Unexplained cash credit under section 68 fails where debtor collections during demonetisation are supported by business records.

Cash deposited during the demonetisation period was accepted as collections from debtors in the ordinary course of business, because the assessee supported the explanation with party details, cash book, bank records, sales figures, VAT returns and stock details. The record showed regular credit sales and contemporaneous evidence of receipts, and the Assessing Officer's comparison with the highest monthly cash receipt was not justified on these facts. The addition as unexplained cash credit under section 68 therefore did not survive and was deleted.

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Issues: Whether the addition made as unexplained cash credit under section 68 of the Income-tax Act, 1961 could be sustained on the basis of cash receipts from debtors deposited during the demonetisation period.

Analysis: The assessee had furnished details of the parties from whom cash was received, along with cash book, bank book, bank statements, sales figures, VAT returns and quantitative stock details. The material on record showed that the business regularly involved substantial credit sales and that collections from debtors were part of the ordinary course of business. The explanation for the cash deposits was supported by contemporaneous records, and the basis adopted by the Assessing Officer by taking the highest monthly cash receipt for comparison was found not to be justified. The existence of the sales and collections was not disbelieved on the facts recorded.

Conclusion: The addition under section 68 did not survive and was deleted.

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