Income Tax Appellate Tribunal - Nagpur
M/S K.M Bhangadiya & Mahendra ... vs D.C.I.T Central Cir.2)1), Nagpur on 30 June, 2017
Fo tee ' --_-- a | . L.7.A.N0s.73 & 74/Nag/2016 ey I.T.A.Nos.272 & 273/ Nag/2016 wr IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P. K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER I.T.A, Nos.73 & 74/Nag/2016 Assessment Years: 2010-11 & 2011-12) ACTT CENTRAL CIR-2(1), > 1 | KM. BHANGADIYA & MAHENDRA | 3°° FLOOR, ROOM NO, 312, | | CONSTRUCTION QV) AAYAKAR BHAWAN, | 905, B WING, LOKMAT BHAVAN, TELANGKHEDI ROAD, | WARDHA ROAD, NAGPUR ~ 440 001, | NAGPUR -- 440010 4PAN: AAKFKI820C, ---- arene (Appellant) r wearer ( Respondent) [.T.A. Nos.272 & 2/3/Nag/2016 Assessment Years:2010-11 & 2011-12) K.M, BHANGADIYA & (| ¥s | DCIT CENTRAL CIR -- 2(1), | MAHENDRA CONSTRUCTION | | AAYAKAR BHAWAN, (JV) | CIVIL LINES, 905, B WING, LOKMAT BHAVAN, | | NAGPUR ~ 440 001. WARDHA ROAD, | | NAGPUR -- 440010 | } | PAN: AAKFK1820C atari (Appellant) | weal (Respondent). i L Revenue by |_i | Shri AR. Ninawe (DR) -- L._____ Assessee by": | Shri K.P. Dewani (aR) -- | Date of Hearing | : 120.06.2017_ | | Date of Pronouncement |e 06.2017 seer ORDER
PER P.K, BANSAL, V.P.:
These cross appeals have been filed against the order of the CIT{A) dated 30.12.2015. In its appeal, the Revenue has taken following grounds of appeal in each of the assessment year except change in figure:
¥ Z.V.A.Nos. 73 & 74/Mag/ 2016 1: Mae ae .T.A.NosS.272 & 273/Nag/70is -¢.- ae 'lL. Whether on the facts and circumstances of the case and in faw the ld CT F(A) was right in fnwarting the Very purpose of Search and seirure POvISIONS Of the Act OY ignoring seized incriminating documents and thereby directing the AO to tay the MiCOMe an Presumed Percentage based on SUITTUSES, J, Whether on the facts and 7 the citcumstances of the case and in law, the Ld CITA) was right in deleting the addition of Rs. 25,46,619/- made On account of bogus sub-contract Payments?
4, Whether an the facts and in the circumstances Of fhe case and in law, the Ld CIT(A} was justified in defeting the addition Of Rs. 25,46, 619/- made on account of bogtis Sub-contract Materials and statements recorded that the sub-contractors OT Gy only name lenders and have not EXeCULED any sub-contract? get Peat , 3 woe
3. Whether on the facts and cHCUIMStaNCes of the case and in Set al law the tof CIT(A) was right in holding that the MCtininating: oe diaries seizad from residence of the main BOSON OF the group a a é, Whether on the facts and in the ChCumstances of the case and in law, the fof CITA) was justified in directing AO to adopt fem from bank with the GSSESSEC Group for safe custody which Wes recorded on the credit side of ihe incriminating diaries Mithout appreciating that if the comention of the assessee js frie & On the facts and CICUMSLANCES OF the case and in law the La. CIT(A) erred jn accepting the assessaes contention that the SUD contractors kept their Money for safe custody with the On debit Side of the MmcnmMinating diaries, 9 On the fact and crcumstance of the case and in law the fd. CITA} erred in not calculating exact ufenpliained expenditure and unaccounted investment Mentioned in seized incriminating diaries as well as inflated claim of expenditure jn Various projects and directing the AO to assume Ceriain percentage, if. ON the fact and circumstance of the case and in law the La. CIT(A) erred in hotding that having been accepted receipts from the assessee for assessing the income in the hance Of stub contractors the payments Made by assessee Group to. such sub contractors cannot be treated as HON Genuine, ignoring the fact that sub contract Payments were assessed in the flands of tHe GSSESSEE FOUN as bogus sub contract payments and in the hands of the sub contractors protective @SSOsshents were mace by treating the entire fOCEHUS 25 income as no contact was executed, fl, On the fet and circumstance of the case and in law the La. CIT¢A) erred in observing that accounted payments or unallowable expenses fike gratification paid to various Pohicians CTIA) ought to have upheld that fhe entire amount of As I7L10 crores is unaccounted expenditure.
lf Fe LT.A.Nos. 73 & 74 /Nag/ 2016 Ae : :
L.7.A.Nos.272 & 273/Nag/2016 ity
2. appeal:
I.T.A.Nos.272 & 273/Nag/2016 © £2. On the fact and circumstance of the case and in faw the Ld, CIT(A) 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 AO or to the appellate authorities while restricting it to 12%, the CIT(A) ought not have relied on the decision of Hon bie LAT when seized documents Prove Clear concealed income and unexplained expenditure,
13. On the facts and circumstances of the case and in law the id. CIT(A} ought to have appreciated the fact that in the case of G@SSES8ECS group ft is nat feasible to estimate the fet promt at a particular ratio as out of gross receipts of 579 crores the aSSCSSEE Group Made unaccounted payments to the tune of Rs, 47i crores and hence spent only Rs. 408 crores towards execution of contract work. Whatever profit was derived on execution Of the contract work by the assessee group, to that GrOht unexplained / unracorded expenses Of Rs, 171 crores were required to be added to arrive at the correct taxable income of Ge ASSESSEE.
