Section 68 cash deposit addition deleted where recorded sales, audited books, and cash flow evidence explained demonetization deposits.

Cash deposits made during the demonetization period were held not taxable as unexplained credits where the assessee maintained audited books, reported recorded cash sales, and demonstrated adequate cash availability through cash flow statements, bank records, and supporting business documents. The ITAT found that the Assessing Officer relied mainly on the timing and manner of deposits, but did not produce contrary evidence to show that the deposits were not sourced from disclosed business receipts. On that factual basis, the addition under section 68 was found unsustainable and was deleted.

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Issues: Whether the addition made under section 68 on account of cash deposits during the demonetization period was sustainable when the assessee had recorded cash sales, maintained audited books of account, and showed adequate cash availability in the business accounts.

Analysis: The assessee was engaged in FMCG retail business through multiple outlets and had furnished month-wise cash flow details, bank statements, cash deposit reports, and supporting records before the Assessing Officer. The material on record showed substantial cash sales and opening cash balances, including sufficient cash availability around the demonetization period. The addition was made mainly on the basis that the deposits were not made in one go and on an inference that the cash was not available on the demonetization date. No contrary evidence was brought to show that the deposits were not sourced from recorded business receipts, and the Assessing Officer did not establish that the impugned deposits were unexplained credits.

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

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