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

ITA 148/PAN/2023

AI Insights

The case involves the Assistant Commissioner of Income Tax, Central Circle, Panaji, Goa as the appellant and M/s Bagkiya Construction Pvt. Ltd. as the respondent. The dispute arose from the reassessment proceedings for the assessment year 2017-18, where the AO made additions to the income of the assessee based on findings from a survey conducted under section 133A of the Income Tax Act, 1961. The CIT(A) later deleted these additions, which the Revenue challenged in the ITAT. The Tribunal examined the materials and statements recorded during the survey, the retraction of admissions by the director of the assessee company, and the legal precedents cited by both parties.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839784 (ITAT-PANAJI)
• Duration Of Justice: 2 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: WT(D)
• Assessment Year: 2017-2018
• Appeal Filed On: 01-09-2023
• Other Referred Cases: Lakshmanan Vs ITO, CIT Vs Anil Kumar & Co., ACIT Vs Ercon Composites, PCIT Vs Janson Investment (P) Ltd., CIT Vs Gowri Gopal Textile Processing (P) Ltd., Shri Kishan Dhanpat Rai Vs CST(UP), Jeevan Ram & Sons Vs CST, Drisha Impex (P) Ltd. Vs PCIT, Ramesh Haribhau Gawli Vs ITO, Multi Commodity Exchange of India Ltd. DCIT, PCIT Vs Shree Ganesh Developers, Nickunj Eximp Enterprises (P) Ltd. Vs ACIT, Bannalal Jat Construction (P) Ltd. Vs ACIT, ACIT Vs BS Yediyurappa, CIT Vs Harjeev Agrawal, PCIT Vs Best Infrastructure (India) Pvt Ltd., Common Cause Vs UOI
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SENTHIL KUMAR LD.
• Keywords: Business income; Reassessment proceedings; Bogus purchase; Retraction; Principle of natural justice; Search and seizure; Bogus
• Section: 147; 148; 143(3); 131; 28; 133A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, GOA ITAT-Panaji Page 1 of 39 BEFORE HON’BLE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER ITA No. 148/PAN/2023 Assessment Years: 2017-2018 Asstt. Commissioner of Income Tax, Central Circle, Panaji, Goa. . . . . . . . Appellant V/s M/s Bagkiya Construction Pvt. Ltd. SF-3, Building No.-3. Techno Cidade, Chogam Rd., Alto Porvorim, Goa-403521. PAN: AACCB9382M . . . . . . . Respondent Represented Assessee by: None for the Respondent Revenue by: Mr Senthil Kumar [‘Ld. DR’] Date of conclusive Hearing : 29/01/2026 Date of Pronouncement : 27/02/2026 ORDER PER G. D. PADMAHSHALI; This Revenue’s appeal filed u/s 253(2) of the Income- tax Act, 1961 [‘the Act’] challenges the order dt. 29/05/2023 passed u/s 250 of the Act by Commissioner of Income Tax(Appeals-2), Panaji [‘Ld. CIT(A)’] which in turn wheeled from the order dt. 25/08/2021 passed u/s 147 of the Act by ACIT, Central Circle, Panaji, Goa [‘Ld. AO’] anent to assessment year 2017-18.[‘AY’] Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 2 of 39 2. This appeal was instituted by the Revenue on 04/09/2023 and by order-sheet dt. 05/10/2023 a copy of the Appeal Momo was forwarded to the respondent assessee through RPAD. Vide 1st notice dt. 05/03/2024 the appeal was listed for hearing on 11/03/2024 against which the assessee sought adjournment, being first hearing the case on such request was adjourned to 03/06/2024. Subsequently the Ld. AR sought adjournment to appear physical and as the matter thought fit so, adjournment granted to 26/11/2024, however registry suo-motu adjourned the case to 18/12/2024 wherein the Ld. AR appeared on behalf of assessee but since queries raised remained unanswered therefore sought time to seek instruction from the respondent, the matter accordingly was again stand adjourned to 05/02/2025. The respondent did neither attend the hearing on 05/02/2025 nor on Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 3 of 39 next hearing 08/04/2025. The appeal thereafter posted for hearing respectively on 03/06/2025, 05/06/2025, 19/06/2025, 21/07/2025 & 12/08/2025. The respondent was indifferent in its behaviour on these dates as well. The bench for administrative reason did not function on scheduled hearing dt. Viz; 17/09/2025 & 22/10/2025. We also note thereafter case was scheduled for hearing on 24/11/2025 in the absence of respondent at the scheduled date and after noting conduct showcased for entire calendar year 2025 the case following principle of natural justice again adjourned to 12/01/2026. When the assessee continued to remain absent, the bench thought fit to grant last opportunity adjourning it to 29/01/2026. In the absence of assessee on 18th listing date, noting the conduct of exploiting judicial process we advanced the hearing ex-parte u/r 25 of ITAT-Rules, 1963. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 4 of 39 3. Tersely stated pertinent facts born out of case records & appellant’s submission are that; 3.1 The assessee a private limited company engaged in the business of civil constructions & structural engineering. For the year under consideration the assessee company filed its return of income u/s 139(1) of the Act on 06/11/2017 declaring therein the total income of ₹3,33,98,000/- The central processing centre, Bengaluru [‘Ld. CPC’] processed said return u/s 143(1) of the Act whereby returned income was accepted without variation. 