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Issues: Whether cash deposits made during the demonetisation period could be treated as unexplained money under section 69A of the Income-tax Act, 1961, and whether the sale consideration allegedly received in specified bank notes could be accepted as the source of the deposits.
Analysis: The assessee explained that the cash deposited in the bank included earlier cash balance and sale proceeds received on 09.11.2016. The objection that specified bank notes could not be dealt with after 08.11.2016 was rejected by reference to the Specified Bank Notes (Cessation of Liabilities) Act, 2017, under which the appointed date was 31.12.2016 and there was no prohibition on holding or dealing with such notes up to that date. The record also showed that the department accepted receipt of sale consideration in cash and the surrounding evidence supported the explanation for the source of the deposits.
Conclusion: The addition made as unexplained money was unsustainable and the claim of source for the cash deposits was accepted in favour of the assessee.
Ratio Decidendi: Where the evidence establishes a cash source for bank deposits and the applicable demonetisation law does not prohibit dealing in specified bank notes up to the appointed date, an addition under section 69A cannot be sustained merely on the basis of the demonetisation timeline.
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