i400 On the fact and circumstance of the case and in jaw fhe -
Ld. CIT(A) failed to appreciate that the taxable income need not be equal to the actual net profit derived by the assessee as it May indude addition towards various other Provisions tke section 40A(3), 40(aNia), 68, 69, 69C etc. and in the case Of the aSSESSCE GFOUp addition u/s. 69C is applicable. "
"I. The notice issued under Saction L534 Of LT. Act 1969 js legal, invalid and bad in law and consequent assessment framed thereupon is table to be cancetled
2. The Learned CIT(A) ought to have directed to accept the INCOME as shown in return filed Pursuarice to notice u/s. 1534 of Lf. Act 1961 and deleted the entire addition as made by the 4.0. in the assessment framed J, The Learned CIfA) erred in not accepting the prayer of assessee io adopt net receipt for determining the estimated Income at the hands of assessee after excluding the recoveries LT.A.Nos.?73 & 74/Nag/2016 aa In its appeal, the assessee has taken the following grounds of FH Hepa L.TLA.Nos.73 & @4/MNagq/2616 -- ET. A.NOS.272 & 273/Nag/2016 Ele made by the Government Departments on account of Material supplied, sales tax and Service tay etc 4 fhe addition confirmed Oy fearned CIT(A) by adopting 16% of receipts is unjustified, unwarranted and Excessive.
5. ihe learned CIT(4) erred in uphoiging the part addition made by AO. by adopting 16% of receipts.
6. The assessee denies habilily to pay interest under SECHON 274A, 2948 and 234C of 1b. Act 1961. Without prejudice. fevy Of interest under section 2344, 2348 and 234C of £7, Act 1967 is unjustified, unwarranted and excessive."
3. At the outset, the assessee 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 14 taken by the Revenue in its appeal in its appeal,.both the parties agreed that the issue invalved in assessee's appeal as well as in Revenue's appeal in all these grounds is common and identica! 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 y whatever view this Tribunal May take in the case of Mitesh Gotulahji Bhangadiya in LT_A.Nos. 56 to 61/Nag/2016 and 261 to 265/Nag/2016, the same view may be taken in all these appeals,
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 LT.A.Nos. 56 to 61/Nag/2016 and 261 to 265/Nag/2016 in the case of Mitesh Gotulalji Bhangadiya. We noted that the similar issue has arisen in that case. The grounds of appeal taken by the aSS€ssee as well as by the Revenue in that appeal are similar and identical to the grounds of appeal taken in the case of Mitesh Gotulalji Bhangadiya. In that case the tribunal under para 12 has held as under:
T.T.A.Nos,73 & 74/Nag/20i5
2. We have heard fhe rival SUBMISSIONS, caretilly considered the same along with the Orders of the tax authorities below. We business of the Bhangdiya group is being looked after by Shri Mitesh Bhanodiva ancl his two sons. The oiler key persons associated with the group are Shri Satyay Rameshchanara Heda, Ausband of Mitesh Bhangdiva's sister Smt Pradnva, resident of £, Ws MG Shangdiva (AERPB2503E), (Prop. MGB)".
COmVerted into a COMPANY M/s MKS C; Onsiro-ventiure Pyt. (AAHCMO3837) Lid. from OL.04, 261 f,
2. MYS Mahendra Construction, Prop. Shr Sanjay Heds3 (MO (AABPH7109}) Ms Mahendra Construction 85 MC Shangdiva (IV) (AANFM5658B) M/S Kirtikumar M. Bhangdiva (Prop. KMB): converted into @ company M/s MKS. Acme Buildcon Pvt itd.
(AAHCMO382K) from OF OF 2011. (AG YPBIGS9G) M/S KM. Bhangdivya & Mahendra Construction GY) (AAKFKIE200) MYS Shrikant M. Bhangdiva (Prop. SMBVATCPBIZ3Z3) Mitcon infraproject Pvt. Lid. (MIPL ) (AAGCM1868H) Lokshati Publications Put. | te (LPPL AABCLE6 731 } MITZ Infraproject Pvt 1 td. (AAGCMI04 74 } Sakshi Gruh Nirman Pyt Lich (SGNPI HAAOCS7974G) by a GS FRNA My Group fiactuding those. * * Of the search acon) are as follows -- ei L.T.A.Nos.272 & 273/Nag/2016 ae L.T.A.Nos.73 & 74/Nag/2016 EE
1.T.4.Nos.272 & 273/Nag/2016 ie ii, Galaji Stone = Crusher 8 fafraventure Prt Ltd (AADCB5273C) i2.2 The group has also entered into joint ventures with various other civil contractors of the city te secure some civif contracts. A few of them are listed below:
M/S 14.G. Bhangdiya & Hitbhav Engg (IV) (AAOFM47451 } M/s MG, Bhangdiva & S. S. Pati & Co. (JV) ABIFS 36451 ) M/s Darshan Constructian (J W) (AAHFDOGS4N) M/s MR Dhoble 85 KM Bhanadiva (FV )(AAPFMO622B) Ah A 23 The nature of the business of the Bhangdivya group Primarily is executing civil contracts. TAG group works mainly for Government departments like M/S Vidarbha -- Irrigation Development Corporation and has been engaged in executing various contracts pertaining to the ittigation projects in the state OF Maharashtra, During the course of search Operations lactiminating documents wera found and seized from the residential premises of Shri Mitesh Bhangdiva, Hem no, ft to 65 of Annexure-B seizad from his residence are the disries containing feagers, daily cash books and bank books maintained by the Bhangdiva Group. 36 Cash books contained antrias for the period from 26/07/2006 ta 18/07/2011 and 27 diaries relate to ihe financial year 2006-07 to 2010-11 whereas the remaining fwo diaries were maintained for fouse hold and miscellgneaus expenses, A statement of Shri Mitesh Shangdiva was recorded On oath on 20.07.2011, In Ais sworn statement recorded during he course of search action, -- Shri Mitesh Bhangdiva was comtonted with the entrias borne out from the seized diaries Marked as B-t to B-65 and to explain the contents of these Haries, Shri Mitesh Bhangdiva in fis statemant recorded has subinitted that the entries in the diaries aad the ledger pertain to the business receipts and business expenditure. The Assessing Officer it the assessment order has recorded a finding that as per the item no. 1 to 65 of annexure-B, it is apparent that the amouns withdrawn fom the bank accounts OF the sub-
