Unexplained cash credit addition failed where opening balance and past savings were supported by accounts and record.

An addition under section 68 for unexplained cash credit was held unsustainable where the assessee's opening balance and past savings were supported by the balance sheet, profit and loss account, and other record showing earlier profits and capital savings. The explanation for the bank deposits was accepted because no defect was found in the accounts, and the amount was traced to stated savings. The addition was deleted, as suspicion arising from demonetisation-related cash deposits was not enough to reject the explanation.

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Issues: Whether the addition of Rs. 1,95,969 as unexplained cash credit under section 68 of the Income-tax Act, 1961, in respect of the assessee's opening balance and past savings was sustainable.

Analysis: The assessee had explained the bank deposits and the source material, including the balance sheet and profit and loss account, showed earlier profits and savings. The explanation for the opening balance was supported by the record, and no defect in the accounts was pointed out. The disputed amount represented a balance out of the stated capital savings, and the explanation could not be rejected merely on suspicion arising from the demonetization cash deposits.

Conclusion: The addition of Rs. 1,95,969 was not justified and was deleted, in favour of the assessee.

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