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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI PAWAN SINGH & SHRI S.R. RAHMAN
O R D E R PER PAWAN SINGH, JM : 1. This appeal filed by the assessee is directed against the order of learned CIT(A)-3, Mumbai dated 09-08-2019 for the Assessment Year 2016-
The assessee has raised the following modified grounds of appeal:-
“Ground No. 1: On the facts and circumstances of the case and in law, Hon’ble CIT(A) grossly erred in taxing a sum of Rs.22,50,00,000 being proceeds on sale of tenancy rights, u/s 68 of the Income Tax Act, 1961 ('the Act') as cash credit. The Appellant prays that the said action of the Hon'ble CIT(A) may kindly be deleted. Ground IMo.2: On the facts and circumstances of the case and in law, the Hon'ble CIT(A) grossly erred in confirming the action of A.O. of not allowing exemption u/s 54F of the Act. The Appellant prays that the said action of the Hon'ble CIT(A) may kindly be deleted.”
2 ITA 5885/Mum/2019 Vinay Toshniwal HUF 2. Brief facts of the case are that the assessee is a Hindu Undivided Family(HUF), filed its return of income on 29-07-2016 declaring total income at Rs.14,43,020/-. The case of the assessee was selected for limited scrutiny under computer aided scrutiny selection (CASS) for examining the issues, (i) whether investment and income in relation to properties are duly disclosed; and (ii) whether deduction from capital gains has been claimed correctly. During the assessment the assessee was served various notices through ITBA-Portal. The assessee filed response to the said notices by filing reply on the portal and uploaded the required documents in support of its claim. In the computation of income the assessee claimed long term capital gain (LTCG) of Rs. 22.50 Crore on transfer of tenancy rights in a right in a Flat on second floor Champagene House, Worli Sea Face Mumbai. The assessee also claimed deduction of LTCG under section 54 as capital gain was invested in purchase of new residential house. The assessing officer vide show-cause notice dated 16.10.2018 asked the assessee to furnish the details of capital asset with the documentary evidences. The assessee filed its reply and furnished the copy of agreement dated 29.05.2015 with regard to transfer of tenancy right in a Flat on second floor Champagene House, Worli Sea Face Mumbai, to M/s Pine Tree
3 ITA 5885/Mum/2019 Vinay Toshniwal HUF Estate Pvt Ltd. The assessing officer again vide notice dated 24.11.2018 under section 142(1) asked the assessee to furnish the evidence of acquisition of tenancy right in the said flat. The assessing officer recorded that the assessee filed reply dated 01.12.2018, but no documentary evidence related to the acquisition of the said flat was furnished by the assessee.
The assessing officer issued notice under section 133(6) dated 07.12.2016 to the Secretary of Champagene House, Worli Sea Face Mumbai, to furnish the details of ownership of the property, occupants of the property in last ten years, if the said flat was occupied by the owner or third party or was given on lease or rent and to furnish the copy of the lease/ tenancy. The assessing officer recorded that the secretary of Champagene House, Worli Sea Face Mumbai, with his reply dated 26.12.2016 furnished the copy of agreement to sale dated 29.05.2015 and that no evidence of acquisition of tenancy (asset) was furnished by him.
The assessing officer also issued notice under section 133(6) dated 07.12.2016 to the M/s Pine Tree Estate Pvt Ltd requiring them to furnish the details and nature of transaction in AY 2016-17, copy of Income tax return of AY 2010-11 to 2016-17, bank statement from 4 ITA 5885/Mum/2019 Vinay Toshniwal HUF 01.04.2009 to 31.03.2016 and source of investment for purchase of tenancy right from M/s Vinay Toshniwal (HUF). The assessing officer recorded that M/s Pine Tree Estate Pvt Ltd vide its reply dated 17.12.2106 furnished only its return of income for AY 2016-17, wherein they have offered Nil income. The assessing officer further issued notice to the assessee as to why the claim under section 54 should not be disallowed. The assessing officer noted that the assessee again not furnished any documentary evidences about the acquisition of tenancy right in the property.