contractors were credited to the daily cash balance of Bhangdiva Gfoup which was confirmed by Shri Mitesh G. Bhangdiya in his statement dated 14/09/2011. The Assessing Officer has reproduced the statement of Shri Mitesh Bhangdiva recorded on IVOY2011 in pata 6 of the assessment order. The Assessing Officer in the assessment order has also recorded a finding that the seized documents being 8-1 to 8-65 contain entries of aff NTE LFAP cApenses incurred by the Bhanodiya Group in cash from F¥ 2006-07 onwards and expenses incurred through the bank accounts from FLY, 2009-10 onwards. fhus, the ASSESSING Officer found that the actual expenses incurred do not match with those shown to have been incutred in the books. The Assessing Officer thus concluded that the LOOKS Of account of ohiti MG. 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 an receipt side various receipts including the withdrawal from the bank of the assessee Group concerns were recorded and on pavment side entries Of expenses tke interest payment, repayment of foan, depasit into bank account, household expenses, personal expenses, payment to various Persons in cash and investment in Droperties are found recorded it was also noted by the Assessing Officer that some of the entries made in the seized diaries were found reflected if the books of account maintained by the Bhangdiya Group. Statement of Mitesh Bhangdiya was recorded on LZO/O7/201 1. During the course of search, Mitesh Bhangdiya was confronted with fhe entries borne out from the seized daries marked B-t to 8-65. In reply to question No. 30 of his statement, Mitesh Bhangdiya submitted that the entries in the diaties and ledgers pertain fo the business receipts and business expenditure Outat = te Present it is very difficult for him to siste whether the entrie recorded in the seized diaries and accounted in the reguiar' books of account and same can be explained only affer er I.T.A.Nos.73 & 74/Nag/2016 & er L.T.4.Nos.272 & 273/Nag/2016 pe ge 'Se, ~ c verification of the entries of the diaries with the regular book of |.
account Mmainiained by the Bhangdiya Group. Shri Mitesh Bhangdiya, reply to guestion No. 38, we noted voluntarily offered additional unaccountect income of Rs.26 crores for the biock period inctuding the current financis} year over and above the regular income declared in the return fled for the aSSESSINENE Year failing within the block period. The HMCOME SO declared are summarized as under:
1 ¥4 ER:
vowel wan nec Particutsr ages of av mores [ avrooane | ay 2009-10 | ay 2010-14 av2o1t-12 | avagag.i3 | Grand Total Ob -OF (Rs) Contract Incimne as | . 1393-96,275 per original return 22,00,540 + 28,96,121 | 18.61,063 | 3072 | 543, 18,322 718,89, 707 rag, '| S wae RGtELiay b Additvanal [ncame declared during Survey 23,97, 961 13.44,009 2704719 | 150.334 1,T.A.Nos.73 & 74/Nag/2016 E.7.A.Nos.272 & 273/Nag/2016 Adéiliona! Income tifered Du tirig Search Contract Incorne Gedared 45,073,901 | 3-99,860, 43,00, 009 If FS-
beFE | 86,46,018 | a | |.
Veen 43,56,175 MES Constr ¥enture Pond sf bon Aen, a! Boe | 255,27393 | . | 864,377,783 | | 2314,64,076 | 1 J 470,04, 006 ! 85,00, 00 | PAU Goo Contract Innoame as Per origing! return 188, 75,973 12 75,373 Additional Income declared during Surrey Additional treome Offered Quring Seanch | T | | Le F46e7 | lead. 67 Contract Inceme Declared F --+----
| | 347,50,000 | 347,50,000 fs. Mahendra Constructian | Contract: ingome as Per ongenal return a ; aditéanal Income | A paclared dung 360,77, 055 40,491,506 125,106,051 49,17 076 26,499,024 Feld 112 20, 60,664 73,3804 | | Feb Aa
-p J66, 20,174 76, 26,315 1? ,B6,308 | 11,138,224 | ae Contract Income Declared 26,30,448 1041,08),010K0 78,874 212,000,000 18,56, 964 | 425,110 | $2,010,004) | 4000 | 702 00,006 347,93, 518 1"
| 101,735,685 134.01 ,946 | 26,4152 20,000 178,00,000 | 34,00,00) Mis, Mahensica Const, & MG, Bhangdiya J¥ Contract Income as Ret orginal peturs 1A? 56 310,52, 743 i [- T _ tT
-4--
6 to17,07,302 f95,14,147 | 358,75, 330 eta Addrtlonal. Income dedaed during _ Survey 157,19,964 Additional Income Offered Guring Search 193,98, 115 | 92 09,093 --" |. --
_ a44.87-112 | 619,64, 164 257,168,230 190,24.680 172,237,664 Contract Income Declared 314,867,720 304,90,858 |I-- --| -- | 1465,00,000 | 5a 0, C0) | 247, 00,000
--_ WHO, 58,578 Le Saeee Tsou | 2 om | Lees MS. kM, Bhanadiva Contract Income as per orginal return 10,108,705 32.86, 795 | 27,20, 401 ! 21,08, 306 | 61,06, 6079 | 32,995,234 | (HG, 00,104 Adtitlonal-Inpome declared dusted Survey H4,12,344 25,22 sas | 13,09, se | a0, 653 | - Vee.
