Specified bank notes received by authorised transport operators cannot be treated as undisclosed income without further evidence.

A transport contractor operating government buses fell within the category of transport operators permitted to accept specified bank notes during demonetisation, so deposits of those notes received from passengers could not, without more, be treated as unexplained or undisclosed income. The small size of the deposits compared with overall turnover also weakened any inference of suppression. On that basis, the addition made on account of specified bank notes was unsustainable and was deleted in favour of the assessee.

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Issues: Whether the deposit of specified bank notes by a government-bus transport contractor could be treated as undisclosed income and added to the assessee's taxable income.

Analysis: The assessee operated government buses on contract and fell within the category of transport operators permitted to accept specified bank notes during the demonetisation period. On that footing, deposits of such notes received from passengers could not be characterised as unexplained or undisclosed income. The deposit was also small in relation to the overall turnover, which further weakened the inference of suppression.

Conclusion: The addition made on account of specified bank notes was unsustainable and was deleted in favour of the assessee.

Ratio Decidendi: Where a taxpayer belongs to an exempt category authorised to accept specified bank notes during demonetisation, deposits of such notes cannot, without more, be treated as undisclosed income.

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