The assessing officer on his aforesaid observation concluded that the assessee failed to prove the genuineness of sale of tenancy right of Rs. 22.50 Crore, hence, the transaction remained unexplained, thus, the said receipt of Rs. 22.50 Crore was treated as unexplained cash credit under section 68. Resultantly, the exemption under section 54 was also denied.
On appeal before ld. CIT(A), the assessee urged that in reply to the notices issued by the assessing officer all documentary evidences with regard to acquisition of tenancy were filed electronically (uploaded on portal). The assessee also handed over all the documents physically to the assessing officer. The name of assessee is mention on rent receipt
5 ITA 5885/Mum/2019 Vinay Toshniwal HUF or last 15 years. There was no doubt cast over the tenancy rights. The sale was confirmed by the buyer in response to the notice under section 133(6). The identity and genuineness of buyer, who paid the money is not doubted. The credit in the books of the assessee is fully explained and the addition under section 68 is bad in law. The lack of income of the purchaser cannot be ground to prove his creditworthy. The ld CIT(A) after considering the submissions of the assessee passed the following order; “During the course of appellate proceedings also, the appellant could not substantiate and furnished any new documentary evidence related to acquisition of his tenancy rights. The AO has categorically mentioned in para 4.1.2 of the assessment order that appellant has provided multiple opportunity and stated that burden of proof is on the assessee to explain satisfactorily with regard to the transaction shown in the return of income along with documentary evidences despite providing sufficient opportunity to prove the genuineness of transaction, appellant failed. In view of the above observation, I find no reason to interfere in the order of AO. Accordingly, the addition of Rs. 22,50,00,000/- as unexplained cash credit made under section 68 by the AO is upheld. Ground No. 1 is dismissed.
Further, aggrieved by the order of ld.CIT (A), the assessee has filed the present appeal.
We have heard the submissions of learned authorised representative (ld. AR) of the assessee and the learned departmental representative
6 ITA 5885/Mum/2019 Vinay Toshniwal HUF (ld. DR) for the revenue and perused the material available on record. Ground No.1 relates to taxing the sale consideration of tenancy right as unexplained cash credit. The learned AR of the assessee submits that assessee entered into agreement dated 29th May 2015 for sale of ‘tenancy right’ of a flat situated on the 2nd floor of Champagne house, earlier known as Shakuntala building, 69 Worli, Mumbai. The tenancy rights were sold to Pine Tree Estate Private Limited for a consideration of ₹ 22.50 crore. The assessee offered capital gain in its return of income for the year under consideration. The capital gain was calculated without claiming any cost of acquisition as cost of acquisition of tenancy right was nil. The assessee claimed deduction under section 54F in respect of cost of property purchased subsequently. During the assessment the assessee was served notices through ITBA-portal. In response to the statutory notices, the assessee furnished its reply from time to time and uploaded the required documents on the portal of the department. Entire proceedings were conducted electronically. During the course of assessment and notice under section 142(1) dated 16th October 2018 was issued to the assessee requiring him to furnish documentary evidence in relation to the acquisition of capital asset and sold during the year. In response to 7 ITA 5885/Mum/2019 Vinay Toshniwal HUF the notice, the assessee furnished all required details relating to transfer of capital asset along with the documentary evidences including deed of transfer of tenancy to the assessing officer. The assessing officer again vide notice dated 24th November 2018 required the assessee to furnish documentary evidences with respect to acquisition of tenancy rights. The assessee furnished the memorandum of partition dated 31.03.1984 along with the other documents evidencing the acquisition of tenancy right. However, the assessing officer in his order recorded that the assessee has failed to furnish any documentary evidence with respect to acquisition of tenancy right in the property. Secondly, assessing officer has observed that a notice under section 133(6) dated 07.12.2016 was served on the Secretary of the building, and in response to which only an agreement to sale of tenancy was furnished and not the tenancy agreement. Similarly, notice under section 133(6) dated 07.12.2016 was also served upon the buyer namely Pine Tree Estate Private Ltd, requiring them to submit the detail of transaction as well as Income tax return and the Bank statement. In response to the same, the buyer submitted copy of their return of income. According to the assessing officer, the income shown by said party is nil for assessment year 2016-17 and, the creditworthiness of the buyer of the 8 ITA 5885/Mum/2019 Vinay Toshniwal HUF capital asset is not proved. The ld AR for the assessee further submits that the assessing officer wrongly concluded that source of sale of consideration is not established and treated the entire sale consideration as unexplained cash credit under section 68 of the Act. No further investigation was conducted by assessing officer against the purchaser for doubting his credibility.
