Demonetisation cash deposits explained by recorded sales and supporting records cannot be taxed as unexplained money.

Cash deposits made during demonetisation were not treated as unexplained money where the assessee's regular books recorded cash sales and were supported by sale invoices, stock records, bank statements, purchase details and VAT returns. In the absence of any defect in the books, any adverse material showing false sales, or any stock discrepancy, the explanation was accepted as discharged. A mere increase in sales during October and November 2016, without evidence of manipulation, was insufficient to justify an addition based on suspicion or presumption. The addition under section 69A read with section 115BBE was deleted.

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Issues: Whether cash deposits made during the demonetization period could be treated as unexplained money under section 69A and taxed under section 115BBE when the assessee had recorded cash sales in regular books and produced supporting sale invoices, stock and VAT-related material.

Analysis: The cash deposits were explained as sale proceeds of jewellery business and the record contained cash book entries, sale invoices, bank statements, purchase details and VAT returns. No defect was pointed out in the books of account, no adverse material was brought to show manipulation of sales, and no inquiry was made with the purchasers named in the sale bills. The comparative rise in sales during October and November 2016, by itself, was held insufficient to disbelieve recorded sales in the absence of evidence of falsity or stock discrepancy. Where the books were not rejected and the supporting documents remained uncontroverted, the burden on the assessee stood discharged and the addition could not rest on presumption or suspicion.

Conclusion: The addition under section 69A read with section 115BBE was deleted and the appeal was allowed.

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