PCIT Vs J.D. Exim Pvt. Ltd. (Delhi High Court)
Summary: The Delhi High Court considered whether an advance of ₹10 crore received by the assessee in FY 2006-07 could be treated as unexplained under Section 68 in AY 2016-17. The assessee had received the amount towards sale of land, while the sale deed was subsequently executed by his power of attorney holder in FY 2013-14. According to the assessee, he became aware of the execution only in FY 2015-16 and accordingly disclosed the transaction in AY 2016-17, offering the resulting capital gain and setting it off against available capital loss. The AO regarded the arrangement as a colourable device and made a ₹10 crore addition under Section 68. The CIT(A) deleted the addition, and the ITAT affirmed that decision because the amount had actually been received in FY 2006-07. The High Court upheld those concurrent findings and dismissed the Revenue’s appeal. The Court observed that even if the assessee had adopted a device to obtain a capital-loss set-off, Section 68 could not be invoked in AY 2016-17 for an amount admittedly received in FY 2006-07.
Core Issue / Main Ground: Whether an amount of ₹10 crore admittedly received by the assessee as advance in FY 2006-07 could validly be treated as an unexplained cash credit under section 68 in AY 2016-17, merely because the subsequent sale transaction was completed in a later year and the Assessing Officer alleged that the transaction was structured as a colourable device to obtain set-off of capital loss against capital gain.