Before the learned CIT(A) the assessee again furnished complete documentary evidences which were furnished before the assessing officer. The assessee specifically contended that assessing officer has wrongly recorded that the documents establishing the acquisition of property has not been furnished. The learned CIT(A) however, dismissed the appeal of assessee by merely reiterating the same contents as made by the assessing officer. The learned CIT(A) confirming the action of assessing officer recorded that no documentary evidence was furnished by the assessee. The learned CIT(A) has not given any finding on the documents furnished before him, which has been duly recorded in para 4 of the impugned order.
The assessee during the assessment as well as during first appellate stage furnished complete details with regard to acquisition of tenancy, partition of tenancy right as a result of partition of BD Toshniwal HUF 9 ITA 5885/Mum/2019 Vinay Toshniwal HUF on 31st March 1984. The learned AR of the assessee also invited our attention on Schedule-G of memorandum of partition dated 1st April 1984. The copy of said partition deed is also placed on record.
It was explained by learned AR of the assessee that Mrs Radhibai Munsukhani and Mahon L Munsukhani were original owner of building. A flat on 2nd floor of building was taken on rent by BD Toshniwal HUF somewhere in 1970. As a result of complete partition of BD Toshniwal HUF on 31st March 1984, the tenancy right in the above flat on second floor along with one garage on ground floor was given to the assessee as a coparcener for himself and his family. Mrs Radhibai Mansukhani and Mr Mohan L. Mansukhani executed a irrevocable power of attorney in favour of Vaman B Sardesai and Ganpat V Chougule on 15th August 1984 for assigning and transferring the ‘Shakuntala property’ to Vikrant Sham Chougule Private Trust through its Trustee Vaman B Sardesai. Consent term was accepted by Bombay High Court and the decree was passed on 23rd December 1984.
The learned AR for assessee further explained that apart from the documentary evidences furnished before the lower authorities the assessee demonstrated that holding period of tenancy right by assessee
10 ITA 5885/Mum/2019 Vinay Toshniwal HUF were submitted before the assessing officer as well as ld CIT(A). It was explained deed of transfer of tenancy right dated 29th May 2015 evidencing right from assessee to the buyer. The letter written by BD Toshniwal HUF & Vinay Toshniwal HUF intimating change of ownership of tenancy to the landlord of the property. The assessee also furnished the copy of letter written by landlord to all tenants including a change in the ownership of property from Radhbai & Mohan Mansukhlal, the copy of those letters are placed on record. The ld AR also invited our attention on the rent receipts placed on record from October 2001 to May 2015 during the tenancy period for the rent paid to the landlord.
The learned AR of the assessee further submits that from the chain of document furnished by assessee it was proved beyond doubt that the tenancy right was acquired by BD Toshniwal HUF in the year 1970 and continue to be in possession till 1984. The tenancy right were transferred to the assessee on partition of BD Toshniwal HUF in 1984.
Karta of the assessee was residing in the tenanted property along with family. The tenancy in the property was sold to buyer on 29th May 2015.
11 ITA 5885/Mum/2019 Vinay Toshniwal HUF 13. On the objection of assessing officer that buyer has no creditworthiness to enter into the said transaction. The learned AR for the assessee submits that in the deed of transfer of tenancy right, all details of buyer along with address and permanent account number (PAN) are mentioned. The assessing officer only doubted the capacity of the buyer but has not proved anything with regard to the same except observing that “on perusal of return of income or Pine Tree Estate Private Limited, it is seen that company has offered nil income for AY 2016-17.” The ld. AR submitted that buyer is not a related party.
