Section 69A cash deposit addition restricted where withdrawals and reconciliations explained part of demonetisation cash balance.

Cash deposits during the demonetisation period were examined under section 69A on the basis of claimed past withdrawals and cash reconciliations. The addition was not upheld in full because the department brought no independent evidence of undisclosed cash introduction and did not verify utilisation of withdrawals. However, the explanation was not fully accepted because the October withdrawal remained unexplained despite available opening cash, and the reconciliation showed a cash difference. The addition was therefore restricted to the unexplained balance of Rs. 17,53,484, granting partial relief.

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Issues: Whether the addition made under section 69A of the Income-tax Act, 1961 in respect of cash deposited during the demonetisation period was sustainable in full, or required restriction having regard to the cash withdrawals and reduction in cash expenses.

Analysis: The cash deposits were claimed to have originated from earlier withdrawals and the assessee furnished cash summaries and reconciliation. The department did not bring any independent evidence to show introduction of undisclosed cash into the books or carry out verification of the utilisation of withdrawals. At the same time, the explanation was not fully acceptable because the assessee could not satisfactorily explain the October withdrawal despite sufficient opening cash, and the reconciliation disclosed a difference in the cash position.

Conclusion: The addition under section 69A was not sustained in full and was restricted to the unexplained difference of Rs. 17,53,484, resulting in partial relief to the assessee.

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