Explained business cash deposits cannot be taxed as unexplained cash credits when turnover records and verified receipts support the assessee.

Cash deposits in a bank account were held to be explained business receipts, not unexplained cash credits under section 68, because the assessee supported the explanation with turnover, gross profit and net profit details and showed that the business involved cash, cheque and digital realisations from wholesale medicine sales. The record also showed that the appellate authority had verified the materials and accepted that a substantial part of the cash receipts had been deposited in the bank account. In the absence of any material to dislodge those verified findings, the addition was found unsustainable and the deletion in favour of the assessee was upheld.

---

---

Issues: Whether the addition made towards cash deposits in bank account as unexplained cash sales or unexplained cash credits under section 68 of the Income-tax Act, 1961 was sustainable.

Analysis: The assessee produced details of turnover, gross profit and net profit for preceding years, and explained that the business involved wholesale supply of medicines with realisation from customers through cash, cheque and digital modes. The record showed that the cash deposits were linked to business receipts, and the appellate authority had verified the materials and accepted the explanation that a substantial part of the cash receipts had been deposited in the bank account. In the absence of any material to dislodge those verified findings, no interference was called for.

Conclusion: The addition under section 68 was not sustainable and the deletion made by the appellate authority was upheld in favour of the assessee.

Ratio Decidendi: Where cash deposits are duly explained as business receipts supported by turnover and profit details, and the explanation is verified on record, an addition for unexplained cash credits cannot be sustained under section 68.

---