross examination of the witnesses, held as under:
"According to us, NOL allowing the assessee tg Cross examine the witness by the Adjudicating Authority though the statements of those witness ware made the basis of the impugned order is a Serious flaw which Makes the order Aittity inasmuch as it amounted to vioiation. of Principles of naturat Justice because of which tie assessee was adversely affectadt in view of the GO0OVE, We ate of the OMmnon that if the festimony of these twa witness is discredited. there was no Material with the Department on the basis Of which I could Justify its action, as the Statement of the aforesaid two WHAOSS was the only basis of issuing the Show Cause Notice.
We, thus, ser aside the impuoned order aS Dassed by the fribunal and allow this appea}"
Following the said decision Of Honble Supreme Court the Statement of the Sub-contractor, in our View, cannot be relied of, Ever otherwise aso, Wwe noted that no COrfroborative evidence being brought on record to Prove that the receipts, Which has been added pb v the Assessing Officer in the income of the assessee is the undisclosed income of the asSOssee. in fact ihe receipts for which the additian has been made by the Assessing Officer represents the Part OF the gross receipts of the aSSe58ee8 and assessea Grou concern and the sub-contractor, which has duly been taved tO income tax, As Pointed by us earlier, due to this addition, there has bean Auge variance in the (pox @§ the same ara available on (OOO WNC are accepled by the assessee and the Revenye authorities without spute L.T.A.Nos.76 &% 77 /Nag/2016 a pe LT.A.Nos.270 8 271/Nag/2016 # and doubted by the Assessing Officer TRE Survey action relates £0 the GSSESSINENE year 2006-07 to 2008-09 which ae part of Tibial Nagpur Bench in i LAWNS. 268 269 and LES/NBQ/IOLZ Vide order dated CL/OF/2013 vier Considering {fe impounded BOOKS of account fike labour HAGES, meaterizf Purchases, EXPENSES, sub contract CXDENSES, off and lubricants, fepars an Maintenance ete Pérta Machine pire AGES, site AY. were not avaliable, Sta fement of Sr Milesh Bhs HUNG fo this MOadiva was WA then LT.A.Nos.76 & 77/Nag/2016 ae 1-T.A.Nos.270 & 271/Nag/2016 | acm recorded under Section 1334 and U/S. I31 of the Act on behalf Of ihe assesse, In the Statement dt.24.02.2009 and 13 @3.2009, i? response to various questions relating 10 the genuineness of ihe payments to third Parly sub contractors and if respect to between aif the assessment years relating to fese four aS5€552, For the year under consideration je, for GSSCSSHEANT year 2006-07 in case of Sri Mithesh Bhangadya, the additional income was offerad at RS.23, GF, 364 /- besides the income recorded an 24-02-2000 BAG 13-32-2009 of Sri Mithesh Shangadiva are incorporated in the order Of the AO. In GueryY OF question No. If it was answered that during the course of survey, Hf was noticed that there are certain discrepancies and omissions and to cover Up aif such discrepancies we have made aut mind to offer additional income over and above the regular income, We are under the PTOCESS fo determine such additional incame to avoid tigation and. to Duy peace of mind 'hereafter i response to question Nos. 18 & 19 of the Statement recorded On L3-3-2009, if was answered that the sish contractors wera awarded the sub contract work Oy our firms as Per contract Hotes and the nature of sub contractors has heen thar fabour charges and machine pire charges. The sub contractors by and large illiterate and therefore, their books of aCCOUunts found to be incomplete, without Mainenance of any bills and vouchers. The recorded during the fOUfse OF Survey that thera Ge certain ascrepancies and anomaies in the sub contract EXDCNnSES iff their books of accounts, non availability of bills and vouchers for the past three ASSESSMENT Years, Accordingly, it was Ssubinitted that there were certain discrepancies arict GHOMAHES in Bhe sub contract accounts, in books of aclounts for assessment years 2006-07 fo 2009-10. ihe assessee declared the acddjtionat income of Rs, 11 crore in helt firm and the five sister concerns in the assessment year 2006-07 to 2009-10. The working of the additional income of Rs. il crores will be done accordingly and the same will be shown. These part of the stalements have bean incorporated in the order of the AO as state above. Thereafter Vitex.