On the observation of assessing officer that secretary of the society to furnish the partition deed cannot lead to a conclusion that assessee has not acquired such right. In the notice under section 133(6), the assessing officer merely ask the secretary of the assessee to furnish, lease documents, tenancy document of the property in the last 10 years.
No enquiry with regard to the agreement/partition took place in 1984 was asked. The learned AR of the assessee finally submitted that during the assessment as well as before first appellate authority the assessee furnished all the necessary documentary evidences about acquisition of tenancy right, the lower authorities has not commented on a overwhelming document furnished by assessee.
12 ITA 5885/Mum/2019 Vinay Toshniwal HUF 15. In support of his contention the ld.AR of the assessee also furnished the following documents:- Screen shot of the E-filing portal showing submission of documents online on 29-11-2018, E-filing acknowledgement for submissions made before the Assessing Officer along with covering letter, Notice u/s 142(1) of the Act, Screen shot of the E-filing portal showing submission of documents online on 01-12-2018, 10-12-2018 and 11-12-2018, E-filing acknowledgements for submissions made before the Assessing Officer, Memorandum of partition dated 31.03.1984, Deed for transfer of tenancy, dated 29.05.2015, Working of capital gain on transfer of tenancy and Written submissions file before CIT(A) 16. On the other hand, the Ld. DR for the revenue supported the orders of lower authorities. The Ld. DR further submits that the lower authorities has given categorical finding that the assessee has not substantiated its claim and has not furnished any documentary evidence about the acquisition of asset. Therefore, the matter may be restored to the file of the AO for adjudication of grounds of appeal afresh.
17. In the rejoinder submission, the Ld.AR of the assessee submits that all necessary evidences were furnished in accordance with the direction of AO. The relevant documents and evidences were uploaded on the portal of AO. Despite informing him that all necessary evidences have been furnished, the AO has not taken cognizance of the facts and the 13 ITA 5885/Mum/2019 Vinay Toshniwal HUF documentary evidences. All documentary evidences again furnished to the Ld. CIT(A). The Ld. CIT(A) also has not taken any cognizance of the same; rather, concurred with the finding of AO and the ld AR for the assessee would submit that the assessee has proved his case beyond doubt and restoration of case to the file of assessing officer or ld CIT(A), no purpose would serve except harassment of the assessee.
18. In further counter submissions the Ld. DR of the revenue strongly objected and would submit that he may be given opportunity to call for the record of AO and of Ld.CIT(A) to verify the fact with the evidence which is claimed by the assessee were actually placed before the lower authorities or not.
Considering the submissions of both the parties, on 02-01-2020, we treated the matter as part-heard and hearing of the appeal was fixed for 10-01-2020 and we directed ld. CIT-DR to call the record of assessment and first appellate authority. On 10-01-2010, the assessing officer brought the record of assessment as well as of the first appellate authority attended the hearing with ld. CIT-DR.
We have perused the record of first appellate authority and find that the assessee had furnished the following documents, which are still available on record:-
14 ITA 5885/Mum/2019 Vinay Toshniwal HUF Screen shot of the E-filing portal showing submission of documents online on 01-12-2018, 10-12-2018 and 11-12-2018, E-filing acknowledgements for submissions made before the Assessing Officer, Memorandum of partition date 31.03.1984, Deed for transfer of tenancy dated 29.05.2015, Working of capital gain on transfer of tenancy and Copy of Written submissions file before CIT(A) 21. We raised our specific quarry to the assessing officer, if the documentary evidences uploaded by the assessee were examined/ perused by him or not. The assessing officer submitted that he may be allowed opportunity to examine all the evidences afresh. However, the assessing officer not disputed the contention of the assessee about uploading of various information and documentary evidences on the web-portal. The ld. AR for the assessee along with instructing Chartered Accountant (CA) team has brought their computer system, and explained before us that the web-portal shows the date of uploading the reply and the various documents, size of documents and value of attachment (description of documents) and time of session. It was explained that on opening the system and by login, we can ascertain as to when the portal was used by the assessee (or his agent) and the details of login and uploading of reply cannot be manipulated by the assessee. All these facts were not disputed either by AO or by ld CIT-DR.
