Explained cash deposits during demonetisation cannot be taxed as unexplained cash credit without defects in books or contrary evidence.

Cash deposits made during the demonetisation period were explained by audited cash books, bank statements, portal submissions, and a cash-in-hand trail showing availability of funds from earlier withdrawals. The books were not found defective, the Assessing Officer did not reject them, and the Revenue produced no contrary evidence to displace the assessee's explanation. Mere assumptions that withdrawn cash would have been spent, or that the cash book could have been manipulated, were insufficient without corroboration. On that basis, the addition as unexplained cash credit under Section 68 was not sustainable.

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Issues: Whether the cash deposited during the demonetisation period was correctly treated as unexplained under Section 68, or was duly explained by the assessee as cash-in-hand supported by cash books, bank statements, and other contemporaneous records.

Analysis: The assessee produced cash books, bank statements, responses filed on the portal, and a consolidated summary of cash balances showing that the deposits were out of available cash-in-hand accumulated from earlier withdrawals. The books were audited, no defect in the cash book was pointed out, and the Assessing Officer did not reject the books of account. The addition was made largely on assumptions that cash withdrawn would have been utilised and that the cash book could be manipulated, but these assumptions were not supported by corroborative material. The impounded papers reflected only part of the cash balance and did not cover all cash books maintained by the assessee. The appellate authority's findings were accepted, including the view that the comparative cash pattern across the relevant years was not abnormal and that the assessee's explanation was supported by the record.

Conclusion: The cash deposits were held to be explained and the addition under Section 68 was not sustainable.

Ratio Decidendi: Where an assessee substantiates cash deposits with audited books, bank records, and a plausible cash-in-hand trail, and the Revenue does not establish any defect in the books or bring contrary evidence, an addition as unexplained cash credit cannot be sustained on mere surmise.

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