Brokerage payment deduction allowed in capital gains computation despite missing broker signatures on registered sale document

The ITAT Jaipur allowed the assessee's claim for brokerage payment deduction in capital gains computation. The AO had disallowed the brokerage payment arguing that brokers' signatures were absent from the registered sale document. The Tribunal held that broker signatures are not mandatory requirements for such agreements and are not typically included in registry documents. The assessee provided adequate documentation including Aadhar cards, payment vouchers, and signed receipts from five brokers. The Tribunal noted that while the land agreement was executed in 2013, the registered sale deed was completed in 2023, with brokerage paid upon completion as per mutual agreement between parties.

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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.

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