ACIT CENTRAL-2 INDORE, INDORE vs. SHRI .GAURAV TEKRIWAL, INDORE

आदेश / O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by appeal-order dated 16.09.2020 of learned Commissioner of Income-Tax (Appeals)-III, Indore [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 29.12.2017 of learned ACIT/DCIT, Central-2, Indore [“Ld. AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the revenue has filed this appeal on following grounds:

“(1) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 3,25,00,000/- made by the assessing officer on account of income from other sources.

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in treating Rs. 3,25,00,000/- as income from long term capital gain. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in allowing exemption of Rs. 2,32,13,084/- u/s 54F against the claim of long term capital gain. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 7,66,500/- on account of share transactions. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 8,48,892/- made by the Assessing Officer on disallowance of interest expenditure u/s 57(iii). 6. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in allowing the disallowance done by the Assessing Officer of long term capital loss of Rs. 80,23,177/- on account of sale of shares.” 2. The assessee is an individual who filed return of income for the relevant AY 2015-16 on 31.03.2017 declaring a total income of Rs. 12,78,540/-. The case was subjected to scrutiny and statutory notices u/s 143(2)/142(1) were issued from time to time, which the assessee complied with. Finally, the Ld. AO completed assessment vide order dated 29.12.2017 at a total income of Rs. 3,53,93,932/- after making certain additions. Aggrieved by order of assessment, the assesse filed appeal to Ld. CIT(A) wherein the assessee got part-relief. Now, the revenue has filed appeal assailing the order of Ld. CIT(A).

GROUND NO. 1 and 2:

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 sub-tenancy right and received a sum of Rs. 3,25,00,000/- as consideration therefor vide Memorandum of Understanding (MOU) dated 02.05.2014, a copy placed in the Paper-Book. The assessee claimed “Nil” cost of acquisition in terms of section 55(2)(a) of the act and accordingly disclosed a long-term capital gain of Rs. 3,25,00,000/-. The assessee claimed capital gain as long- term on the footing that the sub-tenancy right was held for more than 3 years as required by section 2(29B) of the act.

“In response to the above notice, the assessee through his AR submitted reply on 22.12.2017 the same is reproduced as under:- "1.00 That, there was one property situated at 22, South Tukoganj, 2, A.B. Road, Indore (in short, 'the said premises’) which was originally purchased and owned by some Mr. Gulab Nabi Bakshi and his sons prior to 1970. 2.00 That, in the subject properly, Mr Gulab Nabi Bakshi and his sons, through their company, were operating automobile dealership business under the name and style of ‘M/s Fairdeal Motors' 3.00 That, somewhere, in the year 1974, the grandfather of the assessee Late Shri Prahlad Rai Tekriwal and the father of the assessee Shri R.K Tekriwal, through their company named and titled as ‘M/s Fairdeal Marwar Garages Pvt. Ltd' (in short, 'FMG') which purchased the dealership business of M/s Fairdeal Motors by paying a sum of nearly Rs 3 lacs. 4.00 That, as per the terms and conditions between Mr. Bakshi & Ors. and the FMG, the FMG acquired the right of carrying out any business in the said premises as a tenant. 5.00 That, after purchasing the business of dealership and after acquiring the right of tenancy, the FMG carried out business of automobile dealership in the said premises. Initially the FMG was having dealership of Ashok Leyland and subsequently, from 1984, it got the dealership of Maruti Suzuki Ltd. 6.00 That meanwhile somewhere in the year 1980, the said premises was purchased by M/s. Khandelwal Chambers, 415, M.G. Road, Indore, through its beneficiaries Shri Tulsiram Khandelwal and 3 others from Mr. Baxi & Ors. under Sale Deed dated 01-1l-1980. After purchasing the premises, M/s. Khandelwal Chambers became the sole Owner of the said premises. However, Page 3 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 the tenancy rights of the FMG in the said premises continued and thenceforth, instead of paying rent to Mr. Baxi, the FMC started paying rent to Khandelwal Chambers. A copy of the letter conferring right of tenancy as well as change in the name of owners, addressed by Mr. M.Y. Baxi in fabour of FMG is being submitted herewith for kind perusal and record, as Annexure C-1.00. 7.00 That, somewhere in the year 1986, there arose a dispute between the landlord and the FMG and the landlord Khandelwal Chambers filed Eviction Suit against the FMG vide Civil Suit No. 12A dated 30-04-1986 before the Addl. District Judge, Indore (Special Court). The Civil Court passed the Decree against the FMG vide the Decree passed on 21-04-1997 in Civil Suit no. 12A of 97. A copy of the Decree passed against the FMG by the Civil Court is submitted as Annexure C- 2.00. 8.00 That, against the Decree passed by the Civil Court, the assessee filed an appeal before the Hon'ble High Court of Madhya Pradesh, at Indore. The Hon'ble High Court, vide its Order delivered on 01--08-2003, vide Para No. 27, reversed the Order passed by the Trial Court. A copy of the Order passed by the Hon'ble MP High Court is being submitted herewith as Annexure C-3.00. 9.00 That after losing the suit of eviction before the Hon'ble High Court, as stated above, the landlord, M/s Khandelwal Chambers, preferred appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court, vide its Order, set-aside the Order of the Hon’ble High Court with a direction to consider the matter afresh. 10.00 That, meanwhile, the FMG, due to certain financial and other reasons, had to wind up its business in the year 2003. Its only dealership with Maruti Suzuki Ltd got terminated. 11.00 That, after closure of the business, the FMG sub let out a substantial portion (65) of the said premises to the assessee on a monthly rent of Rs. 3000/- per month w.e.f June, 2003. A copy of Kiraya Nama' written by Shri Gaurav Tekriwal in favour of FMG and duly acknowledged by FMG to this effect is being submitted herewith for kind perusal and record of your good self, as Annexure C-4.00. It is submitted that through this 'Kiraya llama', the assessee derived tenancy right in the said property. 12.00 That, meanwhile, the key person of M/sKhandelwal Chambers, "Shri Tulsiram Khandelwal” passed away and thereafter, his grandson Shri Dipesh Khandelwal got various proposals from various builders for redevelopment of the said premises on ratio-basis However, since the property was in the possession of the assessee and other co-tenants, with the matter sub-judiced before the judicial forum "Shri Dipesh Khandelwal” was not in a position to get the premise redeveloped. 13.00 That under the aforesaid circumstances, Shri Dipesh Khandelwal approached to the FMG being the original tenant and as also to the assessee and other persons being the sub-tenancy right in the said property for certain monetary consideration to be mutually agreed upon amongst themselves. 14.00 That, accordingly, after prolonged negotiation and cross offers between the landlord and the FMG and as also between FMG and its sub-tenants inter Page 4 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 se, finally, all the concerned parties reached to an understanding, which was subsequently recorded as a MOU on 02-05-2014. A draft copy of the said MOU was also found in the computer of the assessee during the course of' Search operations carried out in his residential and business premises on 28-02-2014. As per the said MOU landlords agreed to pay consideration aggregating to a sum of Rs. 5 Crores, to the assessee, the main tenant and other sub-tenants. As per the draft MOD and the subsequent negotiations amongst the tenant and sub-tenants, as the assessee was in possession/occupation of 65% of' the said premises, he became entitled for a consideration of Rs. 3.25 crores. 15.00 That, a copy of the final MOU dated 02.05.2014 has already been furnished by the assessee along with his earlier submission letter dated 08-12- 2017. On a perusal of the clause no. (S) of the said MOD, it becomes evident that the assessee was, inter alia, having physical possession and occupation of the said premises as tenant/sub-tenant along with other tenant/sub-tenant. From the clause (3) of the MOD, it is also apparent that the assessee was one of the sub-tenants of FMG. 16.00 That, receipt of consideration for surrendering the tenancy right by tile assessee is evident from the break-up of the consideration of Rs. 5 crores. It is submitted that the entire consideration for relinquishment of tenancy right' has been received by the assessee through account pare cheques only which. in its turn, is evident from the aforesaid MOD as well a' copies of book statements of the assessee already placed on record. 17.00 That, in the case of the assessee as well as in the case of his father Shri. R.K. Tekriwal, Search u/s 132(1) was carried out on 28-02-2014 and accordingly, in pursuance of such Search, assessment proceedings under s. 153A were carried out. During the course of the assessment proceedings, in the case of Shri R.K. Tekriwal, the then ld. AO vide his questionnaire issued under s.142(1) on 29-10-2015, had specifically made a mention of the MOD executed between Shri Dipesh Khandelwal, Shri R K Tekriwal and other tenant/sub- tenants. A copy of the said Notice is being submitted herewith for your kind perusal and ready reference, as Annexure C-5.00. 18.00 In response to the said Notice, Shri R K Tekriwal, vide his letter dated 17-02-2016, made the necessary explanation, which for the sake of ready reference, is being reproduced as under. "In this context, at the outset. it is submitted that the subject MOU was neither entered into during the periods under assessment nor any financial transaction relating to such MOU was made in any of the years under consideration. In other words. it is humbly submitted, the subject MOU is not relevant for determining my income for AY' 2008-09 to A. Y 2014-15. Sir, the subject MOU was entered into by me along with my family members & family concerns, with Shri Dipesh Khandelwal on 02-05- 2014 i.e. during the previous year relevant to A.Y. 2015-16. For a ready reference, a copy of the said MOU is being submitted herewith, as Annexure B-2.00. It is submitted that from the subject MOU the details desired by your good self can very well be gathered.”

