ITO, WARD-2(3)(1), KANPUR, KANPUR vs. KHANNA SALES (INDIA) PVT. LTD., KANPUR

ITA 232/LKW/2025Status: DisposedITAT Lucknow16 February 2026AY 2017-18Bench: SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY (Accountant Member)14 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that a mere change in trading patterns cannot be a ground for addition. The AO failed to demonstrate with evidence why the assessee's explanation for cash sales was unacceptable or point out defects in purchases, stock, or sales. Therefore, the addition made under Section 68 was not justified.

What were the facts?

The assessee deposited a significant amount of cash during the demonetization period, claiming it was from sales. The Assessing Officer (AO) noted an abnormal jump in cash sales just before demonetization and questioned the genuineness of these sales and the source of cash deposits.

What were the issues?

Whether the Assessing Officer was justified in making an addition under Section 68 based on a perceived abnormal increase in cash sales prior to demonetization without rejecting the assessee's books of accounts or providing sufficient evidence to disprove the genuineness of sales.

Which sections of the Income-tax Act were involved?

Section 68

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Income Tax Appellate Tribunal, LUCKNOW ‘A’ BENCH, LUCKNOW

Hearing: 20.11.2025Pronounced: 16.02.2026

PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the Revenue against the orders of the ld. CIT(A), NFAC wherein the ld. CIT(A) has allowed the appeal of the assessee against the orders of the ld. AO passed under section 143(3) for the A.Y. 2017- 18 on 29.12.2019. The grounds of the appeal are as under: - “1- Ld. CIT (A) has erred in law and facts by not appreciating the pattern of cash sales discussed by the Assessing Officer in detail in his order which shows a substantial jump of 38% of total sales in the month of October, 2016 i.e. the period immediately prior to demonetization in November, 2016. Cash sales before and after this period is negligible.

2.

That the appellant craves leave to add or amend any one or more of the grounds

The order continues below.

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