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of <h1>Cash deposits during demonetisation from recorded sales and stock, not 'unexplained' under s. 69A; addition deleted.</h1> Where the AO treated substantial cash deposits during the demonetisation period as unexplained money under s. 69A and taxed them under s. 115BBE after ... Unexplained cash deposits in bank - Addition u/s 69A and taxing the same u/s 115BBE - invoking the provisions of section 145(3) - “large amount of cash deposits in bank account” during the demonetisation period HELD THAT:- As accounts regularly maintained in regular course of business have to be taken as correct unless there are sufficient reasons to indicate that they are unreliable, incorrect or incomplete. There is no evidence that purchases or sales are omitted (in fact it is the other way round where all purchase and sales are found to be recorded) or in other words there is no challenge to the transactions represented by the entries or genuineness of the entries and nothing has been brought on record to disprove the same with evidence on record. AO in the instant case has not challenged the method of accounting as such, and it is not a case where income cannot be deduced from the complicated accounting system and there is neither any challenge to the net profits disclosed nor a case for rejection of books has been made out and the conditions laid out in section 145(3) has not been satisfied in this case and we are of the view that book results cannot be arbitrarily rejected on the basis of preponderance of probabilities. Cash book cannot be rejected and when the availability of STOCK in trade is not disputed as per stock register which is accepted, the sales of goods out of available stock cannot be disregarded as ingenuine. Business volume of the assessee in the year under appeal is fully matching with the comparison of the business volume in the immediately succeeding year, as filed before the tribunal as comparative case. As such we are of the opinion that the addition relating to unexplained cash deposits in bank in the instant case are explained to have arisen out of disclosed sales in books of accounts and are liable to deleted. Appeal of the assessee is allowed. Issues: (i) Whether the partial rejection of books of account and recast of trading results under section 145(3) was justified; (ii) Whether cash deposits in bank during the demonetisation period amounting to Rs. 2,75,57,700/- were unexplained and rightly added under section 69A and taxed under section 115BBE.Issue (i): Whether the partial rejection of books of account and resultant recast of trading account under section 145(3) of the Income-tax Act, 1961 was justified.Analysis: The Tribunal examined the documentary evidence including day-to-day stock register, purchase and sales registers, ledger confirmations, VAT returns and bank statements. The records showed recorded purchases and availability of stock corresponding to sales; no specific defects or contrary evidence were produced to disprove the entries. The Tribunal observed that books regularly maintained in the ordinary course of business are to be accepted unless sufficient reasons are shown to render them unreliable or incorrect, and that the conditions for rejection under section 145(3) were not satisfied on the facts.Conclusion: The partial rejection of books and recast of trading results is not sustained and is decided in favour of the assessee.Issue (ii): Whether the cash deposits of Rs. 2,75,57,700/- in bank during the demonetisation period were unexplained so as to attract addition under section 69A and tax under section 115BBE.Analysis: The Tribunal considered the evidence showing sales recorded in books, corresponding stock availability, confirmations of purchases and sales, VAT returns and bank records. The assessee explained the deposits as proceeds of genuine sales, supported by contemporaneous stock and sales records and third-party confirmations. The Tribunal held that on the available evidence the deposits were explained as arising from disclosed business sales and that the addition based on preponderance of probabilities without contrary evidential foundation was not justified.Conclusion: The addition under section 69A and consequent taxation under section 115BBE is deleted and the issue is decided in favour of the assessee.Final Conclusion: The appeal is allowed and the assessments and additions sustained by the authorities are set aside to the extent challenged, producing a result favourable to the assessee without remand.Ratio Decidendi: Where books of account are regularly maintained and transactions are supported by contemporaneous records and third-party confirmations, courts/tribunals will not permit partial rejection of books or additions under section 69A based solely on preponderance of probabilities absent specific contrary evidential defects demonstrating unreliability of the accounts.
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