3.2 Subsequently, on 25/10/2018 a survey action u/s 133A of the Act was carried out on the business premises of the assessee wherein several incrementing materials [‘IMs’] representing suppression of income were found & impounded under s/s (3) of 133A of the Act and were confronted to the assessee before proceedings thereon. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 5 of 39 3.3 Based on such impounded survey material, statements recorded in the course of such survey under s/s (5) of section 133A, s/s 1(A) of section 131 of the Act, the case of the assessee by an order dt. 26/02/2021 issued u/s 127(2) of the Act was centralised and vide notice dt. 28/03/2021 issued u/s 148 of the Act the reassessment proceedings were initiated calling upon the assessee to file return in response thereto within 30 days therefrom. The assessee filed a return in response thereto on 26/04/2021 declaring total income of ₹3,39,38,824/-which was subjected to scrutiny vide notice dt. 04/05/2021 issued u/s 143(2) of the Act. 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; Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 6 of 39 (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/- Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 7 of 39 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; Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 8 of 39 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 Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 9 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 10 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 11 of 39 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. 6. We note that, while deleting the impugned action of estimating the profit @12% as against 8%(approx.) declared by the assessee the Ld. CIT(A) accepted the twofold arguments assessee company viz; (i) books of Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 12 of 39 account were not rejected by the Ld. AO rather not specifically rejected in terms of section 145(3) of the Act and (ii) impugned addition was solitarily based on the admission made by the director of the assessment company on statement recorded in the course of survey on 25/10/2018 which subsequently in the course of assessment vide letter dt. 19/08/2021 retracted. While reversing the action of Ld. AO in estimating the profit @12@, the Ld. CIT(A) placed reliance on ‘Lakshmanan Vs ITO’ [2021, 127 Taxmann.com 391 (Chennai)], and the respondent assessee beside pressing into service the CBDT Circular F. No 286/20023-IT(Inv) dt. 23/03/2003 also placed its strong reliance on the decisions rendered in ‘CIT Vs Anil Kuamr & Co.’ [2016 386 ITR 702 (Kar)] and ‘ACIT Vs Ercon Composites’ [2014, 49 Taxmann.com 489 (Jod-ITAT)]. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 13 of 39 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 Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 14 of 39 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. 8. By no stretch of imagination, one can be asked to do something against nothing. Therefore, for the purpose of impugned addition the substantive foundation & plea of the respondent assessee that, the books were never rejected by the Ld. AO rendered fallacious & cannot be entertained because such books were intentionally destroyed. Thus, act of the assessee and its employee impeded the Ld. AO and had no choice but to proceed to estimate the income on the basis of IMs and statements without rejection of books specifically u/s 145(3) of the Act. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 15 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 16 of 39 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)]. 11. The reliance placed by respondent assessee on ‘CIT Vs Anil Kuamr & Co.’ & ‘ACIT Vs Ercon Composites’ (supra) and the Ld. CIT(A) on ‘Lakshmanan Vs ITO’ (supra), respectfully are good binding precedent but cannot be applied in the present case, as the facts of those cases before Hon’ble forums were immensely distinguishable. 12. In ‘Drisha Impex (P) Ltd. Vs PCIT’ [2025, 177 Taxmann.com 808 (SC)] the Hon’ble Apex Court dismissed the SLP against the order of Hon’ble Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 17 of 39 Jurisdictional High Court which upheld the addition made where assessee failed to prove genuineness of purchases/expenses and expressed its inability to furnish purchase confirmations and addresses of suppliers. Similarly in case of ‘Ramesh Haribhau Gawli Vs ITO [2024, 301 Taxman 407 (SC)] a SLP against the decision of Hon’ble Jurisdictional High court dismissed where assessee, a civil work contractor, claimed to have spent certain amount on bogus expenses for construction of office of highway Authority. A similar ration also can be traced in ‘Multi Commodity Exchange of India Ltd. DCIT’ [2019, 260 Taxman 243 (SC)]. Coming to recent judgement of Hon’ble Jurisdictional High Court rendered in the case of ‘PCIT Vs Shree Ganesh Developers’ [2025, 476 ITR 568 (Bom)] Where Assessing Officer made additions to income of assessee on account of bogus purchases expenses Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 18 of 39 from various alleged parties, their hon’ble lordship have upheld 100% addition unproved purchase expense with regard to two alleged suppliers. Likewise, in another case ‘Nickunj Eximp Enterprises (P) Ltd. Vs ACIT’ [372 ITR 619 (Bom)] their hon’ble lordship upheld addition in reassessment proceedings by observing that, where in course of survey u/s 133A of the act it was found that assessee made certain bogus bills/expenses, since occasion to consider genuineness of those bogus bills was never a subject matter of scrutiny in proceedings u/s 143(3) of the Act, initiation of reassessment proceedings in such a situation was justified. 