Unexplained cash credit principles: demonetization cash deposits accepted as business receipts, and the section 68 addition failed.

Cash deposits during the demonetization period were treated as business receipts, not unexplained cash credits, where the assessee showed a cash-intensive travel business, opening cash balance, sales-linked collections, and bank-supported deposit details. The record did not reveal any defect in the books or in the explanation that the deposits came from recorded cash sales and collections. On those facts, the addition under section 68 could not stand because it rested on conjecture rather than a demonstrated unexplained source, and the deletion was upheld.

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Issues: Whether the cash deposit of Rs. 1,38,25,455 during the demonetization period could be treated as unexplained cash credit under section 68 of the Income-tax Act, 1961.

Analysis: The assessee showed that it was engaged in a cash-intensive travel business, that cash deposits were part of business receipts, and that the deposits during the demonetization window were lower than the comparable period in the immediately preceding year. The opening cash balance, sales-linked receipts, and bank-supported deposit details were accepted in substance, while no defect was brought out in the books or in the explanation that the deposits emanated from recorded cash sales and collections. On these facts, the addition was found to rest on conjectures rather than on any demonstrated unexplained source.

Conclusion: The addition under section 68 was not sustainable and was rightly deleted.

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