Page 5 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 19.00 Madam, the above explanation "was duly accepted in the proceedings carried out under s.153A of the Act and the MOU furnished by the father of the assessee before the then AO was the same as has been furnished before your good self. It shall further be worthwhile to note that, at an earlier occasion, in the case of assessment proceedings of the landlord namely Shri Dipesh Khandelwal, carried out under s.153A of the Act, the veracity of the above said MOU and contents thereof have been accepted without any adverse inference. The genuineness of the MOU was thus well established earlier and it was duly accepted by the then AO, although in the case of a different assessee i.e father of the assessee. In view of the above submission and various documentary evidences, we hope that we could be able to establish with the documentary evidences that the assessee was a co-tenant (sub-tenant) of the superstructure situated at the subject premises.” 6. However, after considering aforesaid submission of assessee, Ld. AO held that the assessee was not having any kind of sub-tenancy right and the long-term capital gain declared in the return was just a managed capital gain to claim exemption u/s 54F of the act. Ld. Accordingly, Ld. AO rejected the claim of long-term capital gain and assessed the income of Rs. 3,25,00,000/- as income from other sources by holding thus:

“5.8 A notice under section 133(6) of the Act was issued to Shri Dipesh Khandelwal, the owner and land lord of the property under discussion i.e. 'Khandelwal Chambers' situated at 2 A.B. Road, Indore. He filed detailed reply with documentary evidences. Considering the submission filed by the assessee as well as Shri Dipesh Khandelwal, it is seen that the assessee was never been tenant in the said property, therefore, question of relinquishment of tenancy does not arise. Resultantly, the claim of deduction u/s 54F is not tenable. The facts are discussed as under: � The claim of the assessee that he was one of the co-tenants of the property was jointly owned by Shri Dipesh Khandelwal and family, is factually incorrect as the M/s Fairdeal Motors was tenant since 1974, however, the Date of Birth of the assessee is 14.06.1981, then how the assessee become co-tenant in the property. � The property in question was originally owned by Shri Gulam Nabi Bakshi. He through their company, were operating automobile dealership business under the name and style of ‘M/s Fairdeal Motors'. Somewhere, in the year 1974, the grandfather of the assessee Late Shri Prahlad Rai Tekriwal and the father of the assessee Shri R.K. Tekriwal, through their company named and titled as M/s Fairdeal Marwar Garages Pvt. Ltd.' (in short, 'FMG'), purchased the dealership business of M/s Fairdeal Motors. As per the terms & conditions between Mr. Bakshi & Ors. and the FMG, the FMG acquired the right of carrying out any business in the said premises as a tenant.

Page 6 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 � In the year 1980, the said premise was purchased by M/s Khandelwal Chambers, through its beneficiaries Shri Tulsiram Khandelwal and 03 others from Mr. Bakshi & Others under sale deed dated 01.11.1980. However the tenancy rights of the FMG in the said premises continued and instead of paying rent to Mr. Bakshi, the FMG started paying rent to M/s Khandelwal Chambers. � The scanned image of letter though which FMG had to pay rent to Shri Khandelwal is as under: [Reproduced in appeal-order of CIT(A)] � As per the letter dated 01.11.1980 the tenants were required to contact the new land-lord and execute a regular rent note. However, no rent agreement was executed between the new land lord i.e. Khandelwal Chambers and M/s Fair-deal Mar-war Garages Pvt. Ltd., no rent agreement was signed with the assessee and landload. � It is evident that company was the tenant through its director/s at the said premises and was carrying out the business. There was no agreement between the landlord and directors of company to individually execute any rental contract. � Thus, it is undisputed fact that M/s Fairdeal Marnar Garages Pvt. Ltd. was the original tenant in the captioned property, therefore the company is lawfully entitled for receiving consideration of relinquishment tenant right if any. At the most the director of the company may be entitled for tenancy right but not the assessee by any stretch of immigration. � In the year 1986 first legal dispute between the landlord of M/s Khandelwal Chambers and M/s Fairdeal Marwar Garages Pvt. Ltd. arose. At that time the assessee was minor and only 05 years old having no right in the said tenancy occupied by company. � From the year 1986 to year 2014, the said property was in dispute before the various courts, i.e., Civil Court, High Court and Supreme Court for adjudication.(the copies of Court orders and related documents are placed on records) Therefore, it is evident fact that the tenancy itself was under dispute. � As par the claim of the assessee, in the year 2003, M/s Fairdeal Marwar Garages Pvt. Ltd., tenant of the said property, sub-let out a substantial portion (65%) of the disputed property to the assessee Shri Gaurav Tekriwal. However, the owner of property who was under dispute with his tenant M/s Fairdeal Marwar Garages Pvt. Ltd. was not the party of this documents. For ready reference, the document is reproduced as under:- [Reproduced in appeal-order of CIT(A)]

Page 7 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 � After examining the said “Kirayanama”, it is found that the said document is nothing, but a managed document, which was created by the assessee and his father on a simple piece of paper. The said document has no legal authenticity as the owner of properly who was under dispute with his tenant M/s Fairdeal Marwar Garages Pvt. Ltd. was not be party of this documents. � As per the section 14 of "The Madhya Pradesh Accommodation Control Act, 1961" the tenant is not allowed to sub-let the rented property without the previous consent in writing of the landlord. For ready reference, the section 14 of The Madhya Pradesh Accommodation Control Act, 1961 is reproduced as under: Section 14-Restriction on sub-letting (1) No tenant shall, without the previous consent in writing of the landlord- (a) Sub-let the whole or any part of the accommodation held by him as a tenant; or (b) Transfer or assign his rights; the tenancy or in any part thereof, (2) No land lord shall claim or receive the payment of any sum as premium, pugree or claim or receive any consideration whatsoever in cash or in kind for giving his consent to the subletting of the whole or any part of accommodation held by the tenant" � From the above facts, it is evident that the tenant was not legally eligible to sub-let the property to the assessee without consent of landlord in writing. In this case, the landlord was in dispute with original tenant itself since 1986. Therefore, the question of sub-letting the same property to the assessee does not arise. � The assessee referred clause (3) and (5) of the MoU dated 02.05.2014, and claimed that, the assessee was, inter alia, having physical possession and occupation of the said premises as tenant/sub-tenant alongwith other tenant/sub-tenants. However, it is not acceptable as the assessee was never having right of sub-tenancy in the said property as discussed in para above. Physical possession never create legal right of tenancy. It is fact that there was no sub-tenancy right in the name of the assessee since inception of rent agreement by the company with landlord. � The claim of assessee that sub-tenancy right was acquired in the year 2003, as per a "Kirayanama" executed on a simple paper. However, it is fact that the said documents is nothing but a letter head of Gaurav Tekriwal, and signed by Shri Gaurav Tekriwal (as a sub-tenant) and Shri Rajendra Telaiwal (on behalf of the company M/s Fairdeal Manvar Garages Pvt. Ltd as a tenant of the property) without consent of the landlord, without any witness/s, even the documents was not executed on stamp paper. Therefore, the so-called "Kirayanama" is not having any 1cgal authenticity and does not create any sub-tenancy Page 8 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 right in favour of the assessee. � There was no tenancy right, therefore, there is no question of relinquishment of the rights and capital gain as per section 48 of the Act. � This entire edifice was basically a colourable device through which the assessee has tried to show a huge amount of taxable income as LTCG and subsequently claimed deduction u/s 54F of the Act. The Hon'ble Apex Court in the case of McDowell Vs CTO has given strong verdict against any such arrangements by stating that Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges." The legitimate planning within the statute of law is allowable. In view of the Apex Court verdict, this entire arrangement of creating sub-tenancy rights and thereafter pretend to relinquish the same right against consideration of Rs.3,25,OO,OO/- is nothing but a mere colorable devised with the objective to avoid the payment of due taxes to government exchequer by claiming deduction u/s 54F of the Act. 5.9 In view of the above, it is concluded that assessee was not having any tenancy or sub-tenancy rights in the captioned property. The assessee has tried to create documents to show his sub-tenancy rights, which are not having any legal authenticity and not acceptable in the eyes of law. It is undisputed fact that M/s Fairdeal Marwar Garages Pvt. Ltd. was the original tenant in the captioned property therefore the company is lawfully entitle for receiving consideration of relinquishment tenancy right if any. At the most the director of the company may be entitled for tenancy right not the assessee by any stretch of imagination. There was no tenancy right therefore there is no question of relinquishment of the rights and capital gain as par section 48 of the Act. Ac discussed above, the whole transaction was nothing but a managed show to claim deduction u/s 54F against the created Long term Capital Gain (LTCG) arose out of so called relinquishment of tenancy rights. Hence, the claim of Long term Capital Gain of Rs. 3,25,00,000/- shown as received from relinquishment of tenancy right is hereby rejected and the said amount is treated as income from other sources in the hand of assessee within meaning of section 56 of the Act.” 7. During appellate proceeding, Ld. CIT(A) reversed the action of Ld. AO. Ld. CIT(A) accepted assessee’s claim of long-term capital gain by observing as under:

