Cash deposit addition under section 69A overturned where duly maintained cash book explained bank deposits, appeal allowed

Addition on account of cash deposits was held unjustified where the assessee produced a complete month-wise cash book reflecting withdrawals and cash sales that explained bank deposits, and the books of account were not rejected. The tribunal found no defects in the maintained records and no negative cash balance to indicate unexplained receipts, so the reliance on unexplained bank deposits to make additions was improper; consequence: the addition was set aside and the assessee's appeal allowed.

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Issues: Whether the addition of Rs. 5,63,204 made under Section 69A of the Income-tax Act, 1961 as unexplained cash deposits in the bank during AprilMay 2016 was justified.

Analysis: The assessee produced a month-wise cash book and regular books of account showing cash receipts, cash withdrawals and bank deposits; these books were audited and were not rejected by applying Section 145(3) of the Income-tax Act, 1961. The cash book did not show any negative cash balance on any day and recorded receipts from debtors claimed to have been realized in AprilMay 2016. The assessing officer did not produce independent evidence disputing the cash book entries or identifying the sundry debtors from whom payments were allegedly received; the only basis for the addition was a comparison with closing debtor balances in the preceding return year. Given that the source of deposits was traceable to the regular books of account which were accepted and not rejected under Section 145(3), the statutory requirement for treating bank deposits as unexplained under Section 69A was not satisfied.

Conclusion: The addition of Rs. 5,63,204 under Section 69A is deleted and the appeal is allowed in favour of the assessee.

Ratio Decidendi: Where cash deposits are supported by a regularly maintained cash book and books of account which have not been rejected under Section 145(3), such deposits cannot be treated as unexplained for the purposes of Section 69A of the Income-tax Act, 1961.

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