2021 (2) TMI 855 - AT - Income Tax

Disallowance of brokerage expenses - assessee claimed the brokerage expenses @ 3% paid to broker on the sale consideration received from sale of immoveable property - HELD THAT - On going through the records find that the brokerage was paid through account payee cheque and copy of bank statement is filed. Complete detail of broker including his address, mobile number were filed along with confirmation letter before the Ld. A.O. In our view the assessee has duly discharged his onus to prove the genuineness of the expenses. Ld. A.O failed to find any adversities in these evidence nor he made any effort to call the broker. In these given facts and circumstances of the case the action of the Ld. A.O is unjustified, we therefore set aside the finding of Ld. CIT(A) and delete the disallowance of brokerage expenses. Addition u/s 50C - difference between the actual sale consideration received and the valuation done by the DVO - HELD THAT - Property being leased and also disputed, which is not commanding the guideline rate in the open market and this fact is further supported by the report of DVO who has valued the property in question much lower than the guideline rate are sufficient enough to prove that the claim of assessee having received the sale consideration at ₹ 1.20 crore is correct and thus making the addition for ₹ 14,11,600/- u/s 50C of the Act is uncalled for. We therefore set aside the finding of Ld. CIT(A) and delete the addition made by Ld. A.O u/s 50C - Decided in favour of assessee.

Summary

Issues: Disallowance of brokerage expenses and addition made under Section 50C of the Income Tax Act

The appeal before the Appellate Tribunal ITAT Indore pertained to the Assessment Year 2015-16 and challenged the orders of the Commissioner of Income Tax-II, Indore. The issues raised by the assessee included the disallowance of brokerage expenses and the addition made under Section 50C of the Income Tax Act. The assessee, a senior citizen deriving income from Long Term Capital Gain, filed the return of income declaring total income of ?61,37,400. The assessment was completed at a total income of ?79,09,900 after making the aforementioned additions. The assessee appealed before the CIT(A) and partly succeeded, leading to the current appeal before the Tribunal.

Regarding the disallowance of brokerage expenses amounting to ?3,60,000, the Tribunal found that the assessee had paid the brokerage through an account payee cheque, providing evidence of the genuineness of the expenses. Despite this, the Assessing Officer (AO) disallowed the expenses for lack of the person who received the brokerage. However, the Tribunal noted that complete details of the broker were provided, including a confirmation letter and bank statement. In light of the evidence presented, the Tribunal held that the assessee had discharged the burden of proving the genuineness of the expenses. Consequently, the disallowance of brokerage expenses was deleted, allowing Ground No.1 of the assessee.

Concerning the addition of ?14,11,600 made under Section 50C of the Act, the Tribunal observed that the property sold by the assessee was claimed to be disputed, with the fair market value contested to be lower than the guideline rate. The valuation by the Departmental Valuation Officer (DVO) valued the property at ?1,34,11,600, lower than the guideline rate of ?1,80,00,000. The Tribunal noted that the DVO's valuation was an estimate and that the difference between the sale consideration and DVO's valuation was 11.6%. Considering the proviso to Section 50C, which allows for a 10% deviation, the Tribunal held that the addition under Section 50C was unjustified. Therefore, the Tribunal set aside the addition made by the AO and confirmed by the CIT(A), allowing Ground No.2 of the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, ruling in favor of the assessee on both grounds. The judgment was pronounced on 19.02.2021 by the Appellate Tribunal ITAT Indore.