Section 68 cash deposits during demonetisation not unexplained where identity, genuineness and creditworthiness remain unshaken.

Cash deposits received from members during the demonetisation period were not treated as unexplained income where the assessee produced books of account, member-wise details, PAN particulars and audited records. The Tribunal held that the revenue failed to disprove the identity, genuineness or creditworthiness of the depositors and made no effective enquiry to rebut the evidence. It further held that receipt of specified bank notes before the appointed date did not, by itself, convert the transactions into taxable income, since those notes did not lose all monetary significance on 9 November 2016 under the Specified Bank Notes (Cessation of Liabilities) Act, 2017.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961, on account of cash deposits received from members during the demonetisation period was sustainable in law.

Analysis: The assessee explained that the impugned cash deposits represented receipts from members in the ordinary course of business and were supported by books of account, member-wise details, PAN particulars, and audited records. The Tribunal found that the revenue did not disprove the identity of the depositors, the genuineness of the transactions, or their creditworthiness, and no effective enquiry was made to rebut the assessee's evidence. It also held that the mere fact that the amounts were received in specified bank notes during the demonetisation period did not, by itself, convert the receipts into unexplained income. In view of the statutory position under the Specified Bank Notes (Cessation of Liabilities) Act, 2017, the notes did not lose all monetary significance on 9 November 2016, and the assessee could not be taxed merely because it had accepted such notes before the appointed date.

Conclusion: The addition under section 68 was rightly deleted and the revenue's challenge failed.

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