Explained demonetisation cash deposits were not unexplained income; legal tender breach alone did not justify section 68 addition.

Cash deposits made during the demonetisation period were explained as members' collections deposited in the bank within the initial days of the notification, and that factual explanation was accepted. The mere fact that the notes had ceased to be legal tender under the RBI notification did not, by itself, establish unexplained income under section 68 of the Income-tax Act, 1961. Any breach of the demonetisation notification was a matter for action under the relevant law, but it did not satisfy the statutory conditions for treating the deposits as unexplained cash credits. The addition under section 68 was therefore deleted.

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Issues: Whether cash deposits made during the demonetization period from members' collections in specified bank notes could be treated as unexplained income under section 68 of the Income-tax Act, 1961.

Analysis: The deposits were found to have been collected from members and deposited in the bank within the initial days of the demonetization period. The source of the cash was explained and accepted on facts. The mere circumstance that the notes had ceased to be legal tender under the RBI notification did not, by itself, establish unexplained income for income-tax purposes. Any breach of the demonetization notification was a matter for action by the competent authority under the relevant law, but it did not satisfy the conditions for addition under section 68. The deposits were therefore not liable to be assessed as unexplained cash credits.

Conclusion: The addition under section 68 was unsustainable and was directed to be deleted in favour of the assessee.

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