“4.3 I have duly considered tire facts of the case, the AO's order and the appellant’s written submission find that in support of his contentions, the appellant has furnished various documentary evidences, from page nos. 78 to 158 of the paper book. I find that at page no. 68 to 77, appellant has filed a copy of his written submission dated 20/12/2017 which was filed by him before the AO for establishing the nature of the receipt of the amount of Rs 3,25,00,000/-. Further, at page no. 78 to 80, the appellant has furnished one Page 9 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 copy of Memorandum of Understanding [MOU] duly made on 02/05/2014 by and between M/s. Khandelwal Chambers through Shri Dipesh Khandelwal and the appellant and other co-tenants, a copy of sale deed duly executed by the original owner of the property situated at 2, A.B. Road, Indore to M/s. Khandelwal Chambers on 31/07/1980, a copy of letter dated 01/11/1980 given by the original landlord to the Fairdeal Marwar Garrages Pvt. Ltd. (in short 'FMG'), the main tenant intimating the change in the ownership of the property, copies of various court orders from page no. 98 to 155, copy of kirayanama written by the appellant in favor of FMG regarding his sub- tenancy dated 01/06/2003 and copy of relevant bank statement of the appellant with ICICI Bank Ltd. demonstrating the transactions of receipts of a sum of Rs. 3,25,00,000/- by the appellant through banking channels. Further, in support of the various contentions, the appellant has also furnished copies of some judicial pronouncements at page no. 165 to 190 of the paper book. 4.3.1 I find that from the copy of the letter dated 01/11/1980, written by some Mr. M.Y. Bakshi in favour of FMG, the scanned copy whrereof has been reproduced by the AO himself at page no. 17 of the impugned order, that the FMG was a tenant in a property situated at 22 /3 South Tukoganj, Street No. 1, Indore (subsequently known as 2, A.B. Road, Indore) (hereinafter refered to as the "subject property") which was originally owned by some Bakshi family of Shrinagar. Further, from the copy of the sale deed dated 31/10/1980, placed at page no. 81 to 96 of the paper book, I find that the Bakshi family sold the subject property to some Khandelwal Chambers which at the relevant time was owned by the father of Shri Dipesh Khandelwal namely Shri Tulsiram Khandelwal, and other family members of Shri Dipesh Khandelwal. From the clause(3) of the aforesaid sale deed, I find that in the aforesaid registered sale deed, the name of M/s FMG has clearly been shown as the tenanted occupier of the subject property and M/s. Khandelwal Chambers, the buyers, have been given a right to collect from the FMG in future. After the death of Shri Tulsiram Khandelwal, his son Shri Dipesh Khandelwal became one of the co-owners of the subject property. From the aforesaid letter dated 01/11/1980, it is evident that in terms of such letter, the Khandelwal Chambers became the owner of the subject property in place of Bakshi Family and the FMG was allowed to continue its tenancy with the new landlord Khandelrnal Chambers. 4.3.2. I find that the aforesaid facts have also been admitted by the AO herself, through findings given by her at page no. 16, 17 & 18 of the impugned order. I find that as per the findings given by the AO herself at para (5.8) at page no. 18 that in the year 1986, the first legal dispute regarding tenancy started between the landlord M/s. Khandehval Chambers and M/s. FMG and again, from the findings given by the AO herself, it is evident that from 1985 to 2014, the said property was in dispute before various courts viz. Civil Courts, High Court and Supreme Court. The furnishing of copies of the orders of such courts as have also been acknowledged by the AO in the body of the assessment order, have also been filed before me. Thus, in such a situation, the contention of the appellant regarding the landlords' agreeing to compensate the then tenants of the subject property for eviction thereof in lieu of some consideration, is found to be correct. 4.3.3 I find that although on the date when the FMG obtained the tenancy right in the said property from the then landlord in the year 1974, the Page 10 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 appellant was a minor as rightly pointed out by the AC in assessment order but, subsequently, when the appellant derived sub-tenancy right in the said property by way of kirayanama duly written by him in favor of FMG on 01/06/2003, I find that the appellant having the date of birth as 14/06/1981, had attained the majority and therefore, he was competent to enter into sub-tenancy agreement. I find that at no point of time, the appellant claimed that he was the main tenant of the subject property but, his claim all through had been that he was a sub-tenant in the subject property as the main tenant had closed their business when the appellant obtained sub- tenancy right in the property. I find that the AO in the body of the assessment order has disputed such kirayanama merely on the ground that the original landlord was not made a party to such kirayanama and further, by stating that the kirayanama was executed on a simple piece of paper only. In my considered view, sub-tenancy arrangements are always made between the main tenant and the sub-tenant and it is not always necessary that in every such arrangement, the main landlord should also have been compulsorily made a party. I find that in the given case, when according to the herself, the legal battle between the landlord and the main tenant was going on, the question of making the landlord a party in the sub-tenancy agreement cannot arise. But, simply because the landlord was not made a party to the Sub- tenancy, such sub-tenancy arrangement cannot be disputed or doubted. I further find that first of all, for sub-tenancy arrangement letter there was no requirement of payment of any stamp duty and even if it so, it would not undermine the legal authenticity of the kirayanama. I find that so long as both the parties to the kirayanama are endorsing such kirayanarna, merely on presumption, its legal value could not have been doubted by the AO. I find that before the AO, the appellant had claimed to have made month to month rent to FMG and such fact has not been contravened by the AO. I further find that the AO has not made any independent inquiry from the FMG or its functionaries. 4.3.4 . Thus, I find that at the time when Shri Dipesh Khandelwal came for settlement for eviction of the tenanted, the rightful possession and occupier of the said property in the capacity of the sub-tenant. Thus, I find absolutely no substance in the findings of the AO that the appellant was having no vested right or interest, in any capacity in the subject property. In my considered view, the reliance placed by the AO on the various provisions of Madhya Pradesh Accommodation Control Act, 1971 is also misplaced. In my view, even if for a moment it is presumed that the appellant did not derive the sub tenancy right in the subject property in accordance with the aforesaid 1annr, then a1so, any compensation received by him from the landlord cannot get escaped to income-tax view of the change in the provisions of s. 48 r.w.s 55(2)(a) of the Act. if the contention of the AO is accepted, then in every case, wherever any compensation is received by a tenant from the landlord for vacating the property, the same would escape the tax that since, the tenancy was not legalized and therefore, the provisions of s. 55(2)(a) would not apply and consequently, applying the ratio of Hon’ble Apex Court in the case of CIT vs. B.C. Srinivasa Setty, reported in (1981) 128 ITR 294 SC wherein it has been held that transfer of any capital asset which has no cost of acquisition cannot be brought to tax under s. 45. In my considered view, once the tenancy or sub-tenancy is established, any amount received towards the relinquishment thereof cannot get escaped to tax in view of the provisions of s. 55(2)(a) of the Act introduced in the statute after the decision of the Hon'ble Page 11 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 Apex Court in the case of B.C. Srinivasa Settly {supra), merely on technical grounds. 4.3.5 I find that in the wake of the decades long legal disputes of tenancy, Shri Deepesh Khandelwal entered into a Memorandum of Understanding [MOU] duly executed on a stamp paper worth of Rs. 1000/-, on 02/05/2014, a copy whereof is placed at page no. 78 to 80 of the paper book. From such MOU, I find that in such MOU, Shri Deepesh Khandeiwal is representing M/s. Khandelwal Chambers as one of the co-owners of the subject property and the FMG, the original tenant, one other group company, namely, M/s Pithampur Poly Products Ltd., Shri R.K. Tekriwal (appellant’s father), Smt. Meera Tekriwal (appellant's mother) and the appellant as 'Tenants'. I find that in the clause (a) of such MOU, there is a clear mention of the dispute lasting between the owners and the FMG and at clause (5), it has been impliedly accepted by the landlord that the appellant is one of the lawful tenants in the tenanted property having the physical possession and occupation thereof From the para (7.1) of the MOU, I find that all the tenants had agreed to surrender their respective tenancy rights in the subject property in favour of the landlord in consideration of the landlord paying a total consideration of Rs" 5,00,00,000/- to various sub-tenants. I find that in such para itself, there is a clear mention of payments aggregating to a sum of Rs. 3,25,00,000/- to the appellant in six trenches through banking channels. I further find from the copy of the relevant bank statement furnished by the appellant at page no. 157 & 158 of the paper book, that in such bank statement, the receipt of a sum of Rs. 3,25,00,000/- by the appellant from M/s.Khandelwa] chambers, in six trenches, is getting clearly reflected. 4.3.6 I find substance in the contention of the appellant that the veracity and genuineness of the said MOU can also be adjudged from a very significant fact inasmuch in the case of the appellant as well as in the case of his father Shri R.K. Tekriwal, Search under s.132(1) was carried out on 28/02/2014 and during the course of such search, one copy of the draft MOU was found in one of the computer systems found kept in the search premises. It is submitted that if during the course of search action the draft copy of the said MoU was found, then it cannot be said that the said MoU was an after thought or having no evidential value' I found that such submission was also made by the appellant before the AO and the AO did not rebut such factual claim of the appellant. I find that in pursuance of the search in the premises of Shri R.K. Tekriwal, assessment proceedings u/s. 153A were carried out and during the course of such proceedings, a notice u/s 142(1) for A.Y. 2008-09 to A.Y. 2013- 14 was duly issued by the then ACIT(Central)-2, Indore on 29/10/2015, a copy whereof is placed at page no. 159 to 164 of the paper book, and in such notice issued to Shri R.K. Tekriwal, there is a clear mention of the draft MoU entered into betrveen Shri Deepesh Khandelwal and the various entities of the group. In such circumstances, the genuineness of the MOU subsequently entered into between the landlord and the appellant and others, cannot be doubted or disputed. I find that at para (5.8) of the order, the AO has averted that Shri Deepesh Khandelwal was issued a notice u/s. 133(6) and in response, Shri Deepesh Khandelwal filed detailed reply with documentary evidences. The AO then simply reached to the conclusion that the appellant had never been the tenant in the said property without specifying or bringing on record her basis for reaching to such conclusion. I find that it is not the case

