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2023 (12) TMI 52 - ITAT DELHICapital gain computation - Denial of expenses incurred towards removal of encumbrances and indexation thereon for the purposes of determination of tax liability towards capital gain - HELD THAT:- Revenue Authorities have questioned the bona fides of the cost of removal of encumbrances in the absence of any direct evidence except for Rs. 15 lakh paid to one Shri Rajender Kumar. On perusal of bank statement, it is noticed that between the period October 2010 to March 2011 certain withdrawals have been identified in the name of several parties. Other similar entries in the name of other occupants are also discernible. We take note of the plea on behalf of the assessee that an amount of Rs. 15 lakh paid to Shri Rajender Kumar has been accepted by the CIT(A) to have been incurred cost of removal of encumbrances. Thus, the cost of removal of encumbrances per se is not in doubt and rather has been accepted on first principles. The quantum of payment to various parties is put under cloud by the Revenue on account of lack of corroboration. Appraisal of bank statement gives an unflinching impression that several parties as named on behalf of the assessee have been paid costs against their respective names. The payments have been made on various dates close to each other to several parties. Thus, the facts when read in conjunction, there appears to be ring of truth in the version of the assessee towards incurring of cost of encumbrances. While holding so, one needs to bear in mind the ground realities prevalent in the indian-socio-ecostructure. One cannot deny that a large population of India stays unauthorizely in the land parcel belonging to others and move out of such land parcels only on payment of some sort of compensation. The legal remedy for removal of the encroachments, at times, is quite slow and it takes many years through such course. The land owners are thus compelled to pay compensation by force of circumstances to obtain clean possession for sale/use. One cannot put blinkers on such unstated but prevalent eco-system. Thus, where at least one party has accepted the factum of receipt of compensation and payments to other parties are also reflected in the bank statement of the assessee company to be the beneficiary of payments, the plea of the assessee requires a benign consideration. Coupled with this, we note that the payments have been made and accounted for in the Financial Year preceding to the Financial Year 2011-12 in question. Thus, the costs incurred and accounted for in an earlier year cannot be ordinarily visited for a review. We are inclined to accept the plea of the assessee for deduction of cost of encumbrances as claimed. Hence, we set aside the order of the CIT(A) and reverse the disallowance carried out by the Assessing Officer on this score. Assessee appeal allowed.
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