Explained cash source defeats section 69A addition when books, returns, and cash flow support the assessee's explanation

Cash seized from the assessee could not be assessed as unexplained money under section 69A where the assessee supported the source with a cash book, return of income, statement of affairs, cash flow statement and business receipts. The record showed that the cash represented opening balance and business receipts, and there was no adverse finding against the declared receipts or cash balance. On those facts, the source of the cash was treated as explained, so section 69A had no application and the addition was deleted in favour of the assessee.

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Issues: Whether the addition made by treating the seized cash as unexplained money under section 69A of the Income-tax Act, 1961 was sustainable when the assessee explained the source through cash book, return of income, statement of affairs, cash flow statement and business receipts.

Analysis: The seized cash admittedly belonged to the assessee. The material on record showed that the assessee had produced the cash book, return of income, statement of affairs and cash flow statement to explain that the cash represented opening cash balance and business receipts. The earlier accepted assessment position and the absence of any adverse finding against the declared business receipts and cash balance supported the assessee's explanation. In these circumstances, the source of the cash stood explained and there was no basis to invoke section 69A.

Conclusion: The addition as unexplained money was unsustainable and was deleted, in favour of the assessee.

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