Page 12 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 of the AO that Shri Deepesh Khandelwal had denied to have made any payment to the appellant. In my view, Shri Khandelwal could have only stated that the appellant was not his direct tenant but, even such fact would not alter the nature of right of the appellant in the said property and as also the nature of the receipt, by the appellant of the subject sum of Rs. 3,25,00,000/-. 4.3.7 I find force in the contention of the appellant that on the basis of such MOU, a deduction under the provisions of Income-Tax Act, has duly been granted by the Income-Tax Department while making the assessment in the cases of Shri Deepesh Khandelwai. Further, in the cases of other co-tenants, namely, M/s. Pitharnpur Poly Products Pvt. Ltd., Shri R.K. Tekriwal and Smt. Meera Tekriwal, whose name have also been shown in the very same MOU as tenants and no adverse view have been taken by the Department for making assessment in the cases of other co-tenants. In my considered view, when one MOU has been accepted as a genuine document by the Income-Tax Department, in respect of all other parties to the MOU, then, only in respect of, one of the parties i.e. the appellant, the said MOU cannot be said to be a sham document. 4.3.8 Thus, in the aforesaid facts and circumstances, in my considered view, the genuineness of the claim of the appellant as regard to receipt of the subject sum of Rs. 3,25,00,000/- from M/s. Khandeiwal Chambers in consideration of the appellant's surrendering his sub-tenancy rights in the subject property cannot be disputed and it has to be accepted as a genuine capital receipt only chargeable to tax u/s. 45 of the Act. I find that in the similar circumstances the Hon'ble High Court of Bombay in the case of Amol. C.Shah (HUF) vs. ITO 2020 (2) TMI 165 (Bom. HC), wherein the assessee had claimed to have received a certain sum for settlement of his claim to the property and had shown the same as his Long Term Capital Gain, their Lordships observed that there was nothing to show that the MOU was abricated or antedated and further, that the property was in the occupation of the assessee. In such circumstances, the Hon'bie High Court allowed the claim of the assessee by holding that merely on the basis of suspicion, the claim of the assessee cannot be rejected. Hon'ble Supreme Court of the India in the case of CIT vs D.P, Sandu Bros. Chembur (P) Ltd. (2005) 273 ITR 0001 (SC) has held that the monthly tenancy is admittedly a capital asset and the receipt on its surrender is a capital receipt. It was further held by their Lordships that consideration received for surrender of tenancy rights would be assessable under item E of s.14 and it cannot be treated as a casual and non-recurring receipt under s.10(3) and be subjected to tax under s.56. It was also held that although section 45 could not be applied for the assessment year in question as it fell in the pre-amendment period, but if the income cannot be taxed under s.45, then it cannot be taxed at all. Further, the Hon'ble ITAT Mumbai in the case of Kewal Silk Mills vs. ACIT (2013) 21 ITR 121 (Mum Trib) has held that when the assessee was enjoying possession of Property and for peaceful vacation thereof it had received the impugned amount which was described by both the parties as the amount so revived would be chargeable to capital gains and cannot be assessed as ‘income from other sources’. Furthermore, in the similar circumstances with that of the appellant, the Hon’ble ITAT Mumbai Bench, in the case of P.N. Amersey- HUF vs ITO (2012) 31 CCH 252 (MumTrib), decided the case in favour of revenue, has held that the amount received by the assessee on surrender of tenancy rights is liable to capital gains tax if

Page 13 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 assessee was having substantial rights as tenant (Sub-tenant) in the property. Further, the Hob’ble ITAT Mumbai in the case of Kishorilal Basanti Lal Patodia vs ACIT (2013) 35 CCH 450 (MumTrib) has held that the assessee certainly derived some right in the property, legal or otherwise, the same have to be regarded as tenancy rights within the meaning of s. 55(2). In the instant case too, even if the right of tenancy by the appellant is held as illegal by the AO, then too, the amount of compensation received by the appellant from the landlord against surrender of his rights of possession in the property would have to be regarded as amount received against tenancy rights and accordingly, the same would be chargeable to capital gains tax. Lastly, the Ho’nble Mumbai Tribunal in the case of Anewara Marketing Pvt. Ltd. vs ACIT (2006) 25 CCH 0051 (Mum. Trib) was pleased to hold that transfer of sub-tenancy right is also, chargeable to tax under s. 45 of the Act. 4.3.9 In my view, as per section 14 of the Act, any income chargeable to tax has to be classified under the five heads viz. income from salaries, income from house property, income from profits and gains of business or profession, capital gains and income from other sources. Further, u/s. 56(1) of the Act, any income shall be chargeable to income from other sources only when the income is not chargeable to tax under any other heads of income specified u/s. 14, items A to E. Since, evidently the capital receipts made by the appellant is falling under the head Capital Gains, by any cannon of 1aw, merely on the basis of presumption and assumptions, it cannot be shifted to the residua-l head of income from other sources. I find that in the similar circumstances, the Hon'ble High Court of Madras in the case of ACIT vs. Farida Begum Tazudeen (1997) 63 ITD 298 (Mad.) held that the head under which particular income is to be assessed should be decided on legal principles and not on individual beliefs. Further, their Lordships of the Hon'ble Apex Court in the case of United Commercial Bank Ltd. us. CIT (1957) 32 ITR 688 (SC); again in the case of East India Housing and Event Development Trust, Ltd. vs. CIT (1961) 42 ITR 49 (SC); and again in the case of Sultan Brothers Pvt, Ltd. vs. CIT (1964) 51 ITR 353 (SC) were pleased to hold that if an item of income fa1ls specifically under one head, it has to be charged under that head only and no other head. The Hon'ble High Court of Calcutta in the case of CIT vs. General Industrial Society Ltd. (2003) 262 ITR I (Cal.) also held that if a particular income is chargeable under one head, it cannot be computed and charged under a different head or as income from other sources. 4.3.10 Accordingly, in my considered view, the appellant was correct in showing the entire receipts as his capital receipts under the head 'Income from capital Gain' and consequently, I find absolutely no justification in the AO’s action in holding the same as Income from Other Sources. Accordingly the Ground Nos. 3(i) to 3 (iii) of the appellant are Allowed.” 8. Before us, Ld. DR vehemently supported the order of Ld. AO and emphasized following contentions:

(i) The property in which the assessee is claiming to have sub-tenancy right, was originally taken on rent by M/s Fairdeal Motors.

Page 14 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 Subsequently, the business of M/s Fairdeal Motors was taken over by M/s Fairdeal Marwar Garages Pvt. Ltd. (in short “FMG”). Shri Prahlad Rai Tekriwal (grandfather of assessee) and Shri R.K. Tekriwal (father of assessee) were directors in FMG but the assessee, Shri Gaurav Tekriwal, was not a director in FMG. FMG paid rent from time to time to the owners, Shri Dipesh Khandelwal and others. This way, it was FMG who was tenant and who had tenancy-right in the property. But the assessee had no interest whatsoever in the property. The assessee is claiming to have taken 65% portion of the property on sub-tenancy from FMG on the basis of a “Kirayanama” dated 01.06.2003. But (i) the said “Kirayanama” is on a simple piece of paper which is not stamped; and (ii) the original owners of the property are not a party to the “Kirayanama”. Therefore, the “Kirayanama” does not have any legal authenticity.

(ii) The MOU dated 02.05.2014, under which the assessee has received the consideration of Rs. 3,25,00,000/-, states that the assessee had physical possession over the property but mere physical possession does not establish any kind of sub-tenancy right.

With these submissions, the Ld. DR argued that the assessee did not have any kind of right with respect to the impugned property. Therefore, there is no question of surrendering right and receiving consideration of Rs. 3,25,00,000/- as claimed by assessee. Ld. DR submitted that this is only a managed-show in which the assessee had shown his own money in the shape of long-term capital gain, claim exemption u/s 54F and thereby avoided income-tax.

(i) Ld. AR submitted that it is true that FMG was the main tenant in the property, there is no doubt or quarrel about it. But it is equally true that the assessee acquired sub-tenancy right for 65% portion from Page 15 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 FMG in terms of the “Kirayanama” dated 01.06.2003 made between FMG and assessee. Ld. AR submitted that a copy of the “Kirayanama” is reproduced in the assessment-order and also placed in the Paper- Book, which clearly evidences that FMG has sub-let portion of the property to the assessee for a rent of Rs. 3,000/- per month.

(ii) That even if the “Kirayanama” is executed without stamp-duty, firstly there is no provision in the M.P. Stamps Act for registration of sub- tenancy and secondly, the “Kirayannama” is duly sealed and signed by both parties, viz. FMG and assessee which is very much sufficient for income-tax purposes. Regarding non-joining of original owners as party in the “Kirayanama”, according to Ld. AR, the reason is very simple and apparent. It is on record from various documents placed before lower authorities and copies also filed in the Paper-Book that a serious legal battle was going between the original owners and FMG. Therefore, it was not at all possible to make the original owners as party to the “Kirayanama”.

(iii) In terms of “Kirayanama”, the assessee has paid rent @ 3,000/- per month to FMG. This fact is not disputed or doubted by Ld. AO.

