Case Law Details
Economical Credit & Construction Co. Pvt. Ltd Vs ITO (ITAT Delhi)
Introduction: In the case of Economical Credit & Construction Co. Pvt. Ltd vs. ITO, a significant tax dispute arose concerning the income from the sale of land. The dispute revolved around whether the income accrued in the year of sale or in a later year, and the treatment of associated expenses.
Detailed Analysis: The appellant, Economical Credit & Construction Co. Pvt. Ltd, had initially recorded the sale of land during the financial year 2006-07 but had not accounted for the transaction in their books of accounts. The company claimed that it did not receive payment from the purchaser at the time of the sale and that the relevant documents, such as the cheques, were misplaced. Consequently, the company did not report the income for that year but only recognized it in the financial year 2011-12.
During the assessment proceedings for the year 2012-13, the Assessing Officer conducted a verification by sending notices to the purchaser and the bank. It was found that no sale deed was executed during the assessment year, and no amount was credited to the company’s bank account. This led the Assessing Officer to treat the income as coming from undisclosed sources and disallow the associated expenses.
The appellant contended that the delay in recording the transaction was due to the misplaced cheques, and that the facts regarding the non-receipt of payment came to their attention in the financial year 2011-12. However, the tax authorities disagreed, asserting that the sale had taken place during the financial year 2006-07 and that the company had received the consideration as per the sale deed.
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