NES i.T.A.Nos.7 fle AO started Scrulily OF the case te AO noted fiat the GSSOS520 has shown VaMous expenses under the head labour & Wages, machine hire Charges, site EXPENSES and sib CONTACT EXPOSES etc on very Aigher Side, which are AOL supported by Vat vouchers. Neither GAY Further CVIGENCE was Alec ft was GSO observed By the AO that since there are various deicencies jn GCCOUNES Of sity contracts and the ASSESSCE Aas offered a sum OF RS. 23.97 3617. OF account oF discrepancies respect te SUB contract Merefore pe Procéeded fp Make further addition on account of Various deficiencies he,
i) absence of bills and VOUCNETS, excess claim towards IO 12. 7 33/- against additional COME shown by the assessee ai Rs, 23, 97, 380/%, which festtted further eadition of RS.6,15, 362/-,"
6 & 7? /#Nag/2016 ec
2.T.A.Nos.270 & 271/Nag/2016 eee a -- 7 ick Hebe LT.A.Nos.76 & 77/Nag/2016 ME 7 LY.A.Nos.270 & 271/Nag/2016 Gaerne that aif the assesses fave shown government receipt at KS.258, 55, 37,850/- and income On these contracts have been shown by these assessee at RS.6,49 57. £1 1/- which gives 3 NP fate oF 6.38%, The aSSssee fas offeract additional income declared during the surve YOURS. 11, 03, 85,877, which gives a NP rate of 4.27% and the total NP rate in aff thesa Contes Comes {0 1365%. OF course, the additional income of Rs. tt Crore OF Odd was segregated broportionately on the basis of contract receipts in the hands of each concen. if case of M/s Mahendra Construction & MG. Bhangadia (IV), the NP rate Comes [0 19.84% Le. for assessmant veer 2607-08 and this rate Aas been adopted fe AO and has appled the NP rate of 14% if alf the years in case of aif {N€SE ASSESSES On whom a@ Survey Was Conducted. In view, this approach of the AO was not correct approach. In case of MG. Bhangadiya, the NP rate of fhree years come to 9.87% | whereas in Case of other assesses je Sanjay Heda, M/s Mahendra Construction & MG. bhangadiyva (GV) , the NP rate comes ta 2.50% and in case of Ms Mahendra Construction & MG. Bhangadiva GV), the average NP rate of three years comes to £L.28% and if case of MAS irtikumarBhangadiva, the NP rate comes to 8.72%, and it case of MG. Bhangadiva and M/s Mahenaora Construction & MG.
Bhangadiya (IV), the NP rate comes {0 6.12%. In case of MG. Shangadiva and $5. Patit & MG. Bhangadiya, the NP of fhrea yEUS Comes to 11.55%. As stated abo ve, te average NP rate of aif the assesses for aif the vee years comes to 10.65%, Therefore, in our View, @ rational approach Shawd have been adopted hy the AO ar by the learned CIT (A). For one case ie. M/s Mahendra Construction & M.G. Shangadia (JV), the NP rate WAS 13.84% and if this rate is apotied in all other Cases, whch in Our view, is not justified However, there is also no dispute that there were so Many discrepancies in Maintaining vouchers, diffs, Su contracts accounts and other heads, which were fat veriable, therefore, the assesses and fis group came forward fo Offer an additional income of Rs. 11 crore and the same fas also Offered and due tax has been paid. Since as stated above, there are certain discrepancies, we are of the view, that if NP rate of £2% is adopted instead of 14%, that will meet the end of Justice, We made it clear that where NP rate shown by the GSSOS5SEC If any year is more than 12% then the more NP rate shown by the assassee has to be taken as assessee has declared Himself and in other years where NP rate shawn by the assessea is (ower Phan 12%, then 12% NP rate hos fo be taken. The AO wil recomputed the income accoraingly. For the sake of L.T.A.Nos.76 & 77 /Naq/2016 I.T.A.Nos.270 2 271/Nag/2016 clarification, in case of assessee for assessment year 2006-07, fhe NP rate comes to 12.8794 after showing the additional mcome, therefore, the Mcome shown by the assessee fas to be accepted. However, for assessment years 2007-08 & 2008-09, ihe NP rate shown by the assessee after additional income COMES 10 10.69% and 10.53%. The AO will adopt the rate of 12% and will compute the income accordingly. "
