Demonetisation cash deposits supported by PAN-linked member details were not unexplained cash credits, and section 80P disallowance failed.

Cash deposits made during the demonetisation period were supported by member-wise details and PAN particulars, and the assessee's financials showed no discrepancy in the members' identities or receipts. On that basis, and consistent with CBDT Instruction No. 3/2017 discouraging additions where cash receipts are linked to identifiable persons with PAN, further enquiry was not required merely because the deposits were in cash during demonetisation. The treatment of the deposits as unexplained cash credit was therefore not justified, and the consequential disallowance under section 80P was also unsustainable.

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Issues: Whether cash deposits made during the demonetisation period, supported by member-wise details and PAN particulars, could be treated as unexplained cash credit and, consequentially, whether disallowance under section 80P was justified.

Analysis: The assessee explained that the cash was received from members and furnished their details, including PAN. The financials were accepted and no discrepancy was found in the members' particulars. In these circumstances, and in light of CBDT Instruction No. 3/2017 dated 21.02.2017 discouraging additions where cash receipts are supported by identifiable persons with PAN, further enquiry was not warranted merely because cash deposits occurred during the demonetisation period.

Conclusion: The addition as unexplained cash credit was not justified and the consequential disallowance under section 80P was also unsustainable. The appeal was allowed in favour of the assessee.

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