Demonetised cash deposits treated as unexplained money and taxed under the Income-tax Act.

Cash deposits of specified bank notes after demonetisation were treated as unexplained money where the assessee claimed them as business sales receipts. The notes had ceased to be legal tender from 09.11.2016, so they could not validly be accepted in trade after that date. On that basis, the deposits were brought within section 69A of the Income-tax Act, 1961, and the resulting addition was subjected to tax under section 115BBE.

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Issues: Whether the cash deposits made in specified bank notes after demonetisation, claimed to represent sales proceeds of business, could be treated as unexplained money under section 69A of the Income-tax Act, 1961 and taxed under section 115BBE of that Act.

Analysis: The assessee deposited specified bank notes of Rs. 500 and Rs. 1,000 denomination during the demonetisation period and claimed that the deposits arose from business receipts. The order records that such notes ceased to be legal tender from 09.11.2016 under the relevant Gazette notification. It was further noted that after that date the assessee could not validly accept such notes in trade, and the deposits represented receipt and deposit of a currency that had ceased to be legal tender. On that basis, the cash deposits were held to fall within the scope of unexplained money under section 69A and to attract taxation under section 115BBE.

Conclusion: The addition under section 69A and the consequential taxation under section 115BBE were upheld, and the issue was decided against the assessee.

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