Unexplained cash receipts recorded in books cannot be taxed as unexplained money unless the books are first discredited.

Addition of Rs. 1,13,96,000 treated as unexplained money under provision 69A cannot be sustained where the disputed cash receipts were recorded in audited books of account, the books were not rejected and no adverse finding was made as to their falsity; the tribunal held that treating recorded receipts as unexplained would amount to double taxation and that section 69A can be applied only after discrediting the books of account, resulting in deletion of the addition and dismissal of the revenue appeal with taxation under the special rate provision likewise set aside.

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Issues: Whether the addition of Rs. 1,13,96,000/- as unexplained money under section 69A of the Income-tax Act, 1961 and taxation under section 115BBE is sustainable where the disputed cash deposits were recorded in the assessee's books of account and the books were not rejected by the Assessing Officer.

Analysis: The assessment record shows submission of audited books of account, cash book, profit and loss account, balance sheet and bank statements; no rejection of the books was recorded by the Assessing Officer and no finding of falsity in the books was made. The cash deposits in issue were reflected in the books as trading receipts/repayment of advances and were supported by the accounting records furnished during assessment proceedings. An addition under section 69A treats deposited cash as unexplained money only when the source is not satisfactorily explained; where receipts are disclosed in the books and the books are not rejected or shown to be unreliable, treating such recorded receipts as unexplained would result in taxing the same receipts twice. Relevant assessment provisions invoked in the proceedings include sections 142(1) and 143(2) (assessment notices and proceedings) and the appellate provision under section 250; the taxation provision applied by the Assessing Officer was section 115BBE. Having regard to the accounting evidence on record and the absence of any adverse finding on the genuineness of the books, the addition under section 69A cannot be sustained without first discrediting the books of account.

Conclusion: The addition of Rs. 1,13,96,000/- as unexplained money under section 69A of the Income-tax Act, 1961 and taxation under section 115BBE is deleted; the revenue's appeal is dismissed.

Ratio Decidendi: Where disputed cash receipts are recorded and disclosed in the assessee's books of account and the books are not rejected or shown to be falsified, an addition under section 69A cannot be sustained and such amounts cannot be taxed as unexplained money without first discrediting the books of account.

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