Tae HE Additipnal Income Offered Cinng Search Contac' Income Decared | 24,317,049 540.856 10, 70,239 | 67,00) 000 57,00,000 57 00 Gw0
1.T.8.Nos.73 & 74/Nag/7016 & ET.ANos. 272 & 273/Nag/ 2016 a ae 28,4144 | 48,345,430 MKS Acme Build p Lid Contract Income as fer original return 120,090,000 Po.
43,00, 766 | 66,000,000 139,36,206 34431,049 |
--l 44, 70,653 34,70,654 Additionaf Income declared ctursnc Survey Adaitianal tneame Offered Caunng Search 16,29,347 16,20, 347° Contract. ncame Ts, Declared 51,00, 000 51,00,000 ate M/S. 6 Bhanod , nd Mite ig JY 2 Contract Erecome aes Per onginal tetam Addigignal income decared during _ Survey 26,049,727 5,63, 583 3344 220,187 463,997 Additionar income Offered. Guring Search Cortract Income Deeclaned | 33.48,310 | 5.00, ORY 2,459,464 463,997 _ 4,68,994 ee .
38.37.96 | 593802, vee 3,280,475 482,307 bits Mo Bhangdiva and $5 PATIL. Iv
- Span Me Contract incor as Per original retere 4,605,923 4,77 See 9,473,467 Additonal fnegome @ecdared during Survey 6,071,929 8,38, 536 14,40,515 Additional intone Offered. Guririg Search :
Contract Incame 'Bslared
- 10,867,652 14,16,19 40,00) 24,235,982 M/S KM Bhangdiva a Qondract Ineame as Fer original return $14,555 9.42461 14,4702 AMitional Incane fedared dunine _Survey I.T.A.Nos.73 & 74/Nag/2016
1.T.A.Nos.272 & 273/Nag/2016 Additional Income | | ; | | | t Offered During | . | - | . | . | oe | | 585,449 (1,87,539 | 17,52.068 Contract Incania Betigred | | | -- | | TO eg | JT 90 . 32,00 ,000 | | | I : ' _ oo es "Macon Infra emiect p | | or We | | T Contract Income as | Per original return 6G, 39.000 43,948,429 | S220,051 157.47,460 | Addibonal Incarne _ declared duriig :
_ SUEY | .
Additional Tricanag | | I Greed uring
- | ; J Contract Income | | Gaectared 123,00,00n 155,000 _ 42,617,000 | Lil01 573 | 9,09, 940 182,82,520 1-4 62.40,000 | 24040-0008 Search Flot ees Atlcitiemal Jncome a, ", Sfered in cases of . . my wir. | =, faitesh Bhangdiya S479 499 F4, 79,492 a Bi Nip dee ° . - wo .
tae ' - * Rirtekurniar Bhangdiga | 34-00.000. | 20,00,000
-- | ee te ---- 2 Shrikant Bhangdiya | tt 8 | [ 75, 00,000 35,060,000 105,38.510 Keshar Singh Rotele 10,42,553 12,0308 | 80.93.20 q Consolidated For Atl | Contract Iscome ao Der originak raterr 68,96,903 | 345,068,655 | aaaag202 | Hes 34018 1107,15,934 | sse.e5.476 274,24,565 | 3990,49,752 Additional lacomne declazed during Survey Addibonat facome Offered Buring Search 7B, 51,6041 251,55,3553 261,268,080 313,13.596 : - 104,48 509 25,00, #4 51,73, 583 29,07 203 323,927,392 1? 48063 586,14, 524 276,65,435 2356,81 p48 Coniract incon Derlared 274,274,950 652,35,537 705,21, 473 | 1882,40,000 2429,63,907 2644,00,005 994,950,000 F450 79,997 Adititional Ineame tases of Individual | » - an 12,403,007 | 80,93, 260 - (3973442 244,168,352 i2.4 From the statement of Siti Mitesh Bhangdiva, it fs apparent thet the diary found and seized belongs io the aSSESS00 Group and the assessae Group did not disown these diaries even though in the subsequent statement recorded on 27/07/2013 Shit Mitesh Bhangdiva stated that these diaries were Primarily maintained by his father Gotumal Bhangdiva. The Pe gD --_-- CO CO LT.A.Nos.73 & 74/Nag/2016 Assessing Officer, we noted. has also observed that these seized diaries also contain the Payment made in cash for probable extraneous Qratification to various Persons inciiding politicians, government officers/otficials which are recorded adOng with ther flames, dates of payment and amount paid, We noted that the Assessing Officer has not examined these persons for bringing the corroborative evidence on record in support of Ais finding that the cash has been paid by the assessee group for probable extraneous gratification. We noted that the Assessing Officer Made an exercise to match the entries of the tax Payment and feceipt with the entries in the feguiar books of account of Bhangdiva Group. The Assessing Officer came to the conchision 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 hasdeducted a Stun OF RS.361 crores towards the sub-contract Payment agaist the gross receipts aggregating to Rs.579 crores, it was found by hin after verifying from 21 contractors that 3 sum Of Rs, 54.40 crore is attributable to the amount deposited in the bank account Of the sub-contractor by account Payee cheques by various concerns Of Bhangdiya Group, which was sudsequently withdrawn in cash and is reflected on the receipt side of the seized diaries. The total amount so reflected in the Hares Of the receipt side was compitted at Rs.187.52 crore The Assessing Officer added the said vnaccounted amount of Rs. 182.50 crore in the income of the assessee group concern. A SUM OF RS.54.40 crore was added in Proportion to the amount of cheque credited by respective ofoup concern in the hands of the respective group concerns. For the balance amount of RS.128.12 crore. the Assessing Officer added the same jn Proportion to the contract receipt shown b fe group concern in the respective assessment years to the total turnover of the GOP concern in that year. Now the question before us OSES whether the said sum of Rs, 182.52 crores, found recorded in the Giaries found during the course of search as receipt being withdrawal from the