Cash deposits during demonetization: addition under section 69A upheld where unexplained credits and transfer to partner unproved.

Addition under section 69A for unexplained cash deposits during the demonetization period was sustained where the assessee used a bank account for cash deposits and failed to substantiate a claimed transfer of assets and liabilities to a partner under section 189; the partner did not demonstrate that the deposits were reflected in his return. The tribunal held that the assessee did not produce corroborative evidence and failed to discharge the burden of proof, therefore the additions were maintained and the appeal decided against the assessee.

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Issues: (i) Whether notices and assessment proceedings for the relevant assessment year could be validly continued and sustained against a partnership firm alleged to have been dissolved prior to the assessment year; (ii) Whether the addition of Rs.25,00,000 under Section 69A for unexplained cash deposit is sustainable; (iii) Whether the bank deposit constituted a mere contra entry (cash on hand) supported by evidence so as to negate the addition.

Issue (i): Validity of notices and assessment proceedings against a partnership firm alleged to have been dissolved before the assessment year.

Analysis: The issue was decided by examining the record regarding dissolution and the continuity of filings and evidence. The authority evaluated whether procedural provisions permitting issuance of notices and assessment in respect of the relevant year were complied with and whether the dissolution claim was supported by corroborative evidence to negate jurisdictional basis for proceedings.

Conclusion: The notices and assessment proceedings were held valid; the contention that proceedings were void for issuance of notice after dissolution was rejected.

Issue (ii): Sustainability of addition of Rs.25,00,000 under Section 69A as unexplained cash credit.

Analysis: The authority considered bank records showing cash deposits during the demonetisation period, absence of return filing, and lack of corroborative documentary evidence or declaration by the partner allegedly taking over assets to explain the deposits. The material was treated as justifying inquiry and addition under the provisions for unexplained credits where explanation is not borne out by evidence.

Conclusion: The addition of Rs.25,00,000 under Section 69A was sustained in favour of the revenue.

Issue (iii): Whether the deposit was a simple contra entry (cash on hand) supported by evidence so as to negate the addition.

Analysis: The claim that the deposit represented cash on hand from before dissolution and a mere contra entry was examined against the absence of corroborative evidence, lack of reflection in the partner's returns, and failure to prove transfer of assets/liabilities. The submissions were found uncorroborated and insufficient to rebut the unexplained nature of the deposit.

Conclusion: The claim that the deposit was a bona fide contra entry was rejected; the conclusion favours the revenue.

Final Conclusion: The appellate challenge to the ex parte assessment and the addition under Section 69A is dismissed; the assessment and addition stand in favour of the revenue.

Ratio Decidendi: Where cash deposits are reflected in bank records and the assessee fails to furnish corroborative evidence or to demonstrate inclusion in appropriate returns, the assessing authority may sustain additions as unexplained cash credits under Section 69A and notices/assessment proceedings are not rendered invalid merely by an unsubstantiated claim of prior dissolution.

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