Accepted books of account defeat unexplained cash sales additions when deposits are supported by recorded sales and no rejection occurs.

Where books of account are accepted and not rejected, an addition for alleged unexplained cash sales and cash deposits during the demonetisation period cannot rest merely on suspicion, human probability, or absence of earlier similar sales. The ITAT Delhi AT noted that the assessee's cash deposits were explained as sales recorded in the books, the books were not rejected under section 145, and the assessment did not proceed on any rejection of disclosed trading results. It also observed that the cash sales and deposits occurred before demonetisation, weakening any inference of unaccounted money. The addition under section 68 read with section 115BBE was therefore held unsustainable.

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Issues: Whether the addition made on account of alleged unexplained cash sales and cash deposits during the demonetisation period under section 68 read with section 115BBE of the Income-tax Act, 1961 was sustainable when the books of account were accepted and not rejected under section 145 of the Income-tax Act, 1961.

Analysis: The appeal turned on the Revenue's challenge to the deletion of the addition sustained by the first appellate authority. The appellate authority had accepted the assessee's explanation that the cash deposits were out of sales reflected in the books. The books of account were not rejected under section 145 of the Income-tax Act, 1961, and the assessment did not rest on any rejection of the disclosed trading results. In such a situation, addition could not be justified merely by questioning the genuineness of cash sales on the basis of suspicion, human probability, or the absence of past history of similar sales. The record also showed that the cash sales and deposits occurred prior to the demonetisation period, weakening the allegation of any device to introduce unaccounted money.

Conclusion: The addition under section 68 read with section 115BBE of the Income-tax Act, 1961 was not sustainable, and the relief granted by the first appellate authority was upheld.

Ratio Decidendi: Where books of account are accepted and not rejected, an addition cannot be sustained merely on conjectures, surmises, or human probability by doubting disclosed cash sales and corresponding deposits.

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