Explained business receipts defeat unexplained-money treatment for demonetisation cash deposits under the income tax law.

Cash deposits made during the demonetisation period in specified bank notes were not liable to be treated as unexplained money where the assessee supported them with books of account, audit report, financial statements, bank statements and turnover details showing business receipts and sale proceeds. The Tribunal accepted that a cash-intensive trading business in vegetables and fruits, together with the recorded cash flow, made the explanation plausible. It held that once the source of cash deposits is satisfactorily explained as business receipts, section 69A cannot be invoked merely because the cash was received in specified bank notes during demonetisation, and the consequential section 115BBE tax also fell away.

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Issues: Whether cash deposits made during the demonetization period in specified bank notes were liable to be treated as unexplained money under section 69A and taxed under section 115BBE of the Income-tax Act, 1961.

Analysis: The assessee produced books of account, audit report, financial statements, bank statements and comparative turnover details to show that the deposits formed part of business receipts and realised sale proceeds. The reasoning accepted that the assessee was engaged in cash-intensive trading of vegetables and fruits, that the deposits were supported by the recorded cash flow and that, on the facts, the nature of the business and the pattern of receipts made the explanation plausible. Following the coordinate bench view on an identical issue, the Tribunal held that where the source of cash deposits is satisfactorily explained as business receipts, the deposits cannot be assessed as unexplained money merely because they were received in specified bank notes during the demonetization period.

Conclusion: The addition under section 69A and the consequential tax under section 115BBE were deleted, and the appeal was allowed in favour of the assessee.

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