(iv) That the assessee has received the sum of Rs. 3,25,00,000/- on the basis of MOU dated 02/05/2014. Carrying our attention to a copy of the MOU, placed at Page No. 78 of the Paper-Book, Ld. AR submitted that the MOU is executed by and between six persons, viz. (i) Shri Dipesh Khandelwal owner of property on First Part, and (ii) five tenants/sub-tenants in the property on Second Part. Ld. AR submitted that the assessee is one of the five tenants/sub-tenants on the Second Part. Ld. AR submitted that the MOU is executed on a stamp-paper of Rs. 1,000/- and duly witnessed. Ld. AR submitted that the MOU contains full details of the impugned property, its owners, all tenants/sub-tenants (including assessee), the disputes which arose between the owners of property and tenants/sub-tenants,

Page 16 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 the legal battle, how amicable settlement is finally reached for surrender of rights of various tenants/sub-tenants (including assessee), etc. Ld. AR drew our attention to various clauses of the MOU, particularly the followings clauses on Page No. 2 of the MOU:

“5) That, in order to resolve all the disputes and differences, the Party of the First Part has approached to M/s Fairdeal Marwar Garages Pvt. Ltd. through it authorized representative, Shri R.K. Tekriwal for an amicable resolution and settlement of all the disputes as regard to the tenancy rights of the tenanted property to which Shri R.K. Tekriwal also agreed upon. As the remaining parties of the Second Part are also lawful tenants in the tenanted property, having the physical possession and occupation of the tenanted property, the other tenants in the property have also been involved in arriving at the amicable settlement of the disputes related to the tenancy rights in the tenanted property. 7) That, in terms of the amicable settlement, all the parties to the Party of the Second Part have agreed to surrender their tenancy rights in the tenanted property in favour of the Party of the First Part on the terms and conditions as contained hereinafter:” Ld. AR submitted that these terms and conditions very clearly, specifically and loudly speak that the Parties of Second Part (including assessee) were tenants in the property.

Ld. AR, thereafter, referred to various terms and conditions set out on the next page of MOU, wherein condition No. (i) clearly provides that the owner has paid a sum of Rs. 5,00,00,000/- to all parties of the Second Part through RTGS or cheques. Ld. AR submitted that when we look into the break-up of Rs. 5,00,00,000/-, we observe that the owner has paid a total sum of Rs. 3,25,00,000/- to the assessee.

(v) Ld. AR submitted that the assessee has received a sum of Rs. 3,25,00,000/- from the owner through banking channel and the receipt is credited to the account held by assessee in ICICI Bank. A copy of bank statement is filed before Ld. AO and also placed at Page No. 157 of the Paper-Book.

(vi) Ld. AR pointed out a serious lapse on the part of Ld. AO. Ld. AR submitted that the Ld. AO has stated on Page No. 15 / 16 of the Page 17 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 assessment-order that he issued a notice u/s 133(6) to the owner of property, Shri Dipesh Khandelwal, in response to which the said owner filed a reply. However, Ld. AO has neither supplied a copy of the reply to the assessee nor narrated the contents of reply in the assessment-order. Ld. AR submitted that the assessee has come to know about the alleged reply of the owner, only after reading the assessment-order. Therefore, no credence can be given to this observation of Ld. AO.

(vii) Ld. AR submitted that FMG is a company incorporated under the provisions of Companies Act and the same is still existing. But the Ld. AO has not made any enquiry from FMG.

(viii) Ld. AR submitted that the revenue has allowed deduction of Rs. 5,00,00,000/- in the assessment of owner, Shri Dipesh Khandelwal. As a necessary corollary, it is automatically proved that the revenue- authorities have accepted the factum of receipt by assessee from the said owner.

(ix) Ld. AR submitted that the revenue authorities have doubted the receipt of Rs. 3,25,00,000/- in the case of this assessee only. But they have not taken any adverse view in the assessments of other co- tenants who have received remaining consideration of Rs. 1,75,00,000/- [Rs. 5,00,00,000 (-) Rs. 3,25,00,000]. How can authorities approbate and reprobate the same transaction?

With these submissions, Ld. AR argued that the Ld. AO has wrongly rejected the receipt of Rs. 3,25,00,000/- on surrender of sub-tenancy right declared by the assessee and assessed the same as income from other sources. Ld. CIT(A) has, however, correctly accepted the claim of assessee and therefore the conclusion arrived at by Ld. CIT(A) must be upheld.

Page 18 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 10. We have considered rival contentions of both sides and perused the material held on record. We observe that both sides have made a detailed representation on the factual and legal aspects of the issue involved.

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 MOU dated 02.05.2014. We may also look into one more factor which is very relevant. From the documents submitted before lower authorities and also placed in the Paper-Book, it is on record that there was a serious legal battle between the owners and FMG. When it is so, how can we expect that the owners would help FMG / assessee in making a MOU for creating a frivolous long-term capital gain in the hands of assessee who is necessarily a party on the side of FMG. Taking into account all these factors, we do not find any valid reason for the Ld. AO to raise doubt on the authenticity of “Kirayanama” or “MOU”. Other contention of revenue is that Clause 5 of the MOU dated 02.05.2014 states that the assessee had “physical possession” over the property but mere “physical possession” does not establish any kind of sub-tenancy right. But this contention is due to a half-reading of the Clause No. 5 of the MOU, reproduced earlier, which clearly states “As the remaining parties of the Second Part are also lawful tenants in the tenanted property, having the physical possession and occupation of the tenanted property….”. A bare perusal of this Clause demonstrates that the parties of the Second Part were “lawful tenants in the tenanted property, having the physical possession and occupation”. It is apparent that the Ld. AO has taken a part of this Clause and derived a mis- understanding that the assessee was having mere “physical possession”. Thus, the revenue fails in this contention too.

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 that the MOU clearly provides complete details of Rs. 5,00,00,000/- paid by owners to all parties including Rs. 3,25,00,000/- paid to the assessee. Ld. AR has also demonstrated that the assessee has received the sum of Rs. 3,25,00,000/- through banking channel in ICICI Bank. Going further, the Ld. AR has pointed out that the fact of filing reply by the owner, Shri Dipesh Khandelwal, in response to the notice u/s 133(6) issued by Ld. AO, as recorded in the assessment-order is not very credible because the Ld. AO has neither supplied a copy of the reply to the assessee nor narrated the contents of reply in the assessment-order. Even during hearing before us, Ld. DR has not been able to rebut or defend this submission of Ld. AR. We also find merit in the submission of Ld. AR that FMG is an existent- company and the Ld. AO could have made enquiry from FMG but the same was not made. We also find strong force in the submission of Ld. AR that the revenue has allowed deduction of Rs. 5,00,00,000/- in the assessment of owner, Shri Dipesh Khandelwal, which proves, without saying anything more, that the revenue authorities have accepted the factum of receipt by assessee from the said owner. Lastly, we also find merit in the contention of Ld. AR that revenue authorities have doubted the receipt of Rs. 3,25,00,000/- in the case of this assessee only. But they have not taken any adverse view in the assessments of other co-tenants who have received remaining consideration of Rs. 1,75,00,000/-, out of total payment of Rs. 5,00,00,000 to all co-tenants. We agree to Ld. AR’s submission that the authorities cannot reject transaction in the hands of assessee while accepting it in the hands of other co-tenants.

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 and allowed claim of assessee. Accordingly, we dismiss Ground No. 1 and 2 of the Revenue.

GROUND NO. 3:

Page 22 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 15. Ld. CIT(A), however, allowed the claim of assessee partly upto Rs. 1,79,00,000/- (+) Rs. 53,13,484/-, aggregating to Rs. 2,32,13,484/- by making an elaborate analysis as under:

