ITAT Indore rules in favor of assessee, allowing brokerage expenses & setting aside Section 50C addition.

The Appellate Tribunal ITAT Indore allowed the appeal of the assessee for the Assessment Year 2015-16. The Tribunal ruled in favor of the assessee by deleting the disallowance of brokerage expenses amounting to Rs. 3,60,000 and setting aside the addition of Rs. 14,11,600 made under Section 50C of the Income Tax Act. The Tribunal held that the assessee had provided sufficient evidence to prove the genuineness of the expenses and that the addition under Section 50C was unjustified due to the permissible deviation. The judgment was pronounced on 19.02.2021.

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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 Rs. 61,37,400. The assessment was completed at a total income of Rs. 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 Rs. 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 Rs. 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 Rs. 1,34,11,600, lower than the guideline rate of Rs. 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.

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