Cash deposits during demonetisation accepted as explained business receipts where disclosed turnover supported the source explanation.

Cash deposits made during the demonetisation period were examined under Section 69A of the Income-tax Act, 1961 in light of the assessee's explanation that they represented business receipts and realizations from debtors. The record showed a resident of Sikkim carrying on a licensed retail business with disclosed turnover substantially higher than the bank deposits, and the explanation of cash sales and debtor recoveries was accepted as reasonable on the facts. The assessee was held to have discharged the onus of explaining the source of the deposits, so the addition as unexplained money was deleted.

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Issues: Whether cash deposits made during the demonetisation period could be sustained as unexplained money under Section 69A of the Income-tax Act, 1961, when the assessee explained them as business receipts and realizations from debtors and claimed exemption available to a resident of Sikkim under Section 10(26AAA) of the Income-tax Act, 1961.

Analysis: The assessee was a resident of Sikkim carrying on a licensed retail business. The record showed substantial turnover from the proprietary business, and the cash deposits in the bank accounts were much lower than the turnover disclosed. The explanation that the deposits represented cash sales and recoveries from sundry debtors was found to be reasonable in the facts of the case. On these facts, the assessee was held to have discharged the onus of explaining the source of the deposits, and the addition made by treating the deposits as unexplained money was not justified.

Conclusion: The addition under Section 69A of the Income-tax Act, 1961 was deleted and the assessee succeeded.

Ratio Decidendi: Where cash deposits are supported by the scale of disclosed business activity and a plausible business explanation, they cannot be treated as unexplained money without rebutting the assessee's source explanation.

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