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TMI Blog2024 (4) TMI 452X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission recipients act on oral instructions of the seller of the property. Undoubtedly, the commission has been paid through the bank account of the assessee with J K Bank. We are, therefore of the view that the impugned disallowance is not justified. The Hon ble Karnataka High Court has held in Govind Raju (N) [ 2015 (8) TMI 271 - KARNATAKA HIGH COURT] and CIT vs. Venkat Rajendran [ 2015 (7) TMI 656 - KARNATAKA HIGH COURT] that brokerage in connection with transfer is deductible expenditure. Ground No. 1 to 5 are accordingly decided in assessee s favour. Disallowance of cost of improvement - cash expenses allegedly spent for improvement are not supported by proper documentation and hence are not allowable deduction - HELD THAT:- As perused the copy of sale deed placed as describes the assessee as owner of land measuring 2 bighas and 16 biswas along with built-up house. No clear description of built-up house is given therein. Before the AO/DRP it was stated that on bare plot of land purchased in the year 2009 the assessee constructed during AY 2011-12 thereon two storey building having built-up area of 62659 meters on ground floor, first floor and terrace. There is thus no clarit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee is directed against the final assessment order of Ld. Asstt. Commissioner of Income Tax, Circle Int. Tax (2)(1)(2) New Delhi ( AO ) dated 25.09.2023 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act ) pursuant to the directions of Ld. Dispute Resolution Panel ( DRP ) pertaining to the Assessment Year ( AY ) 2021-22. 2. The assessee has raised the following grounds of appeal:- 1. The Learned A.O. and DRP-2 while disallowing the Brokerage expense of Rs. 45 Lakh failed to appreciate that the Brokerage Commission paid by the Appellant to the 3 Brokers was duly supported by the Tax invoices issued by the 3 Brokers which contained their full addresses amongst other details. During the course of the Assessment proceedings the 3 Brokers had again issued Confirmation Letters with regard to the Brokerage paid to them by the the Appellant. The Appellant had placed on record the PAN details of the 3 Brokers. Thus all the primary facts relating to the payment of the Brokerage Commission paid by the Appellant to the 3 Brokers, had been brought on the record of the Assessing Authority by the Brokerage Commission paid by the Appellant to the 3 Brokers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the form of property tax receipt and sale deed supporting the existence of 2 storey structure (Farm land of 2374 sq. Mtrs. Having built up area on GF, FF and terrace of 626 Sq. Mtrs., existing on the sold property in the year 2020. 7. The Learned A.O. and DRP-2 while disallowing the construction/ improvement incurred by the Appellant to extent of Rs. 31,86,363 by disbelieving the cash vouchers signed by Shri C. Prasad, Civil Contractor in year 2011 paid in cash for Labourers with source of fund from relative and friends, when the same could have been verified by calling Shri C. Prasad, Contractor for corroboration by scrutinizing his business returns. 8. The Learned A.O. and DRP-2 while disallowing the in disallowing the construction and improvement cost of Rs. 31,86,363 when the same could have been corroborated by the return filed by Shri C. Prasad, Civil Contractor in his returns when the Appellant provided also the business address, contact details, payment confirmation letter, quotation building covered area with material rates of year 2010 of him. 9. The Learned A.O. and DRP-2 while disallowing the in disallowing the brokerage and construction cost of Rs. 31,86,363 when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng investment of Rs. 11,50,00,000/- be not disallowed. The assessee submitted replies on 23.12.2022 and 26.12.2022 the relevant extracts of which are reproduced by the Ld. AO in para 3.7.1 of the assessment order. It was stated therein that the assessee purchased a plot of land in AY 2010-11 for Rs. 85,47,364/- inclusive of stamp duty of Rs. 57,47,364/-. He constructed residential house thereon and spent Rs. 73,00,000/- on construction. The details of payment amounting to Rs. 41,13,637/- to Mr. C Prasad, Civil Contractor and other vendors out of assessee s J K bank account were given. It was