Explained cash deposits during demonetisation accepted partly where rental income from letting out a Gala was substantiated.

ITAT Mumbai held that cash deposited during demonetisation could not be added in full where the assessee substantiated part of the deposit with rental income from letting out a Gala. Balance sheets, cash books, ledger accounts and return acknowledgments supported receipt of rental compensation over earlier years, and the assessing authority accepted rent for part of the relevant period as a source. As no enquiry was made from the tenants to disprove the explanation, rental income of Rs. 3,72,000 was treated as explained cash, and the addition was confined only to the unexplained balance.

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Issues: Whether the addition made on account of cash deposited during the demonetisation period could be sustained in full, or whether part of the deposit was explained by rental income from letting out the Gala.

Analysis: The assessee produced balance sheets, cash books, ledger accounts and return acknowledgments showing receipt of rental compensation over earlier assessment years. The assessing authority did not dispute that the Gala had been given on rent and accepted rent receipt for part of the relevant period as a source of the cash deposit. No enquiry was made from the tenants to disprove the explanation. On the material on record, rental income aggregating to Rs. 3,72,000 was accepted as explained source of the cash deposit, leaving the balance unexplained.

Conclusion: The addition was confined only to the unexplained portion of the cash deposit and was not sustained in full; the assessee succeeded to that extent.

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