Unexplained cash deposits: tribunal accepts fixed deposit maturities and accumulated agricultural receipts as sufficient source, addition set aside.

Whether unexplained cash deposits during the demonetisation period justified an addition under Section 69A is analysed by assessing documentary links between earlier fixed deposit maturities, accumulated agricultural receipts and the later bank cash deposits; the legal principle applied is that deposits are not 'unexplained' if the assessee satisfactorily proves lawful source. The Tribunal found withdrawals from fixed deposit maturities and aggregated agricultural income adequately explained significant cash receipts, and therefore the addition under Section 69A was not sustained and was directed to be deleted.

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Issues: Whether the addition of Rs. 25,70,000 made under Section 69A of the Income-tax Act, 1961 as unexplained cash deposits during the demonetization period is sustainable.

Analysis: The appeal arose from an addition under Section 69A purportedly based on cash deposits during the demonetization period. The relevant legal framework includes Section 69A which deals with unexplained cash credits and Section 115BBE which prescribes taxation of certain unexplained cash credits. The Tribunal examined the bank statements showing cash withdrawals in September 2015 and subsequent cash deposits in November 2016, as well as evidence of transfers into fixed deposits. The Tribunal evaluated whether the assessee had satisfactorily explained the source of the cash deposits by linking them to earlier fixed deposit maturities and accumulated agricultural receipts, and whether the pattern of bank transactions supported the Revenue's inference of unexplained deposits. The Tribunal concluded that significant portions of the cash deposits were explained by withdrawals from fixed deposit maturities and accumulated agricultural income, and that the Assessing Officer and the Commissioner of Income Tax (Appeals) had not persuasively established that the amounts remained unexplained.

Conclusion: The addition of Rs. 25,70,000 under Section 69A is not sustainable; the assessee's explanation of the source of the cash deposits is accepted and the appeal is allowed in favour of the assessee.

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