Recorded sales and audited books defeated section 69A addition for demonetisation cash deposits

Cash deposits made during the demonetisation period were treated as explained where they arose from recorded sales, were reflected in audited books of account, and the books were not rejected or shown to contain defects. The absence of any abnormal spike in deposits, together with acceptance of the turnover by the Commercial Tax Department, supported the conclusion that section 69A could not apply because the foundational requirement of unrecorded money was missing. On that basis, mere deposit of specified bank notes did not justify an unexplained-money addition, and the addition under section 69A was deleted.

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Issues: Whether cash deposits made during the demonetization period in specified bank notes, when arising from recorded sales and reflected in the books of account, could be brought to tax as unexplained money under section 69A of the Income-tax Act, 1961.

Analysis: The cash deposits were found to be part of the assessee's recorded business turnover and were reflected in the audited books of account. The Assessing Officer did not reject the books or point out specific defects, and the turnover was also accepted by the Commercial Tax Department. The deposits during November and December 2016 were in line with the assessee's cash deposits in the preceding months, indicating no abnormal spike. Section 69A applies only where money is found not to be recorded in the books, and that foundational condition was absent. Mere deposit of specified bank notes during the demonetization period did not by itself justify an addition where the source was explained through recorded sales.

Conclusion: The addition under section 69A was not sustainable and was deleted.

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