Section 68 cash deposit additions fail when recorded business receipts and primary records explain demonetisation deposits.

Cash deposits during the demonetisation period were explained as recorded business receipts from sales, service income and spare parts transactions, supported by day-wise cash books, invoices, bank statements and reconciliation statements. The audited books were neither rejected nor shown to contain fictitious entries, and the Assessing Officer relied mainly on presumption without contrary material showing unaccounted purchases, on-money receipts or diversion of funds. Once the assessee produced primary records proving the nature and source of the credits, the burden shifted to the department to rebut the explanation. On those facts, the deposits were not unexplained credits and the section 68 addition was deleted.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 on account of cash deposits during the demonetisation period was sustainable where the assessee claimed that the deposits represented recorded business receipts from sales, service income, and spare parts transactions.

Analysis: The assessee produced day-wise cash books, sales invoices, bank statements, and reconciliation showing correspondence between cash collections and bank deposits. The books of account were audited and were neither rejected nor found to contain unverifiable or fictitious entries. The Assessing Officer had proceeded mainly on presumption and did not bring any contrary material to show unaccounted purchases, on-money transactions, or diversion of funds. Once the assessee supported the nature and source of the credits with primary records, the burden shifted to the department to dislodge the explanation. On those facts, the deposits could not be treated as unexplained merely because the business involved high-value products.

Conclusion: The addition under section 68 was rightly deleted and the Revenue's challenge failed.

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