13. In view of the totally of facts, our observation and in the light of judicial precedent cited above, we find no error in Ld. AO’s action but in the action of Ld. CIT(A) in vacating the addition, therefore set-aside. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 19 of 39 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’. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 20 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 21 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 22 of 39 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 Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 23 of 39 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). Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 24 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 25 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 26 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 27 of 39 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)]. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 28 of 39 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)]. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 29 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 30 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 31 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 32 of 39 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). Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 33 of 39 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. Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 34 of 39 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 Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 35 of 39 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 Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 36 of 39 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. 24. This impugned addition was since found made on the solitary basis of ‘admission’ made by the director in the course of survey which subsequently by letter dt. 19/08/2021 was retracted, therefore Ld. CIT(A) deleted the same in view of the binding board circular(supra) and in the light of decision in the case Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 37 of 39 of ‘ITO Vs Toms Enterprises’ [2019, 175 ITD 607 (Cochin-ITAT)], and ‘CIT Vs S Khader Khan & Sons’ [2008, 300 ITR 157 (Mad)]. 25. We note that the pursuant to recommendation in of Task Force on Direct Taxes Chaired by Dr. Vijay Kelkar the Board issued instruction vide F. No. 286/2/2003-IT (Inv.), dt 10/03/2003 regarding admission/confession of additional income during the course of search & seizure and survey operation which for the benefit of adjudication is as reproduced herein as; “In pursuance of the Finance Minister's budget speech dated 28-2-2003 this instruction was issued by the CBDT and is as under: ‘Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess undisclosed income during the course of the search and seizure and survey operation. Such confession, if not based on credible evidence, are taken/retracted by the concerned assessees while filing return of income. In these Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 38 of 39 circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.’ This instruction is in line with the recommendation of the Task Force on Direct Taxes Chaired by Dr. Vijay Kelker.\" 26. It remained undisputed fact that, there were no verification of vouchers, bills, and records to conclude that the labour payment made in cash were bogus or sham. Even remotely there were present, there were no books produced to check the corresponding payment in cash recorded in the books. Further none of the IMs impounded in the course of survey or statement of employees recorded Printed from counselvise.com ACIT Vs M/s Bagkiya Construction Pvt. Ltd. ITA No. 148/PAN/2025 AY: 2017-18 ITAT-Panaji Page 39 of 39 could brought out the specific facts & figures of such bogus labour expenditure. There may be payment in the form of cash, but such cash-mode cannot be taken as sacrosanct for disallowance and addition. And all the more the impugned addition conspicuously arisen out of ‘statement’ of the director without there being any corroborative & credible evidence. The impugned addition in absence of substance was rightly deleted by the Ld. CIT(A), therefore we countenanced the deletion in very terms. The ground stands dismissed. 27. In result, the appeal of the Revenue is partly allowed in aforestated terms. In terms of rule 34 of ITAT Rules, 1963 the order pronounced in the open court on date mentioned hereinbefore. -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. The Appellant. 2. The Respondent. 3. The CIT(A)/NFAC Concerned 4. PCIT Concerned 5. DR, ITAT, Panaji Bench, Goa 6. Guard File By Order, Sr. Private Secretary / AR ITAT, Panaji. Printed from counselvise.com "