Section 68 additions on cash deposits fail where cash sales are backed by books and records, with no rejection of accounts.

Cash deposits explained as recorded cash sales cannot be brought to tax under section 68 where the assessee supports the explanation with books and contemporaneous records, and the books of account are not rejected. The assessee relied on stock register, VAT returns, sales invoices, cash book, bank statement and comparative sales data to show that the deposits matched its cash sales pattern. Because the revenue merely doubted the source of deposits without dislodging the recorded sales evidence or rejecting the books, the deeming addition was not sustainable and was deleted.

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Issues: Whether an addition made under section 68 for cash deposits could be sustained when the assessee's cash sales were supported by books and related records and the books of account were not rejected.

Analysis: The assessee produced supporting material including stock register, VAT returns, sales invoices, cash book, bank statement and comparative sales data to explain the cash deposits as recorded cash sales. The addition was made by doubting the source of deposits without rejecting the books of account. On the facts found, the cash deposits were broadly in line with the assessee's cash sales position, and the deeming addition under section 68 could not be sustained in the absence of rejection of books and without dislodging the recorded sales evidence.

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

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