“7.3 I have gone through the assessment order, the written submissions filled by the appellant and the documentary evidences placed on record. I find that during the previous year relevant to the assessment year under consideration, the appellant had received a sum of Rs. 3,25,00,000/-,through banking channels from one Shri Deepesh Khandlwal as compensation towards relinquishment of the appellant's right in a property situated at 2, A.B. Road, Indore. I find that such rights were undisputedly being held by the appellant since the year 2003, under a kirayanama dated 01/06/2003. It is therefore, can be said that the appellant was holding capital assets in the form of sub- tenancy rights for more than 3 years with no cost of acquisition. I find that the AO has also accepted the receipt of such sum by the appellant but, the AO has recharacterized such receipts from income, from capital gain as shown by the appellant to income from other sources. I find that while adjudicating the Ground Nos. 3(i) to 3(iii) of the present appeal, I have already held that the amount received by the appellant at Rs. 3,25,00,000/- was a capital receipt and assessable to tax under the head income from capital gain. 7.3.1 I further find that during the course of the appellate proceeding before me, the appellant has made a detailed written submission which has been extracted hereinabove. I also find that along with such written submission the appellant has submitted various documentary evidences such as copy of agreement for sale dated 15/05/2014 duly executed between the appellant and BPEL, in which the appellant happens to be one of tire directors at page no. 219 to 221 of the paper book. Further, at page no. 222, the appellant has furnished a copy of his house purchase account from BPEL in which the date wise payments of details of purchase consideration of Rs. 1,79,00,000/-/- is getting clearly reflected. Further, at page no. 223 to 226, the appellant has furnished copy of his bank statements with ICICI Bank Ltd., in which the various transactions for payment to BPEL towards purchase consideration of house is getting reflected. The appellant has also furnished a copy of his house under construction account for the F.Y. 2014-15 in which the details of the amount of purchase of incomplete structure at Rs.1,79,00,000/- and the date wise and party wise details of the amount paid for construction of house on the aforesaid incomplete structure are getting clearly reflected. I find that such house construction account was also furnished by the appellant before the AO and the AO did not find any defect or discrepancy in such statement. I also find that in support of the ownership of the land, the appellant has also furnished a copy of the purchase deed duly executed in favor of various group companies which had subsequently leased out such land to the BPEL, at page no.283 to 310 of the paper book Further, at page no. 311 & 312 of the paper book, I find that the appellant has furnished the copy of acknowledgement of income tax return and copy of computation of income of BPEL, in which the short term capital gain on sale of incomplete structure by the BPEL to the appellant is getting reflected. Further, at page no.315 to 222 of the paper book, the appellant has furnished copy of his ledger account in the books of account of BPEL for the period from 01/04/2014 to 31/03/2015. On a perusal of the aforesaid documents, I am of the considered view that the appellant had Page 23 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 aforesaid documents, I am of the considered view that the appellant had actually invested the aforesaid sum of Rs. 2,32,13,484/- uptil 31/01/2015 for purchase of incomplete residential structure and for making further construction on such incomplete structure to make the house inhabitable. However, for the remaining sum of Rs.8'88'855/- claimed to have been incurred by the appellant during the period from 01/04/2015 to 31/07/2015 i.e. uptil the due date of furnishing the return of income in the appellant's case under s.139(1) of the Act' I find that the appellant neither during the course of the assessment proceedings, nor during the course of the appellate proceedings before me has furnished any detail or documentary evidences. Thus in my considered opinion, the appellant is eligible for claim of deduction to the extent of Rs. 2,32,13,484/- only. 7.3.2 I find that the AO has denied the claim of the appellant firstly by stating that the nature of receipt of Rs. 3,25,00,000/- was not falling under the head Long Term capital Gain, which I have already overruled. Secondly, I find that the AO has disregarded the transaction of purchase of incomplete structure by the appellant from BPEL, in which he was one of the directors. I find that during the course of the assessment as well as appellate proceedings, the appellant had duly furnished a copy of agreement duly executed between the BPEL and appellant on 15/05/2014 and- under such agreement, the BPEL had clearly agreed to sale its residential structure under construction on leasehold land bearing survey no. 106 admeasuring 0.39 hectares situated at patwari halka no. 106 at Bicholi Hapsi, Kanadia Road, Indore for a total consideration of Rs. 1,79,00,000/- Further, I find that the entire payment consideration was made by the appellant to the abovenamed seller company through banking channel only which is clearly getting reflected in the copies of the bank statements of the appellant filed before me. l further find that in support of the ownership of the land, tire appellant has also furnished copies of the sale deed's in respect of the land on which the said residential construction was made. In such circumstances. merely for the reason that the appellant was one of the directors in the seller company, the entire transaction which otherwise is genuine, cannot be doubted or disputed. I find that BPEL in its return of income for A.Y.2015-16 has disclosed such transaction of sale and has also paid due taxes on capital gain arising to it on such sales. I find that it is not the case of the AO that in the case of the BPEL' such transaction was not accepted as genuine. I further find that the AO has disbelieved the transaction on the premises that the agreement between the appellant and the seller was not registered. In my opinion, for the purpose of section 54 /54F of the Act, what has to be seen is only the investment for the purpose of purchase or construction or both for a residential house and absolute lega1 ownership by the assessee claiming such deduction is not required. For such proposition, I find that the appellant has rightly placed reliance on the decision of the Hon'ble High court of Madhya Pradesh in the case of CIT vs. Ajitsingh Khajanchi (2008) 297 ITR O095 (MPHC), wherein it has held that in order to claim benefit of deduction under s.54, 54F etc., it is not necessary that the purchase of house is evidenced by a registered deed. Further, in respect of claim of deduction under s.54 of the Act, the Hon’ble Jurisdictional High Court of Madhya Pradesh in the case of Smt. Shashi Varma vs. CIT (1997) 224 ITR 0106 (MP) has held that if the substantial investment has been made in the construction of new asset, then it should be deemed that sufficient steps have been taken and this satisfies the requirements of s.54. Similar view was again Page 24 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 taken by the Hon’ble MP High Court in the case of CIT vs. Ritesh Kumar Kumat 2014 (1) TMI 1491 (MP) in respect of deduction under s.54F of the Act. Furthermore, the Hon’ble ITAT Chennai in the case of ACIT us. Dr. S. Balasundaram (2013) 36 CCH 1A7 (Chen.) has held that if both the parties proceeded to carry the execution of the sale as per the agreement whether it is registered or not, there is no effect so far as transfer is concerned. In the similar circumstances, the Hon'ble Karnataka High Court in the case of PCIT & Anr vs. Mrs. Vanaja Matthen 2019 (1) TMI 154 (Kar.HC) has held that if the assessee had invested the amount received on sale of capital asset either in purchasing a residential house or in construction of a residential house, even though the transactions are not complete in all respects, the assessee would be entitled to the benefit under s.54F of the Act. Further, the Hon'ble High court of Bombay in the case of CIT vs. Mrs. Hilla J.B. wadia (1995) 216 ITR 0376 (Bom.) has held that the assessee was entitled to relief under s. 54 where she entered into an agreement with co-operative housing society for purchase of residential flats and paid almost entire consideration within two years of conveyance of her residential property. I find that the Hon'ble High Court of Andhra Pradesh in the case of CIT vs. Mrs. Shahzada Begum (1988) 173 ITR 397 (AP) has also held that when the assessee who has sold the residential house property has agreed, to buy another property for self- occupation and secures possession of the property within one year from the date of sale of other property, he is entitled for exemption from capital gains under s.54(1) notwithstanding registration of sale deed beyond the period of one year. The Hon'ble Income Tax Appellate Tribunal, Chandigarh Bench, in the case of M.S. Bhavana Cuccria vs. ITO (2017) 156 DTR (Chd.) (Trib.) 251 has also held the same view. Furthermore, the Hon'b1e Amritsar Tribunal in the case of DCIT vs. Assa Singh &Anr. (2016) CCH 0287 (AsrTrib) held that agreement to purchase was sufficient document to indicate transfer of property in favour of the assessee. It was held that through the agreement. the seller was restrained to sell the property to anyone else and therefore, a legitimate right to enforce specific performance of agreement had got created in favour of the purchaser and therefore, the assessee was eligible to claim deduction, under s. 54/54F, in respect of payment made for purchase of property under the agreement. The similar view was held by the Hon'ble ITAT Chandigarh in the case of Anil Bishnoi us ACIT (2017) 167 ITD O381 (Chd). 7.3.4 I find that, in the instant case, ratio laid down by the Hon'bie Apex Court in the case of CIT vs. Balbir Singh Maini (2017) 398 ITR 531 (SC) is not applicable as the facts of the case of the appellant are quite distinguishable from the above case of Balbir Singh Maini. In the case of Balbir Maini supra, the question before the Hon'ble Apex Court was that whether the transfer of rights in a property under a Joint Development Agreement in which was not got registered could be said to be valid transfer' The Hon'ble Apex Court held that in absence of the registration of the agreement, the transfer could not be said to have taken place. Thus, in the case of Maini supra., the question was regarding the transfer but here, the question is relating to the purchase which cannot be put on the same analogy. Further, for the propose of event of transfer, the registration or non-registration of an agreement can be said to be a relevant factor but for the purpose of grant of deduction, under s.54F, which is a benevolent section, it has to be seen that whether or not, the amount has duly been utilized and whether or not, the assessee could be said to have purchased the new asset. In my considered view, by making the full payment Page 25 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 and taking over the physical possession, the appellant had purchased the residential property from BEPL and therefore, the above ratio in the Maini,s case would have no application in the case in hand. 7.3.5 In, view of the facts and circumstances of the case, documentary- evidences placed on record and as also in the light of the various judicial pronouncements, as referred to herein above, I hereby 'hold that by way of making investment towards purchase of incomplete residential structure atRs.1,79,00,000/- and further by incurring construction expenses on such house to the extent of Rs.53,13,484/-,the appellant was eligible for claim of deduction u/s.54F of the Act on an aggregate sum of Rs.2,32,13,084/- in respect of such investment, as against the deduction claimed by him at Rs.2,41,02,339/-, with the result that while computing the total income of the appellant, the addition for the remaining amount of Rs.8,88,855/- would be required to be made by the AO for giving effect to my above findings. Accordingly, the grounds No.6(i) to 6(iii) so raised by the appellant are partly allowed.” 16. Before us, the Ld. DR supported the order of Ld. AO. Re-iterating the observations of Ld. AO, the Ld. DR argued that the exemption claimed by assessee is not allowable, hence the Ld. AO has rightly disallowed the same.

(i) Sufficient explanation has already been given which goes on proving that the assessee had earned long-term capital gain. Therefore, the first contention of revenue is liable to be struck down.

