Section 68 cash credits and ad hoc expense disallowance fail where documentary evidence supports genuine sales and receipts.

An addition under section 68 is unsustainable where the assessee supports the receipt with invoices, bank records, confirmations and identity details, and the material shows genuine sales already reflected in turnover; the cash-credit additions were deleted. An ad hoc disallowance of general expenses also cannot be sustained merely because vouchers are self-made, absent specific defects or discrepancies in the supporting records; that disallowance was likewise deleted. The note reiterates that unexplained income cannot be assessed again where the source and nature of the receipt are duly explained by documentary evidence.

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Issues: (i) whether the addition of Rs. 3,50,000 treated as cash credit under section 68 was sustainable; (ii) whether the addition of Rs. 43,74,210 treated as cash credit under section 68 was sustainable; (iii) whether the estimated disallowance of general expenses was justified.

Issue (i): whether the addition of Rs. 3,50,000 treated as cash credit under section 68 was sustainable.

Analysis: The assessee furnished invoices, bank payment details, and identity particulars of the intermediary through whom the sales were effected. The material on record showed a sales transaction and the explanation to the source and nature of the receipt was supported by documentary evidence. No effective enquiry was made to dislodge the explanation.

Conclusion: The addition of Rs. 3,50,000 was not sustainable and was deleted in favour of the assessee.

Issue (ii): whether the addition of Rs. 43,74,210 treated as cash credit under section 68 was sustainable.

Analysis: The assessee produced invoices, confirmations, bank statements, and identity particulars relating to the sales made to the buyer through the broker. The accounts and supporting documents indicated genuine sales, and the receipt was already reflected as sales turnover. Treating the same amount again as unexplained income was not justified.

Conclusion: The addition of Rs. 43,74,210 was not sustainable and was deleted in favour of the assessee.

Issue (iii): whether the estimated disallowance of general expenses was justified.

Analysis: The disallowance was made merely because the vouchers were self-made, without pointing out any specific defect or material discrepancy. An ad hoc estimate cannot be sustained in the absence of concrete defects in the supporting records.

Conclusion: The disallowance of general expenses was not justified and was deleted in favour of the assessee.

Final Conclusion: All additions and the estimated disallowance were set aside, and the assessee's appeal succeeded in full.

Ratio Decidendi: An addition under section 68 requires a failure of explanation on the nature and source of the receipt, and an ad hoc disallowance of business expenditure cannot stand without specific defects in the supporting vouchers or records.

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