The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) held that the documentary evidences validated the compensation paid to the brokerages and the settlement of disputes out of sales proceeds.
The assessee along with the confirming party, sold land measuring 1 acre 16 guntas of land in Survey in favour of MARS Builders, under sale deed dated 20.01.2020 for a total consideration of Rs.7 Crores. Out of the said amount, a sum of Rs.2,50 Crores was paid to the confirming party, through a cheque, details of which are recorded in the sale deed.
The AO disallowed expenditure of Rs.3,86,40,000/- claimed by the assessee. There was no mention with regard to the sum of Rs.2.50 Crores in the assessment order. Whilst the matter was under consideration before the CIT(A), the Assessing Officer wrote letter dated 04.09.2013 to the CIT(A) to add a sum of Rs.2.50 Crores paid.
So far as expenditure of Rs.3,86,40,000/- disallowed by the AO, the CIT(A) held that a sum of Rs.3,27,00,000/- had been paid through cheques and accordingly confirmed disallowance to the extent of Rs.59,40,000/-. Revenue challenged CIT(A)’s order before the ITAT’.
The ITAT upheld payment of Rs.2.50 Crores to Shri Chethan Gandhi. So far as disallowance of Rs.3.27 Crores, the ITAT considered the list of payments recorded of it’s order and allowed Revenue’s appeal.
The assessee sold a property on 20/1/2010. claimed Rs.3.27 crores as expenditure towards the compensation paid out of the sale proceeds.
It was noted that during the first round of proceedings, this tribunal vide order dated 6/7/2017 denied the claim by observing that most of the payments were made in the year 2013. So The only issue that needs, which is remanded is in respect of disallowance made by the authorities on the expenditure amounting to Rs.3.27 crores
After hearing both the parties It was admitted fact that all the above 5 parties who received cash have produced confirmations during the assessment proceedings. From the written filed by the DR, the tribunal noted that the doubt that arose in the mind of revenue is that the cash was paid to 5 parties on 20/12/2010, 28/1/2010 and 25/10/2010, whereas, the date of sale deed was on 20/01/2010.
Merely because these parties executed confirmatory deeds in favour of assessee relinquishing rights over the scheduled property during the financial year 2007-08, the argument of the Ld.DR that, the subsequent event of cash paid to 5 parties during financial year has to be disbelieved cannot be accepted. There was nothing on record with the revenue to advance such argument.
Further, the transaction had not been disbelieved by the revenue as the DR did not argue on the cheques payments made by the assessee to various parties which are also confirming the receipts as compensation paid by the assessee.
The two bench member consisting of Chandra Poojari (Accountant member) and Beena Pillai (Judicial member) did not find any infirmity in the action of the CIT(A) in the deleting the addition of Rs.3,86,040,000/- in the hands of the assessee. Accordingly, the question of law remanded to the Tribunal by the Hon’ble High Court was allowed in favour of the assessee.
Thus the appeal of the revenue was dismissed.
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