Unexplained cash credits deleted where assessee produced primary evidence and AO failed independent verification after opportunity.

ITAT applied the standard under Section 68 and P. Mohanakala: where the assessee produced primary evidence of identity and genuineness (serially numbered receipts, cash book, vehicle registration) and the AO did not undertake independent verification or produce contrary material, the addition as unexplained cash credit cannot stand. Tribunal found receipts corroborated by books (closing cash balance before demonetisation), noted part of receipts already taxed as income, and concluded the AO failed the burden to rebut; addition of Rs. 50,90,194 under Section 68 deleted and appeal allowed for the assessee.

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Issues: (i) Whether the addition of Rs. 50,90,194/- made under Section 68 of the Income-tax Act, 1961 on account of alleged unexplained cash credits (deposited during demonetization period) is sustainable where the assessee has produced regular books of account, serially numbered receipt copies, vehicle registration details and the books were not rejected under Section 145(3).

Analysis: The Tribunal examined the documentary evidence placed on record including the cash book showing closing cash balance as on 8.11.2016, date-wise receipt details with serially numbered receipt copies, and copies of vehicle registration certificates corroborating the identity and address of borrowers. The Tribunal applied the legal standard under Section 68 as explained by the Supreme Court in CIT vs. P. Mohanakala, observing that once primary evidence as to identity and genuineness is furnished by the assessee, the Assessing Officer must make independent inquiries or bring contrary material before rejecting such evidence. The Tribunal noted absence of any specific verification steps by the AO (no summons under Section 131, no enquiries under Section 133(6)) and absence of any specific instance showing the documentary evidence was false. The Tribunal also observed that part of the receipts (hire charges) was already accepted as income and could not be taxed again as cash credit under Section 68, and that the cash deposits shortly after 8.11.2016 were consistent with the cash balance shown in books prior to demonetization.

Conclusion: The addition of Rs. 50,90,194/- under Section 68 of the Income-tax Act, 1961 is not sustainable and is deleted; the appeal is allowed in favour of the assessee.

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