Opening cash balance must be credited against unexplained cash; only the residual amount is taxable under section 115BBE.

Cash treated as unexplained money under section 69A cannot be brought to tax in full where the assessee has an established opening cash balance supported by the capital account and balance sheet. If the preceding year's financial statements were already accepted and nothing on record dislodges the availability of opening cash, that balance must be credited against the cash found, and only the residual amount can be taxed. The tax consequence on the balance is to be computed under section 115BBE of the Income-tax Act, 1961.

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Issues: (i) Whether the addition of cash treated as unexplained money under section 69A of the Income-tax Act, 1961 could be sustained in full without granting credit for the assessee's opening cash balance.

Analysis: The assessee produced the capital account and balance sheet showing cash in hand as on the opening date of the relevant year. The earlier assessment for the preceding assessment year had been completed accepting the financial statements, and the record did not contain any material to dislodge the factual availability of opening cash of Rs. 15,14,268/-. In these circumstances, the available opening cash had to be given credit against the cash found, and only the balance could be brought to tax. The tax consequence was directed to be worked out under section 115BBE of the Income-tax Act, 1961 on the residual amount.

Conclusion: The addition was not sustainable in full, and credit for the opening cash balance had to be allowed; only the balance amount was liable to taxation.

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