ACIT Vs Harshit Garg (ITAT Lucknow)
Summary: The Lucknow Bench of the Income Tax Appellate Tribunal dismissed the Revenue’s appeal against the order of the CIT(A) deleting an addition of Rs.2,98,53,859/- made under section 68 of the Income Tax Act, 1961 in the hands of Harshit Garg for Assessment Year 2017-18. The assessee was proprietor of M/s Bachhe Lala Jewellers and was engaged in the jewellery business. The Tribunal pronounced its order on 04.07.2025 in ITA No.451/LKW/2024. The assessee’s Cross Objection, C.O. No.25/LKW/2024, was also dismissed after being withdrawn.
The assessee had declared total income of Rs.1,58,01,610/- for AY 2017-18. During the demonetisation period, the assessee deposited Rs.3,80,00,000/- on 10.11.2016 in three bank accounts. The Assessing Officer examined the assessee’s cash sales and noted that total sales during FY 2016-17 were Rs.49,49,07,263/-, while total cash sales were Rs.4,94,40,120/-. According to the AO, there was an abnormal increase in cash sales during October 2016 and up to 08.11.2016. Cash sales of Rs.3,68,53,859/- were recorded in October 2016 and Rs.37,25,359/- up to 08.11.2016, aggregating to Rs.4,05,79,218/- during the period from 01.10.2016 to 08.11.2016.
The AO considered that the cash sales were made through sales invoices below Rs.2,00,000/- and the customers were not identifiable. He also considered the timing of the sales in the context of demonetisation and the period available for filing VAT returns. Relying, among other things, on Kale Khan Mohammad Hanif vs. CIT and Sumati Dayal vs. CIT, the AO held that the assessee had not satisfactorily explained the cash sales recorded during the relevant period and treated Rs.3,68,53,859/- as unexplained under section 68. Since Rs.70,00,000/- had been offered under PMGKY, the AO made an addition of Rs.2,98,53,859/- under section 68. He separately disallowed the Rs.70,00,000/- deduction claimed under section 37.
