Explained cash balance protects demonetisation deposit from section 69 addition where records show sufficient opening cash.

A cash deposit made during the demonetisation period was examined for treatment as unexplained income under section 69 of the Income-tax Act, 1961. The assessee supported the source with audited financial statements and return records showing cash-in-hand of Rs. 11,30,655 as on 31.03.2016, which was sufficient to cover the disputed deposit. In the absence of contrary material to dislodge the disclosed cash balance or show that the deposit lacked an explained source, the addition under section 69 was unsustainable and was deleted in favour of the assessee.

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Issues: Whether the cash deposit of Rs. 5,00,000 made during the demonetisation period could be treated as unexplained income under section 69 of the Income-tax Act, 1961 when the assessee had disclosed sufficient opening cash balance.

Analysis: The assessee's audited financial statements and return records showed cash-in-hand of Rs. 11,30,655 as on 31.03.2016. The disputed deposit of Rs. 5,00,000 was therefore claimed to have been made out of an already disclosed and available cash balance. No contrary material was brought on record to dislodge the disclosed cash availability or to show that the deposit lacked an explained source.

Conclusion: The addition under section 69 of the Income-tax Act, 1961 was held to be unsustainable and was deleted in favour of the assessee.

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