Cash deposit additions fail where recorded sales, books and cash-in-hand explain demonetisation deposits without rebuttal.

Cash deposits during demonetisation were held not to justify an addition under section 68 read with section 115BBE where a bullion dealer supported the deposits with regular books, stock records, audited accounts, sale invoices, cash book entries and reflected cash sales. The books were not rejected, no specific defect in purchases, stock or sales was established, and the revenue failed to rebut the explanation with cogent material. The analysis notes that additions based only on suspicion or probabilities are impermissible, and taxing the sale proceeds again would amount to double taxation. The impugned addition was deleted and the revenue appeal dismissed.

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Issues: Whether the addition under section 68 read with section 115BBE on account of cash deposits during the demonetisation period was sustainable where the assessee, a bullion dealer, claimed the deposits were out of recorded cash sales and available cash-in-hand.

Analysis: The assessee maintained regular books of account, stock records and audited financial statements, and the sales were reflected in the books and VAT returns. The deposits were supported by sale invoices, cash book entries and closing cash-in-hand, while the books were not rejected and no specific defect in purchases, stock or sales was established. The evidence showed that cash sales were a normal feature of the business, and the revenue failed to bring adverse material to rebut the assessee's explanation. An addition on mere suspicion, statistical inference or probabilities was held impermissible, and a separate addition of sales proceeds would amount to double taxation.

Conclusion: The addition under section 68 read with section 115BBE was not sustainable and was rightly deleted; the assessee succeeded on merits.

Final Conclusion: The revenue appeal was dismissed and the deletion of the impugned addition was sustained.

Ratio Decidendi: Where cash deposits are supported by regular books, stock records, audited accounts and recorded cash sales, and the revenue fails to disprove the explanation with cogent material, an addition cannot be sustained merely on suspicion or probabilities.

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