stated that balance payment of Rs. 31,86,363/- were made to the labourers in cash towards labour charges. The source of cash was explained as receipt from relatives, friends and cash in hand with the assessee. Regarding transfer expenses of Rs. 45,00,000/- towards sales commission it was stated that Rs. 15,00,000/- each was given through cheque to Mr. Tanishq Sawhney F. 3/18, Vasant Vihar, New Delhi; Sunshine Buildpro Pvt. Ltd. 14 Sainik Farm, C-3 lane Khanpur, New Delhi and Chinar Farms Pvt. Ltd. 61 Ghitorin, New Delhi. Copies of invoices and bank statement of assessee were provided as proof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer expenses of Rs. 45,00,000/- for lack of supporting document, e.g. agreement etc. The Ld. DRP further observed that just because payment has gone from assessee s bank account does not qualify it, ipsofacto as transfer expenses for the property. The Ld. DRP gave direction to the Ld. AO for further verification regarding claim of Rs. 41,13,637/- and allow if found by him to be bonafide expenses. The Ld. DRP directed the Ld. AO to consider CBDT Circular No. 01/2022 in allowing relief for deposit in Capital Gain Account Scheme. 9. Pursuant to the directions of the Ld. DRP, the Ld. AO completed the final assessment on 25.09.2023 under section 143(3) r.w.s. 144C(13) of the Act on total income of Rs. 1,26,40,460/- including therein the disallowance of transfer expenses of Rs. 45,00,000/- and the indexed cost of improvement of Rs. 57,43,085/- being expenditure incurred in cash of Rs. 31,86,363/- on civil construction against which the assessee is in appeal before the Tribunal and all grounds of appeal relate thereto. 10. The Ld. AR drew our attention to the copy of invoices/bill appearing at page 12-17 of Paper Book which were produced before the Ld. AO/DRP in support of transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs each paid to three parties and the indexed cost of improvement of Rs. 1,31,57,486/-. In the final assessment order passed pursuant to directions of the Ld. DRP, the Ld. AO negatived the claim of deduction of transfer expenses in full and disallowed the claim of the indexed cost of improvement of Rs. 57,43,085/- out of Rs. 1,31,57,486/- claimed. This represents the amount of Rs. 31,86,363/- being expenditure in cash for making payment to labourers on civil construction. 13. It is manifest from the records that during assessment proceedings vide reply dated 20.12.2022 the assessee submitted details of payment regarding transfer expenses of Rs. 45,00,000/- towards sales commission in connection with transfer of property containing therein name of the party and address, PAN, Cheque No. and date and amount (page 2 of Paper Book). Copies of three invoices (page 12-17 of Paper Book) from the parties to whom commission is paid for the commission amount of Rs. 15,00,000/- each were also produced. Copy of J K Bank statement of the assessee showing total payment of Rs. 45,00,000/- in three transactions/entries of Rs. 15,00,000/- each as per the bank statement was also submitted. It is obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at such cash expenditure has been incurred through support of relative and friends. So source of cash payments is not proved; no cash withdrawals are reflected in assessee s bank statements; authenticity of copies of cash vouchers is doubtful as no cash voucher nos. are printed on them; no cash deposits are reflected in the bank statement of Mr. C. Prasad through whom the cash is allegedly disbursed. In the opinion of the Ld. AO/DRP the cash expenses of Rs. 31,86,363/- allegedly spent for improvement are not supported by proper documentation and hence are not allowable deduction. 15. We are inclined to agree with the view of the Ld. AO/DRP. We have perused the copy of sale deed dated 07.08.2020 placed at page 18 to 47 of the Paper Book. It describes the assessee as owner of land measuring 2 bighas and 16 biswas along with built-up house. No clear description of built-up house is given therein. Before the Ld. AO/DRP it was stated that on bare plot of land purchased in the year 2009 the assessee constructed during AY 2011-12 thereon two storey building having built-up area of 62659 meters on ground floor, first floor and terrace. There is thus no clarity about the house constructed o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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