PCIT Vs J D Exim Pvt. Ltd. (Delhi High Court)
Summary: The Delhi High Court rejected the Revenue’s appeal under Section 260A of the Income-tax Act, 1961, challenging the ITAT order concerning Assessment Year 2016-17. The Assessing Officer had made an addition of Rs. 10 crores under Section 68, treating an advance received by the assessee as a colourable device.
The assessee had shown receipt of Rs. 10 crores in FY 2006-07 as advance consideration for sale of land, while stating that the transaction had not culminated at that stage. A sale deed was subsequently executed by the assessee’s power of attorney holder in FY 2013-14. According to the assessee, the execution came to its knowledge only in FY 2015-16 because the power of attorney holder had not informed it. The assessee thereafter reflected the transaction in its return, disclosed the capital gain and set it off against a capital loss.
During assessment proceedings, the Assessing Officer questioned the purchaser and learnt that the sale deed had been executed in FY 2013-14 and that the purchaser had recorded the transaction in its books in that financial year. The Assessing Officer concluded that the assessee had adopted a device to recognise the capital gain in AY 2016-17, when it had suffered a capital loss of Rs. 16 crores, enabling a set-off. He consequently treated the Rs. 10 crore advance as unexplained and added it under Section 68 in AY 2016-17.
