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2019 (6) TMI 1471 - AT - Income TaxAddition u/s 68 - bogus loan - Additions made on account of loan taken by the assessee from M/s.Golden Agro Products Pvt. Ltd.- HELD THAT - Company had advanced loans during the year to the assessee from refund of loan received from M/s.Ali Mohammed Qasim Duberia, whom the company had advanced the loans in May, 2012. In this respect, an affidavit had also been filed by the said person. Even otherwise the loan received from the company cannot be doubted as bogus because the AO had failed to establish that M/s Golden Agro Products Co. is a shell company. The AO could not prove or record that there was cash deposits or cash withdrawals in the bank account either by the assessee or the directors of the company. In the case of loan from creditors is concerned, the same could not be enquired by the Assessing Officer as the enquiry of source of source is not the requirement of law as had been held in the case of CIT Vs. Nirav Modi 2016 (6) TMI 1004 - BOMBAY HIGH COURT and CIT Vs. Pr.CIT Vs. Veedhata Tower Pvt. Ltd. 2018 (4) TMI 1004 - BOMBAY HIGH COURT - Although Assessing Officer had commented upon the financials of the company, who had failed to establish on record that the said company i.e., M/s.Golden Agro Products Pvt. Ltd., was a shell company and he also not brought any anomaly in the banking transactions of the company, while granting loan to the assessee. Thus, when we have upheld that the loan taken from M/s.Golden Agro Products Pvt. Ltd cannot be treated as bogus. Thus the interest paid on such loan cannot be disallowed. Additions under the head capital gains‟ - re-development of the tenanted property - Transfer u/s 2(47) - HELD THAT - Clause-4 provided that the new building was to be constructed in the space available behind the existing building, without causing any hardship or harassment to the current tenants. According to Clause-12, the new building would be ready within 3 years from the receipt of the commencement certificate. As per the terms of the agreement, the owners have agreed that during the operation of the agreement and till the tenants were put in the possession of the alternate accommodation on ownership basis, the tenancy rights of the tenants/occupants including the tenant/occupant herein, shall be treated as continued intact, secured and undisturbed as covered by the Maharashtra Rent Control Act, 1999 - terms of the agreement clearly reflects that there was no surrender of tenancy on the date of agreement i.e., 17-09-2012, because as per the clauses of the agreement, the obligation of the assessee was to hand over the possession of its tenanted flat to the developer, only in exchange of a flat in the re-developed new building. The handing over of the flat would be completed only when the re-developed building was constructed and possession is given to the assessee. Thus in this way, only when the assessee gets possession of the new flat in the re-developed building, then he loses the rights as tenant in the tenanted premises. Hence, considering those facts, it cannot be treated as that of transfer as defined u/s. 2(47) of the Income Tax Act. Once there is no transfer, there is no question of invocation of the provisions of Section 50C of the Act. Neither the new property was received by the assessee nor parted with his tenancy right/tenanted property. The assessee continued to be the tenant of the property, which has been established by payment of rents subsequent to the execution of the agreement with the developer. Thus, CIT(A) also rightly concluded that this cannot be treated as a case involving transfer as per Section 2(47) - once there is no surrender of tenancy rights, the action of the AO in computing the valuation of the tenancy right is not justified. Hence, we uphold the action of Ld.CIT(A) in deleting the addition under the head capital gain . - Decided in favour of assessee.
Issues Involved:
1. Deletion of addition made on account of loan taken from M/s. Golden Agro Products Pvt. Ltd. 2. Deletion of disallowance of interest expenses related to the loan. 3. Establishment of M/s. Golden Agro Products Pvt. Ltd. as a shell company. 4. Ignoring findings on the creditworthiness of the lender and genuineness of transactions. 5. Deletion of addition under the head "capital gains" related to surrender of tenancy rights. 6. Taxing income from house property based on estimated rent instead of the actual amount offered by the assessee. Issue-wise Detailed Analysis: 1. Deletion of Addition Made on Account of Loan Taken from M/s. Golden Agro Products Pvt. Ltd.: The Revenue challenged the deletion of the addition of ?60,00,000 made by the Assessing Officer (AO) on the grounds that M/s. Golden Agro Products Pvt. Ltd. was a shell company. The Commissioner of Income Tax (Appeals) [CIT(A)] found that the identity of the creditor was established through PAN and address details, the genuineness of the transaction was confirmed by banking channels, and the creditworthiness was supported by audited accounts and bank statements. The CIT(A) concluded that the AO failed to establish that the creditor was a shell company and thus deleted the addition. 2. Deletion of Disallowance of Interest Expenses Related to the Loan: The Revenue also contested the deletion of ?3,60,000 in interest expenses related to the loan. The CIT(A) held that since the loan itself was genuine, the interest paid on such a loan could not be disallowed. The Tribunal upheld this view, noting that the AO did not provide sufficient evidence to classify the loan as bogus. 3. Establishment of M/s. Golden Agro Products Pvt. Ltd. as a Shell Company: The AO argued that M/s. Golden Agro Products Pvt. Ltd. was a shell company based on the statement of its director, Shri Jitendra Salecha, who admitted to floating various companies for providing accommodation entries. However, the CIT(A) found that the company had changed its address and had filed Form 18 with the Registrar of Companies. The Tribunal agreed with the CIT(A) that the AO failed to prove the company was a shell entity, noting that the company’s financial transactions were transparent and there were no anomalies in the bank accounts. 4. Ignoring Findings on the Creditworthiness of the Lender and Genuineness of Transactions: The Revenue contended that the CIT(A) ignored the AO's findings regarding the lender's creditworthiness and the genuineness of the transactions. The CIT(A) had considered the remand report and found that the creditor's identity, transaction genuineness, and creditworthiness were satisfactorily established. The Tribunal upheld this finding, emphasizing that the AO did not provide concrete evidence to dispute the lender's legitimacy. 5. Deletion of Addition Under the Head "Capital Gains" Related to Surrender of Tenancy Rights: The AO added ?1,84,63,421 as capital gains, assuming the surrender of tenancy rights. The CIT(A) found that the agreement for redevelopment did not constitute a transfer under Section 2(47) of the Income Tax Act, as the assessee continued to pay rent and retained tenancy rights until the new property was received. The Tribunal agreed, noting that the transfer was incomplete as the assessee had not received the new property nor parted with the old tenancy. 6. Taxing Income from House Property Based on Estimated Rent: The AO assessed deemed rental income at ?5,40,000 based on the location and leave and license agreement, instead of the ?2,20,000 offered by the assessee. The CIT(A) directed the AO to give a set-off for the amount already disclosed and restricted the addition to ?3,20,000, allowing statutory deductions. The Tribunal found no reason to interfere with the CIT(A)'s findings, as the AO had not carried out any inquiries to establish that the lumpsum amount offered was not the actual rental income. Conclusion: The Tribunal dismissed the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s findings on all issues. The Tribunal found that the CIT(A) had judiciously considered the facts, remand reports, and legal principles, and no new evidence was presented to warrant a different conclusion.
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