bank account of the group concern as well as from the bank account of the sub-contractor can be regarded fo be the unaccounted income of the assessea At the micro level, if we look into the nature of the feceipt, itis not denied by the Revenue that the receipt has come from the bank account of Ghé assessee group concern and bart of the receipt and has come out of the cash withdrawn by the sub-contractor fo whom ihe assessee group concern had made the payment. The assessment has been made by the Assessing Officer u/s 1534 in L.T.A.Nos.272 & 273/Nag/2016 [pee ES oe IT.A.Nos 33 & 74/Nag/2016 I.T.A.Nos. 372 & 273/Nag/2016 On substantive basis in the Hands of the sub-contractor, The Assessing Officer thus has Guly accepted while framing the assessment OF the sub-contractor that the payment received by {he sub-contractor from the aSSESSEC AS well as tha ASSC5588 GIOUD Concern were not bogus but were the PavVnent received by Performing the obKGatiON for 3 consideration entrusted On them under the sul-contract. This denotes that the relationship Of the assessee as welf dS A5S88SE° Group concern with he sub- contractor, as genuine. has ily been accepted by the Assessing Officer. Once the sub-Contractor Aas been assessed and feir income has duly bean accented by the Revenue, in our View, the categorically given the finding that ihe diaries consist OF the 'eceint being the withdrawal made by the sub-Contractor as wei} aS fe withdrawat Made Dy the assessoe from the Oank account L.T.A.Nos.73 & 74/Nag/2016 ee 1.7.A.Nos.272 & 272/Nag/2016 a Officer. The source of the receipt therefore, is apparent: Where fhe nature and source Of the receipt stands expiainied. it cannot be added to the income of the assessee. On this basis itself in Our View, NO addition in view of the cash withdrawn from the bank account of the SOUP concern and the sub-contractor which are duly disclosed to the Gepartment, can be added in the MCOME OF the assessee 1Z5 This is not the case of Revenue that these cash withdrawals are from the bank account which have not been disclosed to the Revenue ar in Witch the assessee has deposited ihe cash outside the books of account. SO for the source of tha receipt is concerned. if is not denied that the business of the assessee is executing the Government contract and aff the receipts in the bank account of ihe assesses js generated only through the contract receipt from the contract taken from the State Government. No cogent material or evidence was brought f0 our Knowledge which May prove that the State Government fas made the Payment to the assessee outside the books of acount OF this basic self, we confirm the order OF CITA) that the contractor from their bank account We afso noted that ews Assessing Officer has not only analyzed the receipt side Of thes...
daties but has also analyzed the payment sicle Of the diariek ang' -* a ' found from the payment side that a sum of RS.24.05 crore has + been invested in the immovable Droperty outside the books of account and similarly, a sum of KS.8.47 crore has been utilized aS expenses outside the boaks of account. AS regards to observation of outgoings observed by the Assessing Officer in respect of seized document, it is noted that fhe Assessing Officer has mainly drawn adverse inference without there being any Material evidence on record for sucht conctusion. fven before US, 10 corroborative evidence were feferred to and brought on fecord, Thus, the outgoing/investmant fo the extent of Rs. 32.52 Money withdrawn from bank, the source thereof cannot be regarded to be unexpiained. We noted that in "us case the aSSESSC€ as well a5 assessee group concern, chiting the course Of search, surrendered a SUM OF &SI6 crore and accordingly, filed the return in response £0 the notice u/s 1534, Ar tie most the Assessing Officer coutd As ve made the addition in fespect of the unaccounted investment Provided they are not coverad by 12.6 We noted that the Assessing Officer in percen Of the various group conce tt} ley HEX E.TANOs.73 & 74/Nag/2016 ei
1.T-A.Nos.272 & 273/Nag/2016 fil business income assessed by the lage of the gross receipt in the hands varies from G F4% to 129976 as 5 apparent from the folowing chart:
Particular AY 2006- |AY 2607- [AY 2008- "TAY Zag6- lay 2010- FAY 2011- TaYeqis. 4 OF Os ca 10 il 12 13 M/s M.G. Bhanadiya 179% [44.27% © [35.60% [Taege, IF 46% [49 50% MKS Constro Venture F 9.34% Ltd M/s. Mahendra 10.78% {43.13% [25.44% Trnoan, 41.79% [33.05% [27 734, Construction M/s. Mahendra Const. & 49.53% F4AGy 17, 69% fapsyo, 16.03% M: G. Bhangdiya Jy -
M/s. K.M. Bhangdiye )11.97% ~ fos 30% 25.76% |26.26% 115.22% |Tp9455 MKS Acme Build P Ltd 10;28% M/5.M G Bhanadiya and 66.53% L198% |] 37 8354 0.00% Hitbhay Engg Jy M/s MG Bhangdiya and 54.82% [129.9296 Iraqeen 7 SS PATIL iV M/S KM Bhaagdiya JV 25.28% 39,5295 Mitcan Infra Project P itd (10.07% [10.00% --Tya.boe, Consolidated -- 12.36% 47.01% [74.36% [ie5395 [343855 49.97% lagcsoug a1 __| in the case of the ASSESS22 been framed for ASSESS 2011-12 while assessm £43(3) of the Act years. If assessment year 200 executed for Viesrhha irrigation remains the same as in the Case of eSSESSINGHE years. The sth Group the assessment u/s 153A have ent year 2008-07 to assessment year ent for the assessment yea 2072-13 ifs me during all the assessment
