Explained cash deposits from business sales defeated section 68 addition and consequential section 115BBE taxation

Cash deposits during the demonetisation period were held to be explained where the assessee's trading record showed sufficient stock, cash sales and an available cash balance, and the assessment had relied on an unduly narrow view of the relevant period without examining the full-year business position. On those facts, the addition under section 68 was deleted and the consequential taxation under section 115BBE also failed. The matter was decided in favour of the assessee.

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Issues: Whether the addition made under section 68 on account of cash deposits during the demonetisation period, and the consequential taxation under section 115BBE, was sustainable on the facts of the case.

Analysis: The assessee was engaged in wholesale and retail trade in essential commodities and had cash sales during the year. The deposits in question were treated by the assessment authorities as unexplained cash, but the record showed that the assessee had sufficient stock and that the deposits were out of sale proceeds and cash balance. The assessment was based on a restricted view of the demonetisation period without a proper examination of the full-year stock and business position.

Conclusion: The addition of Rs. 63,41,000 made under section 68 was deleted, and the consequential higher taxation under section 115BBE could not survive. The issue was decided in favour of the assessee.

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