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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 ..... reby 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 Rs. 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 accommodation entries. 4 "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in ignoring the findings given by the A.O. in the remand report in respect of the creditworthiness of the lender and genuineness of the transactions." 5 "On the facts and circumstances of the case and law, the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Ld.AR relied upon the order passed by the Ld.CIT(A) and reiterated the same argument, which was raised by him before Ld. CIT(A). 4.3. We have heard both the parties and perused the judgments cited by the parties and orders passed by the Revenue authorities. Before we decide the merits of these grounds, it is necessary to evaluate the order passed by the Ld.CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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 Rs. 60,00,0007- by cheque on 26.09.12; on the said amount Rs. 3,60,0007- is being credited as interest for the period. (ii) Golden Agro Products Pvt. Ltd. is duly assessed under PAN:AACG9127G. (iii) Confirmation for the period ended 31.3.14 reflecting credit of interest on the said loan amount of Rs. 4,80,000/- making the total outstanding as on 31.3.14 at Rs. 68,40,000/-. (iv) Repayment of said amount by the appellant by cheques on different dates as per confirmations i.e., Rs. 10,00,000/- on 05.01.2015 ; Rs. 10,00,000/- on 07.01.2015; Rs. 30,00,0007-on 09.01.2015 and Rs. 18,40,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company in extending the loan of Rs. 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 preceding paragraphs. Also, there are no cash deposits or cash withdrawals in the bank accounts either by the appellant or the director of the company. These aspects are also confirmed by the director of the company during the remand proceedings. The AO has not highlighted any anamoly in the bank transactions of the company while granting loans to the appellant. 5.13 There are plethora of judgements which do not justify such an addition as attempted by the Assessing Officer in the instant case viz., 1. DCIT Vs. G.V.S. Investment Pvt.Ltd.(2005) 992 TTJ 706 (Delhi), 2. Uma Polymers Vs. DCIT (2006) 284 ITR 80-I (Jodhpur)(TM). 3. Acchelal Shah Vs. ITO(2009) 121 TTJ (Kol.) 695-700 4. Commissioner of Income Tax Vs. Lovely Exports(P) Ltd. [216 CTR 195(SC)] 5. CIT v. Stellar Investments Ltd. (2001)251 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 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. 4.6 We are of the view that 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 [390 ITR 292] and CIT Vs. Pr.CIT Vs. Veedhata Tower Pvt. Ltd., [403 ITR 415]. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 undisturbed as covered by the Maharashtra Rent Control Act, 1999. It was also made clear in the agreement that there was no question of providing temporary alternate accommodation or transit accommodation to the tenants/occupants because the owners will not be shifting and/or no, taking possession of their tenanted premises during construction of the new building. 7.6 Based on the above facts, the Ld. AR has argued that upon perusal of various terms of the agreement it is clear that the appellant continued as tenant in the old property till alternate accommodation got constructed and possession of the same was given to the appellant. In this regard, I agree with the Ld. AR that the terms and conditions of the agreement clearly reflects that there was no surrender of tenancy on the date of agreement i.e. 17.09.2012. As such the appellant continued to pay rent under the terms of agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 1,84,63,421/- is not justified. As such, the addition of Rs. 1,84,63,421/- under the head capital gain is deleted. The ground of appeal number 4 is accordingly, allowed". 5.2. After having gone through the facts of the present case and hearing the parties at length, we find that the assessee entered into an agreement dt.17-09-2012 with M/s.Unique Construction for re-development of the tenanted property at Regi Annexe, 46, MMC Road, Mahim(W), Mumbai, which were 8 flats in the said building being occupied by 8 tenants. Flat No.7 on the 3rd floor was in possession of the assessee, for which he was paying monthly rent. As per Clause-3 of the said agreement of the tenants, 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 Clause-12, the new building w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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'. Hence, this ground raised by the Revenue is dismissed. 6. In the result, the appeal of Revenue is dismissed. 7. Assessee has filed cross-objection with regard to taxing income from house property based on estimated rent, instead of the amount, which was offered to tax by him. 8. We have heard the counsels for both the parties at length and we have also perused the material placed on record, we find from the records that the assessee had received rental income regarding which, the AO had sought proof of rental income receipt and proof of deduction claimed for the same. In this case, the assessee had placed on record copy of leave and licence agreement of Rs. 35,000/-. AO assessed deemed rent income of Rs. 30,000/- per month from the flat at Mahim and Rs. 15,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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