15 ITA 5885/Mum/2019 Vinay Toshniwal HUF 22. In view of the aforesaid observation, we again directed both the learned representative of the parties to re-capitulate their submissions again, on the issues raised in the present appeal. The Ld.AR of the assessee re-affirmed the submissions made earlier. The Ld.AR further submits that the lower authorities, despite furnishing all the evidences have taken a view that no documentary evidence to substantiate the claim was furnished before them. The AO has not made any investigation from the creditor / builder, who have paid a sum of Rs.22.50 crores which was claimed by assessee as a capital gain. The addition made by AO and confirmed by Ld. CIT(A) has no leg to stand. The ld CIT(A) has co-terminus power to examine the issue/claims. The ld CIT(A) affirmed the action of assessing officer, despite the fact that all evidences with regards to acquisition of tenancy its holding period and transfer was available before him. The Ld.AR for assessee, thus, strongly opposed for the restoration of matter to the AO for considering it afresh. The Ld.AR would submit that there was no fault on the part of the assessee, and then the assessee should not suffer unnecessarily and prayed that the bench may decide the appeal on the basis of material available on record. The assessee has not filed any new document before Tribunal, which may require to the 16 ITA 5885/Mum/2019 Vinay Toshniwal HUF considered by AO. It was explained the short question for consideration before the Tribunal is if the assessee held the asset for more than three years prior its transfer or not. The assessee has unequally proved the holding period of asset for more than couple of decades.
On the other hand, the Ld. DR again reiterated his submission made on 05-12-2019 and submitted that once there is a finding of lower authorities that no evidence was furnished by assessee and that the AO has not examined the evidence, the matter requires fresh consideration by AO.
We have considered rival submissions of both the parties and perused the material available on record. In the computation of income the assessee claimed LTCG on sale of tenancy right in a flat. The assessee also claimed deduction of entire gain as it was invested in purchase of new residential house. The case of the assessee was selected for limited scrutiny on two issues i.e. (i) whether investment and income relation to properties are duly disclosed and (ii) whether deduction from capital gain has been claimed correctly. On perusal of working of LTCG the AO noted that the assessee claimed Capital Gain of Rs. 22.50 Crore in the previous year on transfer of tenancy right in a flat in Worli,
17 ITA 5885/Mum/2019 Vinay Toshniwal HUF Mumbai. The AO issued show cause notice to the assessee to furnish the details of capital asset sold with documentary evidence. In response to the show cause notice the assessee furnished its reply dated 10.09.2018. The AO noted that the assessee furnished copy of agreement dated 29.05.2015 about transfer of tenancy sold to Pine Tree Estate Pvt Ltd. The AO vide notice dated 24.11.2018 and 01.12.2018, again asked the assessee to furnish the documentary evidences about the acquisition of the asset. The AO in para 4.5 & 4.7 of the assessment order recorded that assessee not furnished any documentary evidences about the acquisition of the asset/ flat. The AO issued notice under section 133(6) on the Secretary of Champagene House (Secretary of resident society) Worli Sea Face, Mumbai and to require detail of ownership of property, occupants, if the flats were occupied by owner or by third party and details of flat given on lease and lease/tenancy document for last 10 years. The AO recorded that in response to notice, the secretary of Champagene House furnished its reply and filed the copy of agreement dated 29.05.2015. No document of tenancy right in favour of assessee was furnished. The AO issued notice under section 133(6) to Builder/Pine Tree Estate Pvt. Ltd. to furnish copy of ITR from AY 2010-11 to 2016-17, details of transaction in AY 2016-17,
18 ITA 5885/Mum/2019 Vinay Toshniwal HUF Bank statement from the period from 01.04.2009 to 31.03.2016 and source of investment in purchase of tenancy right. The AO recorded that Builder/Pine Tree Estate Pvt. Ltd. furnished copy of return of income for AY 2016-17 only. And that the AO noted that for AY 2016-17, the Builder/Pine Tree Estate Pvt. Ltd. offered Nil income. On the basis of the aforesaid observation, the AO held that creditworthiness of buyer who purchased capital asset i.e. ‘tenancy right’ from assessee is not proved. The AO further noted that despite giving opportunity the assessee not furnished documentary evidence for acquisition of tenancy right in a flat sold to M/s. Pine Tree Estate Pvt. Ltd. in A.Y. 2016-17. The AO held that assessee failed to prove genuineness of sale of tenancy right and that transaction remained unexplained and amount of Rs. 22.50 crore was treated as unexplained cash credit. The ld. CIT(A) affirmed the action of AO by holding that during the appellate stage, the assessee could not substantiate and furnish new documentary evidence related to acquisition of tenancy right.
