Accepted sales and immediate cash deposits during demonetisation cannot sustain a section 68 addition based on estimates.

Cash deposits during the demonetisation period were held not to justify a section 68 addition where the assessee's sales had been accepted as genuine and the cash was shown to have arisen from those sales and been promptly deposited in bank accounts. Once the sales were not disputed, the corresponding cash could not be treated as unexplained merely because it was deposited in cash; if the sales were to be rejected, the trading results first had to be recast. The addition was also found to rest on an estimated average-sales computation and on conjectures and surmises. The ITAT Delhi upheld deletion of the addition and rejected the Revenue's challenge.

---

---

Issues: Whether the addition made under section 68 on account of cash deposits linked to sales during the demonetisation period was sustainable.

Analysis: The assessee's sales before demonetisation were found to have increased significantly, and the cash generated from those sales was immediately deposited in bank accounts. The order of the Assessing Officer did not dispute the genuineness of the sales, and once sales are accepted, the cash arising from them cannot be treated as unexplained merely because it was deposited in cash. If the sales themselves were doubted, the trading results ought to have been recast. The addition was also based on an estimated average sales computation and was therefore held to rest on conjectures and surmises.

Conclusion: The deletion of the addition was upheld and the Revenue's challenge failed.

---