(ii) During the course of assessment-proceeding, the assessee has submitted all details / documents to Ld. AO vide reply-letters dated 08.12.2017 and 22.12.2017. Ld. AR carried us to various documents placed at Page No. 219 to 314 of the Paper-Book to demonstrate that the assessee purchased an incomplete structure of residential house for Rs. 1,79,00,000/- from BEPL. Ld. AR submitted that BEPL is a company registered under companies act and assessed to income-tax, which is evident from the copy of income-tax return and computation of total income of BEPL filed before Ld. AO and also placed in Paper- Book. Subsequent to purchase, the assessee has also incurred expenses to make the property habitable and in this regard, a complete Ledger account alongwith several bills (sample) of the

Page 26 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 suppliers were also filed, copies of which are placed in the Paper- Book. The assessee has also paid municipal tax, copy of the receipt is filed in paper-book. The assessee has also obtained electric connection in his own name and occupied the house for dwelling use by himself with family, copy of electricity bill is also placed in Paper-Book. Ld. AR submitted that these evidences are sufficient enough to demonstrate that the assessee has purchased the house, made it habitable and starting using for residential purpose too. Regarding pendency of registration of the house in assessee’s name, Ld. AR contested that section 54F of the act requires purchase / construction of house only and it does not require registration in assessee’s name as a condition for giving exemption. Ld. AR submitted that once the factum of purchase / construction, investment therein and occupation for residential use, are proved, the pendency of registration cannot come in the way of granting exemption. Ld. AR submitted that in numerous decisions, the Hon’ble Courts have held this proposition. Ld. AR relied upon the decision of Hon’ble Jurisdictional High Court of Madhya Pradesh in case of CIT Vs. Ajit Singh Khajanchi (2008) 297 ITR 0095 dated 25.04.2007.

With these submissions, Ld. AR submitted that the assessee has rightly claimed the exemption and the Ld. AO has wrongly denied the same. According to Ld. AR, the Ld. CIT(A) has correctly considered the evidences, facts and legal position and thereafter allowed relief to the assessee, which must be upheld.

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 1,79,00,000/- (+) Rs. 53,13,484/-, aggregating to Rs. 2,32,13,484/- to the Ld. AO as well Ld. CIT(A). The investment of Rs. 1,79,00,000/- is by way of payment to BEPL from which the assessee purchased incomplete residential structure and the investment of Rs. 53,13,484/- is by way of expenditure on completing that structure to make habitable. The assessee has placed on record a copy of agreement in support of purchase of structure from BEPL, which cannot be doubted because the agreement is executed on a stamp- paper, sealed and signed by both sides and also witnessed. The agreement also discloses the manner of payment and other terms and conditions to entitle the assessee with ownership rights. The assessee has also filed a copy of the ledger account on Page No. 222 of the Paper-Book which gives complete date- wise details of payments of Rs. 1,79,00,000/- made to BEPL. On perusal of the same, we observe that all payments have been made through banker cheques, which are further evidenced by bank-statement placed in Paper-Book. We further observe that the assessee has also filed a complete ledger account at Page No. 232 to 234 of the Paper-Book which gives complete date-wise, party-wise details of expenditure of Rs. 53,13,484/- incurred on completing the structure. On perusal of this ledger account, we observe that the assessee has made payments on account of material, labour, etc. The payments have been made to established business concerns, like M/s Gandhi Hardware Stores, M/s Variety Hardware Centre, M/s Asiad Marketing, M/s Suresh Chand Mangilal, M/s Vinayak Tiles, M/s Ambica Granites, M/s Shams Paints & Hardware, M/s Standard Hardware, M/s Kishan Chand & Sons, M/s Agrawal Metal & Pipers, to name a few. We further observe that the suppliers are registered under sales-tax laws, have issued statutory invoices and the payments have also been made through cheques, the details of cheque numbers have been mentioned in the ledger account. Thus, with such ample evidences on record, there does not remain any doubt qua the expenditure of Rs. 53,13,484/- incurred on completing the house. That brings us to conclude that the assessee has given proper and adequate evidences to prove the investment of Rs. 1,79,00,000/- (+) Rs. 53,13,484/-.

Page 28 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 16. We have also perused the decision of Hon’ble Jurisdictional High Court in CIT Vs. Ajit Singh Khajanchi (supra) cited by Ld. AR, wherein it has been held thus:

“11. In so far as the question No. 2 is concerned, the learned Counsel for respondent has relied on the decision of this Court in Smt. Shashi Vaima v. CFT (1999) 152 CTR (MP) 227 : (1997) 224 TTR 106 (MP). In the said judgment, it was averred that the assessee sold her property at Jabalpur and realized capital of Rs. 31,980 out of which she invested a sum of Rs. 71,256 and purchased a house at Delhi. The exemption was claimed from the charge of tax on capital gain under Section 54F of the Act. It was, rejected by the ITO as also by the Tribunal. This Court observed that substantial investment was made in construction of the house. In view of the requirement of Section 54F of the Act, the Tribunal, in the facts and circumstances of the case, was not justified. We are fortified in the above view by the decision of the Delhi High Court in Balmj v. CIT to the effect that for the purpose of attracting the provision, it was not necessary that the assessee should have become the owner of the property. Section 54F spoke of purchase and registration was not imperative. In this view of the matter, the question No. 2 is answered against the Revenue and in favour of the assessee.”

GROUND No. 4:

“9. During assessment proceeding, it is found from ITS (Income Tax Statement) for F.Y. 2014-15 received from departmental system that the assessee has made transaction of Rs. 7,66,500/- with Client code 1017855 and broker code 13470. In this regard, the assessee was requested to produce the details of shares transactions along with documentary evidence vide letter dated 15.12.2017. Page 29 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 9.1 In reply, the assessee submitted that he has not carried out any transaction of shares with broker code 13470 and his client code 1017855. The reply of assessee is not tenable. It is clear form statement downloaded from ITD system that the assessee has made transaction of Rs.7,66,500/- which is made available from different govt. agencies. Hence, the assessee's contention of denying any transaction is rejected. As the assessee could not provide any details in this regard the issue of share transaction Rs.7,66,5OO/- remained unexplained.

9.2 Therefore, a sum of Rs.7,66,500/- is treated as his income earned from undisclosed sources and added to income for A.Y. 2015-16.” 20. Ld. CIT(A) has, however, deleted addition by observing as under:

“6.2 I have gone through the assessment order, the written submissions filed by the appellant and the documentary evidences placed on record. I find that during the course of the assessment proceedings itself, the appellant vide its counsel's letter dated 20/12/2017 as placed at page no. 76 of the paper book before me, had clearly denied to have made any transaction of shares through Aditya Birla Money Ltd., a broker having code no. 13470 in his Client Account No. 1017855. In support of such assertion, the appellant has also submitted a copy of his account statement with such Broker and in such statement, during the financial year 2014-15 relevant to A.Y. 2015-16, no transaction by the above named broking company with the appellant has been shown. I further find that in the D.P. Account of the appellant with the above named broking firm, no single transaction during the year under consideration in the name of the appellant is getting discernible. I find that despite appellant's denial, the AO has not carried out any independent inquiry and merely on the basis of some information found in ITS made the impugned addition. In my considered view, since from the documentary evidences furnished by the appellant during the course of the assessment proceedings, the alleged transactions of shares are not getting reflected and further since, the AO has not brought on record any material to rebut the denial of the appellant, the addition so made by the AO at Rs. 7 ,66,500/- merely on the basis of unverifiable information of the ITS, cannot be upheld. Accordingly, the addition of Rs. 7,66,500/- so made by the AO is hereby deleted. Accordingly, the Ground No. 5 of the appellant is allowed.” 21. The issue involved is very simple and neat. The Ld. AO has made addition on the basis of alleged transactions of shares done by the assessee with Client Code No. 1017855 and Broker Code No. 13470. The Ld. AO has obtained information of transactions from the database maintained by income-tax department. But, however, during assessment-proceeding, the assessee has denied to have made any transaction of shares with Client Code No. 1017855 and Broker Code No. 13470. Despite clear-cut denial of assessee, Ld. AO heavily relied upon the database of income-tax department and made addition. It is observed that Broker Code No. 1017855 is of Aditya Page 30 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 Birla Money Ltd. but no material is available on record to demonstrate the Ld. AO has made any enquiry from the Broker to find what is true and what is wrong. The assessee has also filed a copy of Account with Aditya Birla Money Ltd. for the previous year 2014-15 relevant to the assessment-year 2015-16 to the lower authorities and the same is also placed in the Paper- Book, which is duly sealed and signed by broker and clearly demonstrates that no single transaction was done during the year by assessee and the opening balance B/F as on 01.04.2015 is carried forward as such as closing balance on 31.03.2015. Thus, the evidences placed by the assessee clearly demonstrate that no transaction had been done. During hearing, Ld. DR is not able to controvert these submissions of assessee. In this view of matter, we are inclined to agree with Ld. CIT(A) that the assessee has not done any transaction of shares as alleged by Ld. AO. Therefore, the Ld. CIT(A) has rightly deleted addition and we uphold his action. Ground No. 4 of the Revenue is thus dismissed.

GROUND No. 5:

Page 31 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 the appellant by way of interest-bearing loans were deployed by the appellant in his family company and on such loans given, the appellant has received an interest income of Rs. 9,74,814/-.” The assessee has also filed evidences in the form of (i) Ledger A/c of Interest Expenditure which shows date-wise party-wise interest-payments; (ii) Ledger A/c of BEPL which shows the loans given to BEPL from time to time on which interest has been received; and also (iii) a detailed Statement showing a co-relation of the amounts borrowed from different persons and investment made in BEPL at Page No. 191 to 201 of the Paper-Book. By means of these clinching evidences on record, the assesse has sufficiently proved that the interest expenditure of Rs. 8,48,892/- has been incurred to earn interest-receipt of Rs. 9,78,814/- disclosed in the return. On test-check of these evidences, we are satisfied with the explanation given by the assessee. Therefore, the assessee deserves deduction of interest expenditure, which the Ld. AO has wrongly disallowed but the Ld. CIT(A) has rightly allowed. Accordingly, we dismiss Ground No. 5 of the Revenue as well.

