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TMI Blog2019 (6) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... ough 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case and law, the Ld. CIT(A) has erred in deleting the addition made on account of loan taken by the assessee from M/s. Golden Agro Products Put. Ltd., of ₹ 60,00,000/- without appreciating the A.O s findings that even the existence of the company could not be proved, meaning thereby that it is a shell company. 2 On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in deleting the disallowance of interest expenses of ₹ 3,60,000/- without appreciating the fact that if the main loan has been given by a company where existence could not be proved, the consequential interest on the said loan would automatically stand disallowed. 3 On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in holding that the A.O. has failed to establish that M/s. Golden Agro Products Pvt Ltd is shell company, notwithstanding that there is information (which subsequently came on record) to show that Shri Jitendra Salecha, Director of the impugned company, admitted on oath before DDIT(Inv), Unit-7 (3), Mumbai that he has floated various companies, including M/s. Golden Agro Products Pvt Ltd for providing accommod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved that M/s.Golden Agro Products Pvt. Ltd., was a shell company. It was further submitted that the Ld.CIT(A) has also erred in deleting the disallowance of interest expenses of ₹ 3,60,000/-, without appreciating the fact that if the main loan had been given by a company, whose existence could not be proved, consequentially, the interest on the said loan would automatically stand disallowed. Ld.DR further submitted that Assessing Officer during the course of assessment, while carrying out explanation, had established that M/s.Golden Agro Products Pvt. Ltd., was a shell company, but even then, Ld.CIT(A) had erred in holding that the Assessing Officer had failed to establish that M/s.Golden Agro Products Pvt. Ltd., is a shell company, notwithstanding the fact that Shri Jitendra B. Salecha, Director of the said company himself admitted before the DDIT(Inv.) Unit-7(3), Mumbai that he has floated various companies, including M/s.Golden Agro Products Pvt. Ltd., for providing accommodation entries. Thus, once there was admission on the part of the said Director of the company himself, in that eventuality, Ld.CIT(A) should have sustained the addition. 4.2. On the other hand, L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o establish the identity and the credit worthiness of the creditor as well as the genuineness of transaction. 5. The identity of creditors can be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by a/c payee cheque. Creditworthiness of the lender can be established by attending circumstances. 5.8 From the assessment order, it is observed that the AO has formed his view about the bogus nature of the loans taken by the appellant from M/s. M/s. Golden Agro Products Pvt. Ltd., as the said company could not be located at the said address. Further, the appellant could not supply any document respect to the said company at the time of assessment proceedings. 5.9 However, during the remand proceedings, following documents were produced by the appellant to establish genuineness of the loans- (i) Confirmation of loan as obtained from Golden Agro Products Pvt. Ltd. of ₹ 60,00,0007- by cheque on 26.09.12; on the said amount ₹ 3,60,0007- is being credited as interest for the period. (ii) Golden Agro Products Pvt. Ltd. is duly assessed under PAN:AACG9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded the statement of Mr. Jitendra B. Salecha, Director of M/s Golden Agro Products Pvt. Ltd. u/s 131 on 07.09.2017. On going through the statement of Mr. Jitendra Salecha, it can be inferred that the registered office of M/s. Golden Agro Products Pvt. Ltd. has been changed twice and Form No. 18 was filed with the ROC. In reply to question no.14 and 15. Mr.Jitendra Salecha has explained that the company was regularly advancing surplus funds as loans to private parties for earning interest income for the company. The company had advanced loan during the year to the appellant, from refund of loan received from Mr. All Mohammed Qasim Duberia to whom the company had advanced the loan in May, 2012. An affidavit was also submitted to this effect. 5.12 No doubt the AO has commented upon the financials of the Company in extending the loan of ₹ 60 lac to the appellant but he has failed to establish that M/r. Golden Agro Products Pvt. Ltd. is a shell company. In my considered opinion, on the given set of facts and circumstances, loans received from this company cannot be doubted as bogus. The appellant on his part has provided ample evidences which has been detailed in the precedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction is concerned, the same was established from the fact that both the acceptance and repayment of the loan had been through banking channels as evident from the bank statement. Lastly, creditworthiness of the lender is concerned, the same was established from the audited accounts, ledger accounts and bank statement, which were filed during the course of appellate proceedings. Apart from that, during the proceedings, Assessing Officer had recorded a statement of Shri Jitendra B. Salecha, Director of M/s.Golden Agro Products Pvt. Ltd., concluding u/s. 131 of the Act. On going through the said statement, we also noticed that M/s. Golden Agro Products Pvt. Ltd., had changed twice their address and Form 18 was filed with the ROC. Even the said Director of the company, Shri Jitendra, during the course of investigation, had explained that the company was regularly advancing surplus funds as loans to the private parties for earning interest income for the company. The 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 als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexe, 46, MMC Road, Mahim (W), Mumbai 400 016. There were 8 flats in the said building being occupied by 8 tenants. The flat no.7 on the 3rd floor was in possession of the appellant, for which he was paying monthly rent of ₹ 500/-. As against the consideration declared at ₹ 12,00,000/-, the Stamp Duty Authorities valued it at ₹ 1,84,63,500/-. As per the clause- 3 of the agreement, all the tenants would continue to stay in their premises till construction of the new building was completed for occupation. The 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 the clause- VI, the new building would be ready within 3 years from the receipt of commencement certificate. It is highlighted that the clause-14(M) has specified that 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 undist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral power of attorney only if the terms indicate that complete control is given to the developer. If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer under section 2(47)(v). Apart from that it is observed that Hon'ble jurisdictional High Court has taken a consistent stand that only upon receipt of the possession of the new property, the transfer will be treated as complete. In the instant case, neither the new property was received by the appellant nor has he parted with his tenancy right/tenanted property. The appellant continued to be the tenant of the property, which has been established by payment of rents subsequent to the exclusion of the agreement with the Developer. 7.8 Considering the totality of the facts and circumstances of the issue involved, this cannot be treated as a case involving transfer as per section 2(47) of the I.T. Act. Once there is no surrender of tenancy right, the action of the AO in computing the valuation of the tenancy right at ₹ 1,84,63,421/- is not justified. As such, the addition of ₹ 1,84,63,421/- under the head capital gain is delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, 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. Recently, the Hon'ble Bombay High Court in the case of CIT Vs. Dr.Arvind S.Phake has held that immoveable property can be regarded to have been transferred on the date of execution of the development agreement and irrevocable general power of attorney only if the terms indicate that complete control is given to the developer. But as per the facts of the present case, 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, considering the totality of the facts and circumstances, Ld.CIT(A) also rightly concluded that this cannot be treated as a case involving transfer as per Section 2(47) of the Act. Therefore, we are also of the view that once there is no surrender of tenancy rights, the action of the Assessing Officer in computing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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