Cash deposits during demonetization recorded in audited books cannot be treated as unexplained money; tax addition negated.

Where cash deposits made during the demonetization period were recorded in the books of account, supported by audited financial statements, bank statements, sales and purchase ledgers, vouchers and stock records, the statutory provision targeting unexplained money cannot be invoked to treat those deposits as unaccounted investment; precedent requires that investments be absent from books to attract such additions, and reliance on banking-channel payments and contemporaneous audited records negates the levy, resulting in relief to the taxpayer.

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Issues: Whether additions under section 69A of the Income-tax Act, 1961 can be made in respect of cash deposits made during the demonetisation period when such deposits are recorded in the assessee's audited books of account and declared in the return of income.

Analysis: The Tribunal examined the scope of Section 69A which applies where money, bullion, jewellery or other valuable articles are not recorded in the books of account and the assessee offers no explanation or an explanation unacceptable to the AO. The assessee produced audited financials, cash book, sales and purchase ledgers, stock register, sale bills, VAT returns and bank statements demonstrating that cash receipts were recorded in the books and reflected in tax audit reports filed under Section 44AB. The Tribunal followed coordinate decisions holding that where the cash deposits are recorded in audited books and declared in the return, Section 69A cannot be invoked to treat such amounts as unexplained income.

Conclusion: The addition made under Section 69A is not sustainable and is deleted; the appeal is allowed on this legal ground in favour of the assessee.

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