Explained demonetisation cash deposits and beneficial ownership allowed depreciation, with verified donation relief under section 80G.
Cash deposits made during demonetisation were treated as explained where contemporaneous cash book entries, bank records, customer confirmations, cash withdrawals and a sufficient cash balance supported the explanation; no addition under section 68 survived. Depreciation on immovable property was allowed where the assessee had possession, an agreement to purchase was executed during the year, part payment was made and registration followed shortly thereafter, the assessee being regarded as owner for the year on the basis of beneficial ownership and possession. Deduction under section 80G was allowed only to the extent of verified donations supported by receipts, while the balance disallowance remained undisturbed.
Issues: (i) whether cash deposits in specified bank notes during the demonetisation period were liable to be treated as unexplained cash credit, (ii) whether depreciation on the immovable property purchased on agreement but registered shortly thereafter was allowable, and (iii) whether deduction under section 80G was allowable for the substantiated donation.
Issue (i): whether cash deposits in specified bank notes during the demonetisation period were liable to be treated as unexplained cash credit
Analysis: The assessee produced the cash book, bank statements, customer-wise details, confirmations and evidence of cash withdrawals and cash receipts from customers. The deposits were made during demonetisation and the business required frequent cash payments for operational expenses. The cash balance in the books was found to be sufficient and there was no negative cash balance. Independent verification also supported part of the cash receipts, and no cogent material was brought to dislodge the explanation.
Conclusion: The cash deposits were held to be duly explained and no addition under section 68 was sustainable.
Issue (ii): whether depreciation on the immovable property purchased on agreement but registered shortly thereafter was allowable
Analysis: The property had been in the assessee's possession even before purchase, the agreement for purchase was executed during the year, part payment had been made, and registration followed within a short time. Applying the Registration Act provisions on the operation of registered documents and the principle that beneficial ownership and possession may suffice for depreciation purposes, the assessee was treated as owner for the relevant year.
Conclusion: The claim for depreciation was allowed.
Issue (iii): whether deduction under section 80G was allowable for the substantiated donation
Analysis: Receipts for two donations were available and the assessee sought relief only to that extent. The matter required verification of the receipts and grant of relief in accordance with law, while no relief was sought for the balance amount.
Conclusion: Deduction under section 80G was allowed to the extent of the verified donation, and the remaining disallowance was not disturbed.
Final Conclusion: The assessment additions relating to unexplained cash deposits were deleted, the depreciation disallowance was reversed, and the donation issue was granted only to the verified extent, resulting in a partial allowance of the appeal.
Ratio Decidendi: Where cash deposits during demonetisation are supported by contemporaneous cash book entries, withdrawals, customer confirmations and sufficient cash balance, they cannot be treated as unexplained income; and beneficial ownership coupled with possession may justify depreciation even if registration follows shortly after the agreement.