Unexplained cash deposits during demonetization: 50% of deposits treated as assessable where source not satisfactorily proven

Unexplained cash deposits during the demonetization period were addressed: where the assessee failed to satisfactorily explain nature and source of cash, the assessing officers addition and the assessees claim of sufficient cash both found unacceptable, and precedents were held distinguishable on facts. The operative treatment applied an estimation principle that 50% of total cash deposited during demonetization can reasonably be treated as available to the assessee for making those deposits, resulting in appeals being partly allowed accordingly.

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Issues: Whether the addition of Rs.27,00,000 made under Section 69A of the Income-tax Act, 1961 in respect of cash deposits during the demonetisation period was justified.

Analysis: Evidence shows cash deposits during the demonetisation period and the assessee asserted the source as earlier bank withdrawals recorded in audited books and cash book. The Assessing Officer doubted the explanation due to a departure from the assessee's normal pattern of immediate cash utilization and absence of denomination reconciliation; no adverse material disproving bank withdrawals was produced by the Revenue. The cash-availability statement demonstrates substantial monthly withdrawals and closing balances, making neither party's position wholly acceptable. Considering the factual matrix and the need for a reasonable estimate given the anomaly in pattern and lack of detailed denomination reconciliation, a partial adjustment was deemed appropriate.

Conclusion: The addition under Section 69A is sustained in part and restricted to Rs.13,50,000 (50% of Rs.27,00,000); the appeal is partly allowed, which is partly in favour of the assessee.

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