Explained cash deposits during demonetisation were accepted where books, sales records and cash balance supported the assessee's explanation.

Cash deposits during the demonetisation period were treated as explained where the assessee produced cash book, stock register, sales invoices, bank statements and VAT returns showing substantial cash sales and adequate cash balance. In the absence of rejected books, any defect in sales or stock records, or a finding that demonetised currency had been received, the deposits could not be added as unexplained income. An estimate of allowable cash sales based on an earlier year's average was found misconceived and unsupported by the year's actual figures, so the addition was deleted.

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Issues: Whether the addition made towards cash deposits during the demonetisation period as unexplained income was justified, or whether the deposits stood satisfactorily explained by the assessee's recorded cash sales and cash balance.

Analysis: The assessee produced cash book, stock register, sales invoices, bank statements, VAT returns and other supporting records showing substantial cash sales during the relevant period. The books of account were not rejected, no defect was established in the sales or stock records, and there was no finding that demonetised currency had been received. The assessee also had sufficient cash balance as per the books, and the approach of estimating allowable cash sales on the basis of an earlier year's average sales was held to be misconceived and unsupported by the actual figures of the year under consideration.

Conclusion: The cash deposits were held to be duly explained from the assessee's own books and records, and the addition as unexplained cash deposit was deleted.

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