Unexplained cash deposits during demonetisation: ITAT reduces addition under 69A, accepts records but disallows 10% for inconsistencies.

Assessment challenged an addition for unexplained cash deposits during demonetisation. Tribunal found that the taxpayer produced day-to-day cash book and bank statements, negating any permissible presumption of unrecorded income; the Assessing Officer proceeded on an incorrect proposition and did not identify specific false entries. The tribunal nevertheless regarded certain submissions as self serving and noted inconsistencies, applying a proportional adjustment to account for evidentiary weakness. Consequence: addition reduced by allowing records but disallowing 10% of the reported deposits, quantified as Rs.84,650, and the appeal was partly allowed.

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Issues: Whether the addition of Rs. 8,46,500 made under section 69A of the Income-tax Act, 1961 on account of unexplained cash deposits during the demonetisation period is justified.

Analysis: Relevant material includes bank statements, day-to-day cash book, financial statements and ledger entries for prior years showing opening capital and transactions, and evidences of loans repaid during the year. The assessing officer accepted part of the claim by allowing assessed cash-in-hand of Rs. 2,00,000 but treated the balance as unexplained under section 69A. The assessee produced books of account maintained over decades and supporting bank and party ledger entries to explain the deposits as withdrawals, cash on hand and loans returned. Some submitted documents are self-serving and contain minor inconsistencies. Balancing the evidentiary value of contemporaneous books and bank records against the noted inconsistencies, a proportional approach to the unexplained addition is appropriate.

Conclusion: Addition under section 69A confirmed by lower authorities is not fully justified; 10% of the challenged amount is disallowed to account for inconsistencies and the balance is accepted. The appeal is partly allowed in favour of the assessee.

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