Section 68 cash deposit addition fails where no books of account are maintained and the statutory precondition is unmet.

Section 68 could not be applied where the assessee had not maintained books of account, because the statutory pre-condition is that the sum must be found credited in the assessee's books for the relevant previous year. On the stated facts, the assessment record proceeded on the basis that no books existed, so the addition for cash deposits lacked the legal foundation required under section 68. The deposits were also linked to statements recorded during survey and search proceedings, including an explanation that the cash came from unaccounted sources, which did not cure the absence of books. The addition was therefore unsustainable and the assessee succeeded on this issue.

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Issues: Whether addition of cash deposits could be sustained under section 68 when the assessee had not maintained books of account and the source of deposits was explained through statements recorded during survey and search proceedings.

Analysis: Section 68 applies only where a sum is found credited in the books of an assessee maintained for a previous year. The assessment record itself proceeded on the basis that no books of account were maintained by the assessee. In such a situation, the statutory pre-condition for invoking section 68 was not satisfied. The material relied upon by the revenue also showed that the cash deposits were linked to the statement of Shri D. S. Nandish, who ed the deposits as coming from his unaccounted sources. The reasoning adopted for making the addition therefore could not be sustained on the legal foundation required for section 68.

Conclusion: The addition of the cash deposits under section 68 was unsustainable and the assessee succeeded on this issue.

Ratio Decidendi: Section 68 cannot be invoked unless the impugned sum is found credited in the books of account maintained by the assessee for the relevant previous year.

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