-O7, the nature of the Work Develooment Corporation the assesses for subsequent "contractors, who have executed fhe LT.A.Nos.272 & 273/Nag/2016 £ work, are also similar in various assessment years, The Assessing Officer, we noted, in the case of the assessee group for the assessment year 2006-07, has accepted the income as shown by the assessee group in the return about 12% of the gross 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 circumstances, There had been search in the case of the assesseé, fhe nature of the business of the assessee remains fhe same, No other business activity or the business were found from where the income is derived or generated. in various noting in the seized documents i.e. diaries are part of the GOSS receipt Of the contract receipt of the group entity, is not disputed. The Assessing Officer, while inaking the addition, observed that the amount withdrawn from the diary is utilized for unaccounted payments which are not allowable fike gratification paid to politician and Government -- officials. However, the Assessing Officer does not refer to ary corroborative evidence on record to hold that the assessee has Made payment as ifegal gratification. He has taken a view by observing that payment made in cash is Probable extraneous gratification. During the course of search, statement of Shri. °° Mitesh Bhangdiya was recorded on 20/07/2011 and he in answer fo question No. 30 explained that the seized documents te getails of cash flow. During the assessment proceedings Si Fal Mitesh Bhangdiva has explained that the diaries are noting tone fe movement of the cash in reply to question No. 23. in the statement recorded on 27/07/2013. It was alsa explained by Aim in the course of the assessment Proceedings that the sub- contractors on the withdrawal of the money gave to his father for safe custody, the amount which are found to be Aoted in the seized documents. In the statement recorded, the assessee has Clearly explained that the notings made in the seized Gocuments has nothing to do with the political leaders as much as political leaders have Ao business transactions with Bhangdiva group. Even we noted that the Assessing Officer has not brought out on record any specific evidence to show that Payment is made to any politician or the Government officer/official to whom the gratification payment have been given by the assessee group. We noted that the Assessing Officer out of the sum of Rs.182.52 crores, added Rs. 54.40 crores on the Pasis of deposition of the sub-contractor for which when the assessee has asked for the crass examination, the cross examination was not allowed to the assesseé, which is contrary to the principles of natural justice, L.7.a.Noes.73 & 74/Nag/2016 ee &.
aS, fot AHowing the ASSESSAEa py Crass ie iviiness by the AGudicating Authority ough ihe Statemants OF those WHNESS Were MaI2 Hy basis of the 'Mpugned Oer Is 3 PEVOUS Alay, Which TAKES the Omer Midiity MASINUCh as jt HNOUED ty MONON oF PAC bles of Matuira} FUSE Fy fits 8Ction 3z6¢ fe S@lemeany OF the HOresafe iwo Witness Was the OMY basis oF ISSUING the Show Cause Notice We, L4US, ser aSIGE the "MD utonedt Order a5 Passed OY the rune} Cd show cys qONea3/"
'Chowing RO say C&ision of Hon bhe Suprerie Court the Statement of fife SUO-contrsctor 4? Ott ery, COMI be feller} OF, Eyer OMerYi5e ASO, yen HOD tae AD "Or oborative CVvidence Leing rougher Of Cord to P'OVE that fie FeCeipts WHER has OfER adelar} OY the Assessing Weer jy Me income OF fhe PSSOSSCA je fe UNAS COS. MCOntie OF th ASSAG5, Lf fae © fCeipts fo, THA the ation fA Made & Assessing Officer TOM OSENES es PATE OF th OSS T8Cip te OF tt, WEE also UMC ip GP DCH ae MOC Edina. Gnd have achieved tinatity File TELLIN Ly/s 1334 hayes GSO bean fled as Pe CentaGE oF fECeIDES ip his Soup Crtities, jp WH ony TPO ODT ate fo determina fe "Come as PEN Centage of TOEC8IDES OS the SaME are eVaRHIDLe on "BOOK which HE aCepted OV the PSSESSES arid tyes Revenue authorities MiEAOT Spite , fei . HES 1.T.4,.Nos.73 & 74/Nag/2016 i "eh {EF 1.T.A.Nos.272 & 273/Nag/2016 "TR iZ/7 We may mention that in the case Of the assasseae Group, SUIVEY aACHON was conducted on £/02/2009 wherein under the Similar situation, the payment to sub-contractor was disputed and Goubted by the Assessing Officer. The surve VY action relates fo the assessment year 2006-07 to 2008-09, which are part of fhe block period for the search action conducted on 19/07/2011. fhe Assessing Officer while Making the assessment apohed @ net Profit @14% but when the matter reached to the Tribunal. the Tribunal Nagpur Bench int T.A.Nos. 268, 269 and 285/Nag/2012 vide order gated 03/04/2013, after Considering the impounded material directed the Assessing Officer to adopt the net profit @12% as against the net profit adopted by the Assessing Officer @l4%. There are also the similar type of defects found as have been found in the course of search, We noted the CIT(A) has in the impugned assessment years Made if consequence of SCACH, directed the Assessing Officer to astimate the PTOfit @16% and Ot @12%, -- Even though the CIT (A) was