Section 68 addition deleted where cash deposits were traced to agricultural land sale proceeds and documentary evidence supported the source.

Cash deposits were held not to justify an addition under section 68 where the assessee supported the source with documentary evidence showing sale of agricultural land on behalf of relatives, followed by transfer of the proceeds to the real owners' accounts. The record established that the money originated from agricultural land transactions, which were treated as outside the definition of capital asset under section 2(14), and the revenue did not rebut that evidentiary trail. On those facts, the explanation for the deposits was accepted and the addition under section 68 was deleted.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 for cash deposits in the assessee's bank account was justified, where the deposits were explained as sale proceeds of agricultural land received on behalf of relatives and subsequently transferred to their accounts.

Analysis: The assessee produced documentary evidence of the land transactions and the flow of funds. The cash deposits were found to have originated from the sale of agricultural land, which is not a capital asset within section 2(14) of the Income-tax Act, 1961, and the amounts were immediately transferred to the accounts of the real owners. The explanation was accepted as establishing the source of the deposits, and the revenue did not dislodge the evidentiary record supporting the assessee's claim.

Conclusion: The addition under section 68 was not sustainable and was rightly deleted; the issue was decided in favour of the assessee.

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