GST Component in Turnover Reconciliation Defeats Section 68 Addition: ITAT Delhi

ACIT Vs Tarun Tulsian (ITAT Delhi)

The ITAT Delhi dismissed the Revenue’s appeal against the order of the CIT(A)/NFAC for AY 2018-19, which had deleted an addition of ₹6,68,43,219 made under Section 68 of the Income-tax Act, 1961. The Assessing Officer had treated the difference between the assessee’s disclosed turnover of ₹14,82,43,587 and cash deposits of ₹21,52,03,300 in two bank accounts as unexplained cash credits after giving credit for the returned income.

During the appellate proceedings, the assessee explained that, while computing the alleged unexplained income, the Assessing Officer had ignored the indirect tax component on sales and purchases. The assessee furnished details of month-wise sales, VAT/GST, cash collections, bank deposits and certified copies of GST returns. The CIT(A) examined the profit and loss account, bank statements, GST returns and the reconciliation furnished by the assessee.

The CIT(A) found that the turnover disclosed in the income-tax return and the GST return was ₹14,82,43,586.29. Applying the inclusive method under Section 145A, the total turnover, including indirect taxes, worked out to ₹26,94,03,705. The assessee had disclosed cash collections from sales of ₹23,46,78,587, while the cash deposited in the bank accounts amounted to ₹21,52,03,300. The CIT(A) concluded that the cash deposits formed part of the gross turnover, inclusive of GST, and deleted the addition after considering the documentary evidence.

Before the Tribunal, the Revenue contended that the assessee had failed to disclose turnover of ₹6,68,43,219 during the scrutiny assessment. The Tribunal, however, found no merit in the Revenue’s contention. It observed that the assessee had consistently reconciled the difference by demonstrating that it represented the indirect tax, namely the GST component, and that this explanation remained unrebutted by the Revenue.

The Tribunal held that the CIT(A) had rightly accepted the reconciliation of the business turnover after a detailed examination of the material on record. Finding no error in the appellate order, the Tribunal dismissed the Revenue’s appeal.

FULL TEXT OF THE ORDER OF ITAT DELHI

This Revenue’s appeal for assessment year 2018-19, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1080892337(1), dated 18.09.2025 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).

Heard both the parties. Case file perused.

2. Coming to the Revenue’s sole substantive grievance raised in the instant appeal; we notice at the outset that it is aggrieved against the learned CIT(A)’s lower appellate discussion reversing the Assessing Officer’s assessment findings making section 68 unexplained cash credits addition of Rs. 6,68,43,219/-; reading as under:

“6. 6. Decision

6.1 I have carefully considered facts and circumstances of the case, submission of the assessee and material available on record.

6.2 It is found that the assessee has contested grounds of appeal at serial No. 1 stating that the learned Assessing Officer has erred on facts and in law in making additions of Rs.6,68,43,219/- assumed as unexplained credit on account of cash deposited in Banks and the turnover /sales shown in the Balance Sheet as per draft assessment order without giving proper time

6.3 It is found that the assessee has deposited the cash in the bank account as under –

6.4 The assessing officer held that the assessee has disclosed turnover of Rs. 14,82,43,587/- whereas the assessee has deposited cash amounting to Rs. 21,52,03,300/-. Therefore, after giving credit of returned income, the assessing officer has come to a conclusion that the balance amount of Rs. 6,68,43,219/- is not explained by the assessee for the purpose of provisions of section 68 of the IT Act.

6.5 I have considered written submission of the assessee. It is found that the assessee has disclosed turnover as under-

6.6 Further, it is found that the assessee has stated that while arriving at the applicability of provisions of section 68 and undisclosed income of Rs. 6,68,43,219/-, the assessing officer has not considered the component of indirect taxes paid by the assessee on sales and purchases respectively. During the course of appellate proceedings the assessee has submitted the details of sales made month-wise including the indirect taxes paid as under-

From 01.04.2017 to 31.03.2018

AFTER APPLICABILITY OF GST

6.7 The assessee has also submitted certified copies of the requisite GST Returns to substantiate its claim.

After considering the facts and circumstances of the case, submission of the assessee, bank account statements submitted by the assessee and perusal of the GST returns submitted by the assessee, it is found that if the component of indirect taxes is considered to the turnover disclosed by the assessee, the total turnover of the assessee (inclusive of the indirect taxes] within meaning of provisions of section 145A of the IT Act is amounting to Rs. 26,94,03,705/-. The assessee has disclosed that it has collected the cash out of sales amounting to Rs.23,46,78,587/-, In support the assessee has submitted certified copies of the GST Returns disclosing the requisite turnovers, details of input tax credit, details of turnover as per GST return. After perusal of profit and loss account and GST return submitted by the assessee, it is found that the assessee has disclosed turnover amounting to 14,82,43,586.29 in income tax return (profit and loss account) and GST Return.

6.8 Therefore, if the inclusive method of taxation within meaning of provisions of 145A is applicable to the sales made by the assessee and purchases made by the assessee, the total turnover of the assessee would amount to Rs. 26,94,03,705/-and cash collection disclosed by the assessee is amounting to Rs.23,46,78,587/-. As against this disclosed turnover, the assessee has deposited an amount of Rs.21,52,03,300/- in the bank accounts as mentioned supra.

Therefore, considering the facts and circumstance of the case, submission of the assessee, bank account statements submitted by the assessee, GST Returns submitted by the assessee, the cash deposit amounting to Rs.21,52,03,300/- is part and parcel of gross turnover of the assessee including GST Rs. 26,94,03,705/-. Therefore, considering these cardinal findings along with documentary evidences, grounds of appeal contested by the assessee at serial No. 1 is allowed.

7 In result, the appeal of the assessee is allowed.”

3. Both the parties vehemently reiterate their respective stands. The Revenue’s case, more particularly, strongly supports the impugned addition made in the assessment order alleging the assessee not to have disclosed turnover of Rs.6,68,43,219/- during scrutiny. The same is found to be hardly carrying any merit since the assessee has all along successfully explained the difference as attributable to indirect tax i.e. “GST” component which has gone unrebutted from the Revenue side. We thus conclude in this factual backdrop that the learned CIT(A)’s detailed discussion has rightly accepted the assessee’s reconciliation of his business turnover in his lower appellate discussion. The Revenue fails in its instant sole substantive ground therefore.

4. This Revenue’s appeal is dismissed.

Order pronounced in the open court on 11^th May, 2026