fully aware of that during the assessment year 2006-07 to 2009-10 the assessee Group has surrendered additional income at Rs.11 crore and the inbtunal has directed the Assessing Officer to estimate the net Profit @12%. The Tribunal in that arder under para 4 observed aS unger: a "4. Brief facts of the case are that a Survey u/s. 133A of = oe income Tax Act, 1961 was carried out in the business gremis os: Of the assesses and his associates on 17.02.2000 Dutigg, the: course Of survey operations it was found that most of the ills, . vouchers and other evidence in SUDPOIT Of the entries in the books of account tke fabour charges, material Purchases, Machine hire charges, site EXPENSES, SUD Contract expenses, oif and lubricants, repairs and maintenance etc. Pertaining to this A,¥. were not available. statement of Sri Mitesh Bhangadiva was recorded under Section 1234 and u/s. 131 of the Act on behaif Of the assesse, In the statement Of.24.02.2009 and 132. OF. 2009, ff response to various questions relating to the genuineness of the payments to third Party sul contractors and in respect to other deficiencies, the assessee admitted additional income in GrOup cases of Rs. It crore and Proportionately were atocated between aff the assessment yeas relating to these four assessee. For the year under consideration { &, for assessment year 2008-07 in case of Sri Mithesh Bhangadiya, the additional income was offered at Rs. 23,97, 561/- Besides the HCOMe shown originally at Rs. 23,63, 910/-. Due tax was paid before ~ Nee Hee:
1T.A.Nos.?73 & 74/Nag/2016 Gi ' L.T.A.Nos.272 & 273/Nag/2016 eee the issuance of notice under section 148 as admitted b Wy the AO in para 2 of his arder. The Mporant contents of SuOMISSION recorded on 24-02-2009 and 13-3-2009 Of Sri Mithesh Bhangadiya are incorporated in the order of the AQ. In query of question No. 11, it was answered that during the course of Survey, If was noticed that there are certain discrepancies and omissions and to cover Up aif such discrepancies we have made out mind to offer additional income over and above the regular income, We are under the PROCESS LO Cetermine such adelitional income to avoid Htigation-and, to buy peace of mind, Thereafter én response to question Nos. 18 & £9 of the statement recorded On 7-3-2009, it was answered that the sub contractors were awarded the sub contract work by our firms as ber contract Motes and the nature of stub contractors has been that labour charges anid machine pire charges. The sub contactors by and farge illiterate and therefore, their books of accounts found ta be incomplete, without maintenance Of any biffs and vouchers, The expenses incurred by our firm hes been on the basis of the so called vouchers raised by them and therefore. there aOR ars the discrepancies in the expenses claimed. ft was further Stated that the assessee has admitted in his previous statement recorded during the course of survey that there are certain discrepancies and anamaties in the sub contract EXPENSES iF thelr books of aCCOURES, On availability of bills and vouchers for the past three assessment years. Accordingly, it was submitted that there were certain discrepancies and anomatias the sup contract accounts, in books of accounts for assessment years 2006-07 to 2009-10. The a5sessee decsrad the additional fncome of Rs. 11 crore in their firm and the five sister concerns if the assessment year 2006-07 to 2009-10. The working of the adtitional income of Rs. 14 crores will be done accordingly and the same wilt be shown. fhese part of the Statements have bean 'ncorporated in the order of te AO as state above fhereafter the AQ started scrutiny of the case. The AO Hoted that the aSSES8C@ has shown various expenses under the head fabour & wages, Machine hire charges, site EXPENSES and sub contract EXPENSES OFC. Of very higher side, which are not supported by valid vouchers. Neither any further evidence was fled it was deficiencies in accounts of $uO contracts and the asseassee has offered a sum of Rs. £3,97,361/- on account of dlscrepancies . i" respect to sub contract, therefore, he proceeded to make further addition on account of various deficiencias £é. in absence of bills and vouchers, excess claim fowards 4tfez LT.A.Nos.73 & 74/Nag/2016 pee . L.T.A.Nos.272 8 273/Nag/20i5 Be MEd Machinery pire charges, verification oF aDOCability Of provision OF Section 2940 and demal of alleged sub contractors regarding fe sub contract given by the aASSESSEE, Alf these aiscreoancies ae noted by the AO in his order Vhereafter in para 7 the AO has observed that after having rejected the books of account of fe assessee tinder Section L45(3) OF the Act, the profit of the aSSO55€ Has to he estimated reasonably. The AO also observed ihat the assessee has declared fet profit ratio of 6% and 7% of Me total turnover jn ASSESSING years 2006-07 & 2007-08.
After offering acditiona! income of RS.2L 97 360/- for Bhangadia (IV), who had dea fared additional income of Rs.
LS7,47, 760/- ip the Assessinent Year L007-08. which Gives 3 Met profit ratio of 13.84% of the net contract receipts, in view of these facts the AQ adopted 14% net Prot. Thereafter the AO completed the assessment and made addition OF Rs.
