Section 68 cash deposit addition deleted where documentary evidence of agricultural income and loan proceeds was not properly verified.

Cash deposits during the demonetisation period could not be added under section 68 where the assessee produced bank statements, tax records, agricultural-income material and evidence of KCC loan proceeds, and the bank reply also supported the loan source. The addition was unsustainable because the appellate authority affirmed it without adequate verification or confronting the documentary evidence on record. The finding that the source of deposits was not proved was therefore based on insufficient enquiry and unsupported appreciation of evidence, and the addition was deleted.

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Issues: Whether the addition sustained under section 68 on account of cash deposits during the demonetisation period was liable to be deleted, and whether the appellate authority was required to make proper enquiry before affirming the addition.

Analysis: The assessee had produced bank statements, Form 16, Form 26AS, returns, and material showing agricultural income and availability of KCC loan proceeds, while the bank's reply indicated sanction of the loan on the basis of agricultural income. The appellate authority sustained the addition without conducting adequate verification or confronting the documentary material placed on record. In such circumstances, the finding that the source of cash deposits was not proved was held to rest on insufficient enquiry and unsupported appreciation of evidence.

Conclusion: The addition was deleted and the assessee succeeded.

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