Section 68 unexplained credits cannot be applied mechanically to recorded member deposits of a cooperative credit society.

A cooperative thrift and credit society's member deposits and cash deposits supported by its books could not be treated as unexplained credits under section 68 merely by questioning the closing balance. The records showed that the deposits and repayments were entered in the books, with member-wise details and cash-book support, so the source of the credits was traceable to transactions with members. The addition was therefore unsustainable to the extent made, because section 68 requires a realistic appraisal of the nature of the transactions and the documentary record rather than a mechanical demand for further proof of already recorded small-denomination deposits.

---

---

Issues: Whether the addition made under section 68 on account of unexplained term deposit liability and cash deposits received from members was sustainable in the case of a cooperative thrift and credit society.

Analysis: The assessee was a cooperative society carrying on thrift and credit activities for its own members and maintained books showing deposits and repayments. The disputed liability represented member deposits, and the cash deposits in the bank were supported by the cash book and member-wise details. The addition was made by treating the closing balance of deposits as unexplained, without appreciating that only the incremental deposits during the year represented fresh transactions and that the society's records reflected the source of cash from its members. In these circumstances, the statutory burden under section 68 could not be discharged by merely demanding further evidence for small denomination deposits already recorded in the books and supported by the society's documents.

Conclusion: The addition under section 68 was not sustainable to the extent made, and relief was warranted in favour of the assessee.

Ratio Decidendi: For a cooperative society dealing with its own members, duly recorded member deposits and cash-book entries cannot be treated as unexplained credits merely because the closing balance is questioned; section 68 requires a realistic appreciation of the books and the nature of the transactions.

---