Cash sales in scrap trading cannot be treated as unexplained income without evidence, where income is declared under presumptive taxation.

Cash sales from scrap trading could not be treated as unexplained cash credit under section 68 where the assessee had regularly disclosed turnover and income under the presumptive scheme in section 44AD. The concentration of sales in October 2016, without cogent evidence of bogus receipts or unexplained income, was insufficient to reject the declared business activity. As books were not required to be maintained in the manner assumed by the Assessing Officer, the declared sales could not be disbelieved on suspicion alone. The addition under section 68 was therefore deleted in favour of the assessee.

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Issues: Whether the addition made by treating cash sales as unexplained cash credit under section 68 could be sustained when the assessee was carrying on scrap trading and had declared income under section 44AD.

Analysis: The assessee was engaged in scrap trading, had regularly disclosed turnover and income under the presumptive scheme, and had shown comparable business activity in earlier years. The mere fact that the turnover was concentrated in October 2016 did not, by itself, establish bogus sales or unexplained income. In the absence of cogent evidence disproving the business receipts, the addition rested only on suspicion. Since income was declared under section 44AD, the books were not required to be maintained in the manner suggested by the Assessing Officer, and the declared sales could not be rejected without proper rebuttal.

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

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