2023 (3) TMI 48 - AT - Income Tax

Appeal dismissed for excessive brokerage commissions; lack of evidence; delay condoned; natural justice violation not proven.

The Tribunal dismissed the appeal, upholding the disallowances of brokerage commissions exceeding 2% of the sale value of flats and for land purchase, ... Disallowance of commission on the sale value - commissions payment which is more than the reasonable rate of commission in the real estate business - AO disallowed in excess of 2% of the sale value of flats - CIT(A) confirming the addition being paid over and above @ 2% of agreement value of sale of flats - HELD THAT:- CIT(A) upheld the addition by concurring the action of assessing officer. Before us, assessee has not given any convincing factor for making payment of such commission, which is not the prevailing in the real estate business, except making submissions that it was incurred/ paid wholly and exclusively for the purpose of business. In our view the assessing officer rightly disallowed the commissions payment which is more than the reasonable rate of commission in the real estate business. Thus, the ground No. 1 of the appeal is dismissed. Disallowance of commissions expenses - such commission was paid for purchase of land, however, no such land is shown in the asset side in the balance sheet - HELD THAT:- We find that ld CIT(A) that confirmed the addition by holding that no land was purchased by assessee during the year. The plea of typographical error ‘commission paid for land’ is self-serving statement of assessee and made to wriggle out of situation when the assessing officer pointed out the discrepancy. As noted earlier, before us, the ld AR for the assessee has vehemently argued that when genuineness of such expenses were not in doubt and expenses incurred wholly and exclusively for the purpose of assessees business, same should be allowed and reasonableness of the expenditure has to be checked from the point of view of businessman. We are not convinced with the submissions of the ld AR for the assessee, when the commissions expense is wholly unreasonable and the assessee has taken such stand that the alleged commission was paid for purchase of land and in fact no such land was admittedly purchased during the year, the revenue authority cannot examine the reasonableness of the expenses on peculiar facts of the case. Therefore, we do not find any reason to interfere with the finding of the present case. In the result, this ground of appeal is also dismissed. Appeal of the assessee is dismissed. Issues Involved:1. Delay in filing the appeal.2. Disallowance of brokerage commission exceeding 2% of the sale value of flats.3. Disallowance of brokerage commission claimed for purchase of land not shown in the asset side.4. Alleged violation of natural justice.Issue-Wise Detailed Analysis:1. Delay in Filing the Appeal:The appeal by the assessee was filed with a delay of 65 days beyond the statutory limit of 60 days. The assessee's Authorized Representative (AR) cited the Hon'ble Apex Court's decision in Suo Motu Writ Petition (C) No.3 of 2020, which extended the time limit for filing appeals until 28.02.2022 with an additional 90 days' grace period from 01.03.2022. The Revenue did not object to the delay. The Tribunal condoned the delay, admitting the appeal for adjudication on merits.2. Disallowance of Brokerage Commission Exceeding 2%:The assessee, engaged in land development and building, claimed Rs.34,98,888/- as brokerage charges. The Assessing Officer (AO) noted discrepancies and disallowed Rs.2,65,555/- paid over the generally accepted 2% commission rate in real estate. The CIT(A) upheld this disallowance, agreeing with the AO's assessment that the brokerage commission should not exceed 2% of the sale value of flats. The Tribunal found no convincing argument from the assessee to justify the higher commission rate and upheld the disallowance.3. Disallowance of Brokerage Commission for Land Purchase:The AO disallowed Rs.23 lakhs claimed as brokerage for land purchase, noting no land was shown in the assessee's balance sheet. The CIT(A) upheld this disallowance, rejecting the assessee's claim of a typographical error. The Tribunal agreed with the lower authorities, noting that the assessee's claim of brokerage for land purchase was self-serving and unsupported by evidence. The Tribunal found the disallowance justified given the lack of genuine evidence for the claimed expenses.4. Alleged Violation of Natural Justice:The Tribunal noted that no specific submissions were made regarding the alleged violation of natural justice during the hearing. Consequently, this ground of appeal was treated as not pressed and dismissed.Conclusion:The Tribunal dismissed the appeal, upholding the disallowances made by the lower authorities. The decision emphasized the importance of providing convincing evidence for claimed expenses and adhering to generally accepted business practices. The Tribunal found no merit in the arguments presented by the assessee regarding the disallowed brokerage commissions and the alleged violation of natural justice. Order Pronouncement:The order was pronounced in the open court on 27/02/2023.