Demonetization cash deposits and alleged unexplained cash additionsbooks and cash sales evidence led to allowance of claim

Demonetization-period cash deposits were challenged as unexplained cash additions under income tax provisions; the tribunal applied the test of human probability and found the deposits recorded in books, supported by cash book entries and stock movement, demonstrating declared cash sales and past savings as source. Because the assessee was not a habitual cash depositor and the revenue had previously accepted cash sales in accounts, the invocation of unexplained cash addition was rejected and the assessee's claim was allowed.

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Issues: Whether invocation of section 69A to make addition of Rs. 45,23,500/- (and application of Section 115BBE) is justified where cash deposits during the demonetisation period are recorded in the assessee's books and sales declared in the return.

Analysis: The issue concerns whether the preconditions for applying the unexplained cash addition provision are satisfied. Relevant legal framework includes the requirement that the assessee must be the owner of money not recorded in books of account before unexplained cash provisions can be invoked, and related special taxation provisions for unexplained income. The factual matrix shows (a) cash sales recorded in the assessee's books and declared in the return, (b) cash deposits concentrated during the demonetisation period, and (c) absence of cash found in hand for which Section 69A was invoked. Prior authorities emphasise that Section 69A applies only where the money is not recorded in books and the assessee cannot satisfactorily explain the nature and source. The record here includes cash books, VAT returns and sales accepted by Revenue, and deposits correspond to cash sales and past cash in hand in the context of demonetisation.

Conclusion: Invocation of the unexplained cash provision is not justified; the addition under section 69A (and consequential invocation of the special taxation provision) is disallowed in favour of the assessee.

Ratio Decidendi: Where cash receipts are recorded in the books of account and accepted by Revenue, and the money is not found to be unrecorded, the unexplained cash addition provision cannot be invoked; the provision applies only to money owned by the assessee that is not recorded in books and whose nature and source remain unexplained.

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