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Issues: (i) Whether the cash deposit of Rs. 13,75,000 made on 25.11.2016 in specified bank notes could be treated as unexplained income and added under section 68; (ii) Whether the disallowance of 10% of car expenses as personal expenditure was justified.
Issue (i): Whether the cash deposit of Rs. 13,75,000 made on 25.11.2016 in specified bank notes could be treated as unexplained income and added under section 68.
Analysis: The bank deposit was made before the appointed day fixed under the Specified Bank Notes (Cessation of Liabilities) Act, 2017. The statutory scheme, including the appointed day under section 2(1)(a) and the operation of sections 3 and 5, showed that the liability regime for specified bank notes continued till 31.12.2016. The notification relied upon by the Revenue could not override the substantive statutory position. The deposit was therefore not liable to be treated as unexplained merely because it was made in the post-demonetisation period.
Conclusion: The addition of Rs. 13,75,000 under section 68 was deleted in favour of the assessee.
Issue (ii): Whether the disallowance of 10% of car expenses as personal expenditure was justified.
Analysis: No log book or other satisfactory evidence was produced to establish exclusive business use of the . In the absence of supporting material, the estimate of a portion of the expenditure as personal in nature was treated as a reasonable exercise of discretion.
Conclusion: The disallowance of Rs. 27,587 was upheld against the assessee.
Final Conclusion: The addition relating to cash deposit was deleted, while the disallowance of car expenses was sustained, leaving the assessee with only partial relief.
Ratio Decidendi: Where the governing statute fixes the appointed day for specified bank notes, a cash deposit made before that day cannot be treated as unexplained solely because it occurred after demonetisation notifications, and an estimated disallowance of vehicle expenses may be sustained in the absence of evidence of business use.
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