Unexplained cash deposits require direct evidential defects; mere sales fluctuations do not justify additions when books stand undisputed.

Treating cash deposits during the demonetisation period as unexplained income was rejected where audited books, cash book, stock register, sales/purchase ledgers and VAT returns remained intact and were not discredited; comparative sales fluctuations alone, without direct evidence of backdating, stock manipulation or defective accounts, do not satisfy the revenue's evidentiary burden. Authority and coordinate-bench precedent require more than suspicion; where accounts and contemporaneous records support the assessee's explanation, additions as unexplained cash deposits are unsustainable and were deleted, allowing the appeal.

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Issues: Whether the addition made by the Assessing Officer and confirmed by the CIT(A) treating cash deposits during the demonetisation period as unexplained income u/s 68 of the Income-tax Act, 1961 is justified.

Analysis: The assessee produced audited books of account, cash book, stock register, sale and purchase ledgers, VAT returns and other contemporaneous documents showing availability of stock and recording of cash sales; the books were not rejected. Comparative fluctuations in sales and higher cash deposits during demonetisation were relied upon by the revenue, but no direct evidence was produced to show backdating, manipulation of stock, or that sales were not genuine. Coordinate-bench precedents and Supreme Court authority establish that additions cannot rest on suspicion where books and documentary evidence remain unchallenged. The Assessing Officer and CIT(A) based the addition on disproportionate monthly figures without pointing to defects in the accounts or stock verification that would rebut the assessee's explanation.

Conclusion: The addition u/s 68 confirmed by the CIT(A) is not sustainable and is deleted; the appeal is allowed in favour of the assessee.

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