There is no dispute that tenancy right is a capital asset. The lower authority has not disputed that nature of capital asset. The lower authority disputed about the acquisition of the tenancy right by taking
19 ITA 5885/Mum/2019 Vinay Toshniwal HUF view that assessee failed to prove by documentary evidence that assessee has genuine transaction. We have noted that before us the assessee has furnished copy of screenshot of portal of department (web-portal) showing that assessee uploaded document on 29.11.2018, 11.12.2018, 10.12.2018 & 01.12.2018. Further, the assessee has placed on record, the submission of document in response to notice dated 01.08.2018 on 05.12.2018, wherein the assessee furnished the copy of partition deed of B.D. Toshniwal (HUF) dated 31.03.1984 by virtue of which the tenancy was transfer to Vinay Toshniwal (HUF). The copy of acknowledgement about furnishing the aforesaid documents is filed on record as per page no.9 of PB.
During the hearing on 10.01.2012, this fact was confronted with the AO. The ld. AR of the assessee vehemently submitted that all the documents uploaded on the portal of revenue, screenshot of which is placed on record, can still be opened to ascertain the contention of assessee about the submission of document electronically, as the assessment proceeding were undertaken electronically. This fact was not disputed by AO nor by ld. CIT-DR for the revenue. Copy of Memorandum of Partition dated 01.04.1984 is placed on record before us. Perusal of Schedule G of this Memorandum of Partition clearly
20 ITA 5885/Mum/2019 Vinay Toshniwal HUF describe that tenancy right at Shakuntala 69, Worli Sea Face, Bombay was allotted to Shri Vinay Toshniwal. Further Sh. B.D. Toshniwal, Karta of B.D. Toshniwal (HUF) written a letter dated 23.08.1984 to owner of the building “Shakuntala” informing them that on desolation of their HUF, the tenancy right in flat and garage have been allotted to his son Vinay Toshniwal being coparcener having right to get these rights (tenancy right) in the capacity of his HUF including his wife and children. Further, on the same day assessee has also written similar letter to the owner of Building “Shakuntala” that on partition of B.D.
Toshniwal (HUF) is allotted tenancy right in favour of assessee.
Further, owner of Building “Shakuntala” also written a letter dated 15.08.1984 (letter of atonement) to tenants/occupants of Building “Shakuntala” confirming about the transfer of tenancy right in favour of assessee. The copy of all the documents is on record at page No. 20 to 22 of PB. The aforesaid documentary evidences clearly establish that the assessee held asset (tenancy right) from 1984 in its individual capacity.
