Section 68 cash deposit additions fail when audited books and cash flow evidence sufficiently explain the source.

Cash deposits during the demonetisation period were held not to attract section 68 where the assessee substantiated the source through cash book details, audited accounts and an affidavit, and the books were neither rejected nor shown to be defective. The addition was found unsustainable because the Revenue relied on suspicion and conjecture without cogent contrary material or specific discrepancies in the explanation. Verifiable cash in hand reflected in the accounts could not be treated as unexplained cash credit merely on preponderance of probability alone. The addition was therefore deleted in favour of the assessee.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 in respect of cash deposited during the demonetisation period was sustainable.

Analysis: The assessee explained that the deposits were made out of cash in hand generated from regular cash withdrawals from the bank, supported by cash book details, audited accounts, and an affidavit of the Managing Director. The cash availability was not rebutted by any defect in the books of account, nor were the books rejected. The addition was found to have been made on presumption and conjecture without cogent contrary material, and suspicion or preponderance of probability could not replace evidence in the absence of any specific discrepancy in the assessee's explanation.

Conclusion: The addition under section 68 was held unsustainable and was rightly deleted, in favour of the assessee.

Ratio Decidendi: A cash deposit explained by verifiable cash in hand reflected in audited books cannot be treated as unexplained cash credit under section 68 merely on suspicion, conjecture, or preponderance of probability unless the Revenue brings cogent contrary evidence or defects in the accounts.

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