FE, 12, 722/- against additional income shown by the aS5SES506 dt Rs. 23 9A I60/-, which resulted further addition of AS.6, 15, 362/-,"
ee and ultimately under para 7 as reprodticed hereunder, estimatercc. " OM. Net profit @12%: La: | -
a: 'lk * x '7 After considering the submission dnd perusing the material . ous Of fecord, we find that the assessee desaryas (0 succeed in fig 1 appeal int part. We noted for the year under consideration i.e, for assessment year 2006-07, the aS5E5S20's NP rate comes to 12.87%, for GSSESSINONE year 2007-08, the ASSESSES NE rate COMES tO 10.53% respectively, We also noted that if the NP rate OF all the concerns ae taken inta consideration, then jt js S@en that aif the assacses have shown government recejot at R's. 258, 55, 37,850/~ and MICOME on these contracts have been Shown by these assessee at Rs 6.49 S711 LS which gives a NP fate Of 6.38%. The eSSCSSCE Nas offered additional income declared auring the SurVEY at RS. 11, 03 85, O77, which gives a NP rate of 4.27% and the folal NP rate in alf these concerns COMES to 106594. OF course, the adaitvonal income Of Rs, tf crore or odd was Segregated Proportionately on the basis of contract receipts in the hands of each concer. In case of Ms Mahendra Construction & MG. Shangadia (VY), the NP rate COMES tO 13.84% fe. for ASSESSNEN year 2007-09 and this rate iT A Nos.?73 & 74/Nag/2016 iam L.T.A.NOs.272 & 273/Nag/2016 op YOU'S COME £0 9.87% , Whereas in case of Other assesses ja eaay Heda, M/s Mahendra Construction MG Bhangadiva (IV), the NP rate comes 0 9.50% and in case af M/s Mahendra Construction & MG. Ghangadiva (7), the average NP rate of ffree years comes (0 11.28% and jn case of M/s KirhkumarBhangadiya, the NP rate comes to 8.72% and in case OF ALG. Shangadiya and M/s Mahendra Construction & MG. Bhangadiya VY) , the NP rate COMES (0 6.12%, IN Case of ALG.
ail the assesses for aif the three years comas to 10.65%, Therefore. in our WieMW, 2 rational aPProach Should have been adopted by the AO or Dy the learned CIT (A). For one case je. AYs Mahendra Construction & MG. Shangadia (IV), the Np fate Was 19.84% and if this rate is applied in all other CaSES, Which in Our View, ts not justified However, there is also fo dispute phat Mere were so Many Giscrepancies in Maintaining vouchers, UR, igs . "yt SUD Contracts accounts and other heads, which wee "0 42% 8 adopted instead OF 14%, that will meet fhe end of justice. We made it clear fhat where NP rate shown by the ASSESSEC iN any year is more than 12% then the Mare NP rate 's tower than 12%, then 17% AB fale fas to be taken. fhe AQ wi recomputed fe income accordingly. For thea Sake of clarification, in case of @SSESS0@ (OF assessment year 2008-07, ite NP rate comes to 12.87% after showing the additional ficome, therefore, the income Shown by the assessee fas fo be accepted, However, for aSSESSMEN years 2007-08 & 2008-09, the NP raie shown by the assessea after additional income corhes to 10.69% and 10.539, ihe AO will adopt the rate of 12% and wilt COMPpULe the income accordingly, * 128 We noted that the CLITA} even Hough followed the order Of the Tribunal in the Case Of the assessea for fe assessment year 2006-07 to 2009-10 but directed the Assessing Officer to me Hee oor.
are certain discrenancies, we are OF the View. that if NP fate of --
e *
1.T.A.Nos.272 & 273 /Nag/2016 | estimate the net Prorit during the block Period @16% and for hat he has given the reasons that there is material difference in fhe years under Gppeal 1.8. Search action has also resulted into detection of the UNGCCOUMEd assets to the tune of RS.26 crores and unaccounted Jewellery Of Rs.2.37 crores whith has not bean disclosed by the @SSE5SC8 Grotlp in their FeESpeCctve returns filed Of withdrawal from the bank account Of the group conchin Ai, well as from the bank account of the sub-contractor. hic cannot be regarded to he undisciosed, Wa. therefore, Go nee aGree with the reasoning of the CI; (A) i? adopting the net profits Unaccounted jewellery of Rs? 77 crores Could be made. We therefore, after considering the facts of the Case, past histo ihe CIT(A) is at a higher side and is not fustified. Therefore, we SEC aside the order of CIITA) to the extent of directing the Assessing Officer to estimate the net profit @16% of the aross receipts and direct the Assessing Officer to estimate the net Profit on the gross receipt @12% as fas been estimated and rétumed by the assescae OUP in theit respective returns filed iN response to the AOUCE Issued u/s 1534 and u/s 139 of the income Tax Act LT-A.Nos.73 & 74/Nag/2016 ae Ce A NOS.73 & 74/Nag/2016 pga LT.A.Nos.272 & 273/Nag/2016 ala
6. Respectfully following the said decision of this Tribunal, we dismiss the ground taken by the Revenue and partly allow 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 iast ground in assessee's appeal relates to the charging of interest u/s 2344, 2348 and 234C of the Act. Learned A.R. was fair enough to concede that this ground fs consequential in nature. We, therefore, direct the Assessing Officer that the interest chargeable u/s 234A, 234B and 234¢ be recomputed after giving effect to our this order. Thus, this ground is allowed for statistical Purposes in all the appeal,
8. In the result, 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 Copy of the order forwarded to:
The Appeiiant The Respondent Woe oe Concerned CIT The CIT(A) Wyko DR, tt. Registrar ~~.
Guaal fe SERRE Gitta Ase, : poms aon thy a'Strar ToMf TAX Appotign ee TSH mange ale bung _ PiBur Gen