Unexplained income under sections 69 and 69A cannot be applied to recorded investments and pre-appointed-day bank-note receipts.

Section 69 could not be invoked where the investment was recorded in the books of account and reflected in the computation of income, so the addition as unexplained investment was unsustainable. Cash sales during the demonetisation period and receipt of specified bank notes were also not treated as unexplained money under section 69A because the assessee had sufficient cash balance and the prohibition under the demonetisation statute operated from the appointed day, not before it. The Commissioner (Appeals) was not required to remand the matter under Rule 46A, as the documents produced were only supporting material for the return already filed. The additions were not sustained.

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Issues: (i) Whether section 69 of the Income-tax Act, 1961 could be invoked where the investment stood disclosed in the books of account and the computation of income; (ii) Whether cash sales during the demonetisation period and the receipt of specified bank notes could be treated as unexplained money under section 69A of the Income-tax Act, 1961; (iii) Whether the Commissioner (Appeals) was required to remand the matter to the Assessing Officer under Rule 46A of the Income-tax Rules, 1962 on account of the documents produced before him.

Issue (i): Whether section 69 of the Income-tax Act, 1961 could be invoked where the investment stood disclosed in the books of account and the computation of income.

Analysis: Section 69 applies to investments not recorded in the books of account. Where the investment is reflected in the books and also disclosed in the computation of income, the statutory basis for treating it as unexplained investment is absent.

Conclusion: The invocation of section 69 was not sustainable, and the relief granted by the Commissioner (Appeals) on this issue was upheld.

Issue (ii): Whether cash sales during the demonetisation period and the receipt of specified bank notes could be treated as unexplained money under section 69A of the Income-tax Act, 1961.

Analysis: The Tribunal found that the assessee had sufficient cash balance on the relevant date. It further held that, under the Specified Bank Notes (Cessation of Liabilities) Act, 2017, the appointed day was 31 December 2016 and section 5 prohibited holding, transferring or receiving specified bank notes only from that date. On that basis, receipt of specified bank notes from cash sales during the intervening period could not, by itself, be treated as illegal or as unexplained money for the purpose of section 69A.

Conclusion: The addition under section 69A was not justified, and this issue was decided against the Revenue.

Issue (iii): Whether the Commissioner (Appeals) was required to remand the matter to the Assessing Officer under Rule 46A of the Income-tax Rules, 1962 on account of the documents produced before him.

Analysis: The documents before the Commissioner (Appeals) were found to be supporting material for the return already filed, and not fresh additional evidence warranting a mandatory remand. In the circumstances, there was no requirement to invoke Rule 46A for further verification by the Assessing Officer.

Conclusion: No violation of Rule 46A was established, and the Commissioner (Appeals) was not required to remit the matter.

Final Conclusion: The additions made by the Assessing Officer were not sustained, and the appeal and cross-objections were dismissed.

Ratio Decidendi: Section 69 and section 69A cannot be applied where the relevant transaction is recorded and explained through the books and surrounding records, and receipt of specified bank notes before the appointed day under the demonetisation statute is not, by itself, sufficient to treat the amount as unexplained income. Rule 46A is not attracted when the appellate authority merely verifies material supporting the return already filed.

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