2023 (11) TMI 1048 - AT - Income Tax

Computation of capital gain - Disallowance of Brokerage Payment paid in respect of sale of land - addition made on the ground that none of the person to whom brokerage payment had been claimed to have been made had signed at any place in the registered sale document or initial sale agreement - HELD THAT - From the record, it is noted that the assessee had submitted the copy of ID Proof i.e. Aadhar Card showing name and address of the above 05 persons. It is also noted that the assessee had submitted the payment voucher and signed receipt of brokerage payment. The Bench feels that there is no requirement of getting signature or putting the name of signature of the broker which is not part and parcel of the agreement and it is nowhere indicated in the registry about the name of the broker. We also find that the assessee had entered into agreement of land on 25-03-2023 but claimed payment of brokerage on 22-06-2015. To this effect, the Bench noted arguments of the ld. AR of the assessee wherein he prayed that the brokerage is paid only after complete receipt of sales consideration or after the date of registry. In this case, it is noted that the sale agreement was entered on 25-03- 2013 (PB No. 43-47) on receipt of payment advance of Rs. 5.00 lacs. However it was decided by the parties that complete payment would be paid within 3 years and thus thereafter the registered sale deed got executed on 22-06-2023 which is registered before the Registering Authority and thus the brokerage was paid by the assessee on completion of the job. Thus no justification in the orders of the lower authorities to make disallowance as it is a mutual agreement between the purchaser and broker to get the deal done. It is also noteworthy to mention from the affidavit of the assessee Shri Ashok Singh that he had paid brokerage in cash to the above mentioned five persons. Hence, taking into consideration the facts and circumstances of the case, the brokerage amount is allowed.

Summary

Issues Involved:
1. Disallowance of Brokerage Payment of Rs. 9,78,500/- in respect of sale of land.

Summary:

Issue 1: Disallowance of Brokerage Payment of Rs. 9,78,500/-

The assessee filed an appeal against the order of the CIT(A) confirming the AO's disallowance of brokerage payment amounting to Rs. 9,78,500/-. The AO observed discrepancies in the brokerage payment, such as the absence of broker signatures in the sale agreement, payments made in cash, and the sale agreement being signed by the assessee who was also the director of the purchasing company. The AO concluded that the brokerage payment was an afterthought to reduce tax liability and lacked independent evidence, resulting in the addition of Rs. 9,78,500/- to the assessee's income.

In the first appeal, the CIT(A) upheld the AO's disallowance, noting that the brokerage payments were made in cash and the receipts were dated inconsistently. The CIT(A) agreed with the AO that the assessee's claim lacked strong independent evidence and appeared to be an attempt to reduce tax liability.

The assessee argued that the brokerage payments were genuine, providing ID proofs of the brokers, payment vouchers, and signed receipts. The assessee explained that brokerage is typically paid after the complete receipt of sales consideration, which was the case here. The assessee further clarified that he became a director of the purchasing company to safeguard against potential fraud, and the discrepancy in the date of brokerage receipts was a typographical error.

The Tribunal examined the evidence, including affidavits from the assessee and the brokers, and found no requirement for broker signatures in the sale agreement. The Tribunal noted that the brokerage payment was made upon completion of the sale and supported by affidavits. The Tribunal concluded that the brokerage payment was justified and allowed the appeal, deleting the disallowance of Rs. 9,78,500/-.

Conclusion: The appeal of the assessee is allowed, and the disallowance of brokerage payment of Rs. 9,78,500/- is deleted.