GROUND No. 6:

8.2 The submission of the assessee was perused, however, the same was not Page 32 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 found satisfactory. It is clear from his submission that securities transfer from is nothing but a simple paper and not any legal documents. Further, on the share certificates it is clearly mentioned that it is issued in lieu of old shares. This facts establish that the assesse has again created a colourable device to show that the shares transaction of Pithampur Poly Products Ltd. are genuine.

8.3 From facts discussed below it is proved that the shares transactions are not genuine. � It is fact that the company Pithampur Poly Products Ltd is family concern of the assessee. � The company was incurring loss since 17 years. � The shares have been shown to be sold in F.Y.2014-15 to Smt. Suchitra Agarwal � However, the consideration was receive after two years ie. From 15.10.2016 to 20.03.2017. It is highly impossible that the shares were sold on credit. � It is also important to note that Smt. Suchita Agrawal is sister of the assessee. Thus, the sahres remains in the family and loss has been artificially created in the hands of assessee. � It is evident from transaction that the whole script has been written to set off the remaining amount of LTCG generated on account of relinquishment of tenancy right. � As discussed in para 6.5 to 6.10 the transaction is nothing but a sham transaction to evade the tax. Even though the assessee has tried to show the transaction as genuine, however, the truth is that the loss was not earned from sale of shares as shown or primarily apparent, but the loss has been artificially created to claim set off of the same against the LTCG. Thus, it is proved that the transaction is a sham transaction and the loss is required to be disallowed.” 27. During appellate proceeding, Ld. CIT(A) allowed claim of assessee by holding as under:

“8.2 I find that the AO has dealt with the subject issue at Para (8) to Para (8.5) of the Order. The AO noted that the securities transfer form was a simple paper and not any legal document and further, on a perusal of share certificates, it was noted by the AO that they were issued in lieu of old shares. The AO further noted that the company PPPL was a family concern of the appellant which was incurring losses since 17 years and further, the shares have been sold to Smt. Suchita Agrawal who is sister of the appellant and thus, shares remained in the family and loss was artificially created in the hands of the appellant. Further, the AO averted that the consideration was received after two years and it was highly impossible that shares were sold on credit. According to the AO, the loss was not earned from sale of shares but the loss has been artificially created to claim set-off of the same against Page 33 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 the LTCG. 8.3 I find that during the assessment proceedings, as well as before me the appellant in support of the genuineness of loss as claimed on sale of shares, furnished various documentary evidences such as copy of Share Transfer Deed dated 31/03/2015 in the prescribed Form No. SH-4, specimen copies of Jumbo Share Certificates duly issued in favor of the purchaser i.e. Smt. Shuchita Agrawal on 30/06/2015, copy of the Market Rate Quotes of PPPL at the relevant time, as downloaded from the official website of BSE, copy of the ledger account of the buyer in the books of the appellant, copies of the relevant bank statements in which the sale proceeds of shares are getting reflected. 8.4 I find that the PPPL is a widely held company duly listed on Bombay Stock Exchange (BSE) and in which the public are substantially interested. I find that the price of each share of the PPPL is governed by the market forces and not determined or influenced by the appellant or any of his family members. I find substance in the contention of the appellant that he has sold the shares to his married sister at a price of Rs. 15/- per share, despite the negative worth of the PPPL and despite the fact that all the banks had classified the loan accounts of PPPL as NPA Account and no other buyer was prepared to buy such shares even for a single penny. I find no merit in the findings of the AO that the securities transfer form was made on a simple paper and it was not a Legal document. I find that the Securities Transfer Form 'SH-4' is prescribed under section 56 of the Companies Act, 2013 read with sub-rule (1) of Rule 11 of the Companies (Share Capital and Debentures) Rules 2014 and under the Companies Act, a share transfer form can be filed on a plain paper and should bear the stamps of requisite value. Thus, I find that, the securities transfer form was complete and a legally admissible document if the same was duly filled, executed and signed by the transferor and transferee and also bears stamps of the requisite value. Thus, I find that there is no embargo in the Statute that the transfer of shares should only be on a legal document. I find that the appellant has transferred the subject shares to the buyer, by way of the prescribed securities transfer form SH-4, which has been duly filled and signed by both the appellant as well as the buyer and which is bearing stamps for a value of Rs.14,100/- [being 0.25% of the sale value of Rs. 56, 12,895/-]. 8.5.1 As regard the finding of the AO that the share certificates have been issued in lieu of old shares, I find that the buyer Smt. Suchita Agrawal, after executing the share transfer deed, had applied to the share transfer agent namely M/s. Purva Sharegistry (India) Pvt. Ltd., vide her letter dated 19/06/2015, for issuing her the consolidated share certificates in lieu of the shares received by her. Accordingly, the aforesaid share transfer agent has issued the fresh copies of consolidated certificates in the name of the buyer namely Smt. Suchita Agrawal. In the said Share Certificates, there Page 34 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 IS a mention that such consolidated certificates were issued in lieu of old share certificates. Thus, I find that merely for the reason that the share transfer agent has issued a consolidated share certificate to the buyer in exchange of the old certificates, no adverse inference can be drawn and cannot be regarded as colorable device. 8.5.2 I find substance in the contention of the appellant that he was in need of funds and he could not find any buyer in the market who could buy the bulk number of shares of a company which was already running in losses. Since the value of his investment in shares were already diminishing every day, he decided to make a distress sale of the shares on credit. Thus, according to the appellant, he had no option but to sell out his shares on credit to a related person. However, the payment consideration has duly been received by the appellant from the buyer which has not been doubted by the AO. I find that the appellant had received the entire consideration from sale of shares through banking channels only and therefore, by no stretch of imagination, it can be said that the transaction of sale of shares by the appellant was a sham transaction. 8.6 Thus, in my considered View, the appellant having genuinely transferred the shares of a loss making widely held company, through banking channel, the transfer whereof has been recognized in the statutory books and records of the company, any loss arising on such transfer cannot be disregarded on the extraneous consideration such as sales made to a relative, or consideration received after some time, Accordingly, in my considered view, there was absolutely no justification for the AO to disregard the claim of the appellant as regard to loss arising on sale of shares in PPPL at Rs. 80,23,177/- Accordingly, I hereby direct the AO to grant the due set-off to the appellant while computing his income from capital gain arising from the relinquishment of his sub tenancy rights. Consequently, the Ground No. 7 of the appellant is Allowed.” 28. Before us, Ld. DR relied upon the order of Ld. AO. Per contra, Ld. AR relied upon the order of Ld. CIT(A) as also the evidences filed in the Paper- Book at Page No. 367 to 422.

(i) The assessee has sold 374193 shares of Pithampur Poly Products Limited on 26.03.2015 for Rs. 56,12,895/- to Smt. Suchira Agarwal

Page 35 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 through Form SH-4 “Securities Transfer Form”. This Form is a statutory form pursuant to section 56(1) and Rule 4.9(1) of company laws. The Form contains all details, particularly, the name of seller, purchaser, CIN of the company, distinctive numbers of shares, sales consideration, registered folio numbers, etc. Further the Form is duly signed by assessee, purchaser and witness. A stamp duty of Rs. 14,100/- is also paid on execution of this Form, which has gone to exchequer.

(ii) The company has subsequently transferred shares in the name of buyer and issued new consolidated-certificates to the buyer, copies of share-certificate are placed in the Paper-Book.

(iii) A copy of ledger account of the buyer and the bank statement are placed at Page No. 399 to 402 of the Paper-Book according to which entire sale-consideration has been received through banking channel.

(iv) A copy of the certificate issued by Mr. Harish Modani, practicing Company Secretary, accompanied by the copies of Annual Return of the Company in Form No. MGT-7 filed to ROC containing a list of shareholders and list of share-transfers, is also placed in the Paper- Book. These documents are part of the statutory records under company laws and they clearly evident that the shares were transferred from assessee to the buyer.

On the basis of these documents, which are statutory, we observe that the assessee has in fact sold impugned shares to buyer. We also observe that even the Ld. AO has not denied the authenticity of these statutory documents, but he had simply formed a view about bogus claim on the footing that the buyer is a relative of assessee and substantial portion of the consideration had been received after 2 years of sale. We observe that the company was a loss making company and the buyer was also sister of assessee, therefore there is a justification in the deferred receipt of consideration by the assessee. We also agree with the observations of Ld. Page 36 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16 CIT(A) that even otherwise such trivial considerations should not be a basis to deny the transaction, which has a statutory backing, supported by statutory documents and acted upon by parties. We observe that the Ld. AO has treated the loss claimed by assessee as bogus on mere suspicion and assumption as against the various documentary evidences. It is an accepted law that suspicion and presumption, how so ever strong, cannot be a basis for drawing any conclusion. Therefore, considering the documentary evidences on record in support of assessee’s claim which could not have been disputed by Ld. AO, we do not find any merit in the action of Ld. AO. We agree with the findings made by Ld. CIT(A). Accordingly, Ground No. 6 of Revenue is also dismissed.

Order pronounced on 21/11/2022 as per rule 34 of I.T.A.T., Rules, 1963.

Sd/- Sd/-

(MADHUMITA ROY) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore �दनांक /Dated : 21.11.2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY

Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

Page 37 of 38

Shri Gaurav Tekriwal ITA No.62/Ind/2021 Assessment year 2015-16

Page 38 of 38