Recorded cash sales and debtor realisations cannot be taxed as unexplained income when books and contemporaneous records support the deposits.

Cash deposits made during the demonetisation period were not assessable as unexplained money where the assessee produced sale and purchase registers, bank statements, stock records, debtor ledgers, VAT returns, audit reports, cash book and month-wise cash sales to show that the deposits arose from regular business activity. Because the books of account were not rejected and no specific defect was found in the maintained records, the deposits were treated as accounted business receipts and debtor realisations. The same amounts could not be taxed again as unexplained income under section 68 or subjected to section 115BBE, as that would amount to double taxation of recorded business receipts; the addition was deleted.

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Issues: Whether cash deposits made during the demonetisation period were liable to be assessed as unexplained money under section 68 and taxed under section 115BBE, or whether they represented accounted business receipts from cash sales and debtors' realisations.

Analysis: The assessee produced sale and purchase registers, bank statements, stock register, debtor ledgers, VAT returns, audit report, cash book and month-wise cash sales and deposits to show that the deposits were generated from regular business activity. The books of account were not rejected and no specific defect was pointed out in the maintained records. The turnover and business income disclosed in the accounts supported the explanation that the cash deposits arose from business receipts and were subsequently remitted to suppliers. On these facts, the same deposits could not again be treated as unexplained income, as that would amount to taxing accounted business receipts twice.

Conclusion: The addition made by treating the cash deposits as unexplained money was not sustainable and was directed to be deleted; the assessee succeeded on this issue.

Ratio Decidendi: Where cash deposits are duly recorded in the books, supported by contemporaneous business records, and no defect is found in the accounts, such deposits cannot be treated as unexplained income under section 68 or brought to tax again as business receipts already accounted for.

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