Further, the assessee vide tripartite registered agreement dated 29.05.2015 transferred the said tenancy right to M/s Pine Tree Estate Pvt. Ltd. on a consideration of Rs. 22.50 crore. Perusal of registered
21 ITA 5885/Mum/2019 Vinay Toshniwal HUF deed for transfer of tenancy agreement clearly shows that the landlord/owner of Champagne House (earlier known as Shakuntala) also received a consideration of Rs. 45,00,000/- vide Demand Draft dated 407315 & 407316 dated 28.05.2015 of Rs. 22.50 lakhs each, drawn on HDFC Bank being confirming party. And it is clearly evident from perusal of registered deed for transfer of tenancy agreement that B.D. Toshniwal (HUF) was the tenant in the said premises. After the death of B.D. Toshniwal, his son Vinay Toshniwal was occupying the said premises along with his family. It is further mentioned that Vinay Toshniwal expired in August 2004. After the death of Vinay Toshniwal, the tenanted premise was under the possession of his family member in the name of Vinay Toshniwal (HUF). The assessee has also placed on record the rent receipt for payment of rent from April 2015 to May 2015 @ Rs. 4000/- paid to V.S. Chougule & R.S.
Chougule Pvt. Trust. We have further noted that all these documents were filed before AO as well as the ld. CIT(A). This fact was verified by us from the record of ld. CIT(A) while hearing the appeal. The lower authority has not given any finding on the documentary evidence furnished by assessee to substantiate that the asset in the form of tenancy right was in existence since 1970.
22 ITA 5885/Mum/2019 Vinay Toshniwal HUF 28. From the documentary evidence, we find that initially the tenancy was created in the name of B.D. Toshniwal (HUF), which was transferred to Vinay Toshniwal (HUF) after its partition in 1984. The owner of the building/property while transferring the tenancy right acknowledged the tenancy right in favour of assessee being one of the confirming party in the transfer deed dated 29.05.2015 and received consideration of Rs. 45,00,000/-. The assessee has also placed on record other corroborative evidence being rent receipt of tenanted premises.
We have further noted that during the assessment, the AO made investigation from the buyer of the property i.e. Pine Tree Estate Pvt. Ltd. The AO recorded that only income tax return for A.Y. 2016-17 was filed by the buyer in response to notice under section 133(6). No further action or investigation about the creditworthy of buyer was conducted by AO. The income tax return always contained the PAN of the assessee, which is sufficient to carry out further enquiry against the said buyer. No such show-cause notice to prove the creditworthy of Pine Tree Estate Pvt. Ltd. was issued by the AO. Further, the registered transfer deed of tenancy clearly shows that the payment of consideration for transfer of asset/tenancy right was paid to assessee through Demand Draft No. 407314 dated 28.05.2015 drawn on HDFC
23 ITA 5885/Mum/2019 Vinay Toshniwal HUF Bank. Thus, in the aforesaid transaction, no addition under section 68 can be made against the assessee. The assessee right from the beginning has categorically stated that consideration of Rs. 22.50 crore was received against the transfer of tenancy right. As we have noted earlier that it is settled position under the law, that tenancy right is a transferable asset. The assessee received consideration on transfer of said right. Further, the assessee has unambiguously proved that asset was in the possession of assessee for more than three year, thus, on the sale of tenancy right the assessee is entitled for LTCG. Therefore, the addition under section 68 against the proceeds of sale consideration is not unjustified. In the result, Ground No.1 of the appeal is allowed.
Ground No.2 relates to deduction under section 54. We have noted in the computation of income and working of Capital Gain the assessee has claimed exemption on the ground that assessee has invested the sale proceeds for acquisition of residential property/ flat No. 39 in Raheja Towers, Rajabhau Desai Marg, Prabhadevi, Mumbai. As the AO treated the sale proceeds of tenancy right as unexplained cash credit and resultantly not allowed the deduction/exemption under section 54F. Considering the fact that we have allowed LTCG by allowing Ground No.1 in favour of assessee. Thus, we direct the AO to 24 ITA 5885/Mum/2019 Vinay Toshniwal HUF verify the fact about the investment of sale consideration / gain in purchase of new residential house and allow exemption/deduction under section 54/54F in accordance with law. In the result, this ground of appeal is allowed for statistical purpose.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 26-02-2020.