Demonetisation cash deposits treated as business turnover; section 69A addition deleted, with income estimated on total credits.

Specified bank note deposits made during demonetisation were treated as part of an established cash business where the Revenue could not show any independent non-business source, so the addition as unexplained money under section 69A was deleted. The Tribunal also held that the bank credits represented business receipts from the same trading activity and upheld estimation of income at 10% on the total credits. The operative principle was that deposits linked to a proven cash may be assessed as turnover rather than as unexplained money, while income can still be estimated on the credits.

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Issues: (i) whether cash deposits in specified bank notes during the demonetisation period could be treated as unexplained money under section 69A; (ii) whether the entire bank credits were liable to be assessed as business turnover with income estimated therefrom at 10%.

Issue (i): whether cash deposits in specified bank notes during the demonetisation period could be treated as unexplained money under section 69A.

Analysis: The assessee was engaged in business of dealing in second-hand vehicles and the Revenue did not establish any independent source of income apart from that business. The deposits in specified bank notes were found to be part of the trading activity, and once the other cash receipts were accepted as business turnover, the specified bank note deposits could not, on the facts, be singled out and brought to tax under the deeming provision as unexplained money. The decision also noted that similar additions on SBN deposits had been deleted in earlier Tribunal decisions after considering the Specified Bank Notes (Cessation of Liabilities) Act, 2016.

Conclusion: The addition under section 69A was deleted in favour of the assessee.

Issue (ii): whether the entire bank credits were liable to be assessed as business turnover with income estimated therefrom at 10%.

Analysis: Since the assessee's business receipts were largely in cash and the deposits represented turnover from the same business, the credits were treated as business receipts. The Tribunal accepted the estimation of net income at 10% on the entire bank credits and directed recomputation accordingly.

Conclusion: The entire credits were to be treated as business turnover and income was to be estimated at 10% in favour of the Revenue on this limited aspect.

Final Conclusion: The assessment was sustained only to the extent of estimating business income at 10% on the entire credits, while the addition as unexplained money under section 69A was deleted.

Ratio Decidendi: Where the Revenue fails to show an independent non-business source for specified bank note deposits made in the course of an established cash business, such deposits may be treated as trading receipts and not as unexplained money under section 69A; however, business income may still be estimated on the total credits.

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