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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the addition of Rs. 6,19,500/- made under section 68 of the Income-tax Act, 1961 treating deposits of specified bank notes (SBNs) during the demonetization period as unexplained cash credits is sustainable.
Analysis: The assessee explained that the deposits in SBNs comprised (i) cash forming part of closing balance as on 08/11/2016 collected prior to demonetization and (ii) a smaller sum received from a member during the demonetization period, with documentary support including cash book entries, cash deposit slips, balance sheet and audit report. The books of account were not rejected and the assessing officer did not record any adverse material rebutting the explanation as to source and nature of the deposits. The question for income-tax purposes is whether the amounts are unexplained credits under section 68 of the Income-tax Act, 1961, not whether any separate regulatory breach of demonetization notifications occurred; any action for contravention of RBI/other guidelines lies with competent authorities. Coordinate Tribunal decisions on identical facts have held that deposits explained by records and books which are not rejected cannot be treated as unexplained cash credits under section 68. Applying those principles to the factual matrix and documentary evidence on record leads to the conclusion that the addition is not warranted.
Conclusion: Addition of Rs. 6,19,500/- under section 68 of the Income-tax Act, 1961 is deleted; the assessee's ground challenging that addition is allowed.
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