Unexplained cash deposits do not attract addition where recorded in books and accepted by tax and commercial authorities.

Section 69A is inapplicable to cash deposits in specified bank notes during the demonetization period where those receipts are recorded in audited books, the source is explained on verification and the turnover is accepted by tax and commercial authorities; the statutory test requires money to be unrecorded to attract addition, and procedural demonetization notifications alone do not convert recorded business receipts into unexplained income. Because deposits showed consistency and the explanation was accepted, addition under the unexplained-money doctrine was held unsustainable and the appeal allowed in favour of the assessee.

---

---

Issues: Whether cash deposits in specified bank notes (demonetized currency) made during the demonetization period, which are recorded in the assessee's books of account and accepted as sales/turnover by tax and commercial authorities, can be treated as unexplained money and added to income under Section 69A of the Income-tax Act, 1961.

Analysis: The material facts show the assessee maintained audited books, declared turnover and recorded the disputed deposits as sales; the Commercial Tax Department accepted the turnover; monthly deposits for November-December 2016 align with deposits in other months and do not show abnormal spikes. The statutory scope of Section 69A requires that the money be not recorded in the books of account; where transactions are recorded and the source is explained and accepted on verification, Section 69A is not attracted. Relevant authorities and tribunal decisions applying the same legal test were considered; procedural notifications relating to demonetization do not, by themselves, convert recorded business receipts into unexplained money for income-tax assessment unless the books or explanation are shown to be defective or unreliable.

Conclusion: Addition under Section 69A of the Income-tax Act, 1961 in respect of the cash deposits in specified bank notes during the demonetization period is not sustainable where the deposits are recorded in the books of account, supported by turnover accepted by tax/commercial authorities and not shown to be abnormal; the appeal is allowed in favour of the assessee.

---