£28 We noted that the CLT(A) even though followed fhe order Of the Tribunal in the case of the assessee for the assessment year 2006-07 to 2009-10 but directed the Assessing Officer to estimate the net profit during the block period @16% and for that he fas given the reasons that there is material difference in the years under appeal i.e. search action has also resulted info disclosed by the assessea group in their respective returns fled flat ihe source of such acquisition Of such assets could be explained satisfactorily, We do not agree with such finding of CTT(A) as we noted that outing the block period. the ASSESSEE has surrendered Rs.11 crore during the course of Stivey for the assessment year 2006-07 to 2008-09 and further curing search a Sum OF R$.26 crore was surrendered Mus, & sum of Rs.37 CfOre Was available with the assessee Which assessee cotld have utilized for investment in the aSSElS aS well as for the purchase Of Jewellery. The unaccounted assets aS well as unaccounted Jewellery is only Rs.28.37 crore, which is much fess and is dhily covered by the disclosure of Rs. 27 crore during the block period Made by the assessee. Rs. 14 crore during the survey and Rs.26 crore: during the block period -- Even otherwise also, the Assessing Officer. we fhoted has gathered the information of UNACCOUMEd assets and unaccounted jewellery out of the documents found during the course of search which shows the agree with the reasoning of the CT T(A) if adopting the net Profit @16% of the grass receipts. IN our opinion, ne addition on account of unaccounted assets to the extent of Rs. 26 crores and gnaccouned jewellery of Rs.2.37 croras could be made. We. lHerefore, after considering the facts of the case, past history, relevant case laws and nature of the activities catried an by the GSSESSCE, ae Of the view that the estimation of the incame oy [68 HeeH I.T.A.Mos.76 & 77/Nag/2016 Fe
1.T.8.N0s,.270 & 271/Nag/2016 Bape the CIT(A) Is at a higher side and is not justified. Therefore. we set aside the arder of CITfA) to the extent af Grecting the Assessing Officer to estimate the net Profit @16% of the oross receipts and direct the Assessing Officer to estimate the net Profit on the gross receipt @12% as has been estimated and returned by the assessee group in their respective returns filed i response to the notice issued u/s 153A and is £39 of the income Tax Act.
6. Respectfully following the said decision of this Tribunal, we dismiss the ground taken by the Revenue and Partly aliow the ground taken by the assessee and direct the Assessing Officer to estimate the income of the assessee in each of the assessment years by applying the net profit @12% on the gross contract receipt of each year which has been applied by the assessee while filing the return.
7. The jast ground in assessee's appeal relates to the charging of interest u/s 234A, 234B and 234C of the Act. Learned A.R. was fair enough to concede that this ground is consequential in nature. We, therefore, direct the Assessing Officer that the interest chargeable u/s 234A, 234B and 234C \, be recomputed after giving effect to our this order, Thus, this ground is allowed for statistical purposes in all the appeal.
8. In the resuit, both the appeals of the Revenue are dismissed whereas both the appeals of the assessee are partly allowed, (Order pronounced in the open court on 30/06/2017 Sd/. Sd/.
(AMARJIT SINGH) ( P. K. BANSAL } Judicial Member Vice President Dated:30/06/2017 *Singh 1S Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. Concerned CIT
4. The CIT(A)
5. D.R., é) Gaal He (o-
1.7.4.N0s.76 & 77/Nag/2016 BR ee LT.A.Nos.270 & 271/Nag/2016