Unexplained cash deposits during demonetisation were partly sustained, with addition restricted to the extent justified by facts.

Cash deposits during the demonetisation period were claimed to represent past savings and personal gifts. The assessee did not file a cash flow statement, but that omission alone was not enough to conclude that no cash in hand or savings existed. On an overall appreciation of the facts, the explanation was accepted only in part, and the unexplained portion was confined to the extent justified by surrounding circumstances. The addition was therefore restricted to 30% of the deposits, with the balance deleted, giving partial relief to the assessee.

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Issues: Whether the addition made towards cash deposited during the demonetisation period as unexplained income required to be sustained in full or could be restricted on the facts and circumstances of the case.

Analysis: The assessee explained that the cash deposits represented past savings and cash gifts received on personal occasions. No cash flow statement was filed, but the absence of such statement did not justify an inference that the assessee had no cash in hand or savings. On an overall appreciation of the facts, the explanation was not accepted in full, yet the addition was considered excessive in the circumstances.

Conclusion: The addition was restricted to 30% of the amount deposited, and the remaining addition was deleted, resulting in partial relief to the assessee.

Final Conclusion: The assessment was modified by substantially reducing the impugned addition on unexplained cash deposits, and the appeal was disposed of with partial relief.

Ratio Decidendi: Where cash deposits are explained as arising from past savings and gifts, but the explanation is not fully substantiated, the addition may be sustained only to the extent justified by the facts and surrounding circumstances rather than in full.

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