Unexplained cash deposits accepted when supported by audited books, VAT returns and stock records; addition deleted, income recomputed.

Addition for unexplained cash deposits during the demonetisation period was rejected by ITAT after finding audited books, VAT returns and stock records evidenced the cash entries; the tribunal applied the evidentiary principle that documentary reconciliation and stock sufficiency rebut an unexplained cash classification and that treating sales already offered to tax as unexplained cash would produce double taxation; outcome: the addition was deleted, the assessee's explanation accepted and the assessing officer directed to recompute income accordingly.

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Issues: Whether the addition made by the Assessing Officer of unexplained cash deposits during the demonetization period can be sustained where the assessee has produced audited books of account, VAT returns, stock records and has shown the cash as recorded in cash book and offered to tax.

Analysis: The assessee is a partnership firm engaged in trading with audited books, VAT returns matching sales turnover and no discrepancies in stock quantification. Cash deposits during the relevant period were shown in the cash book and related to sale proceeds of jewellery. The Assessing Officer disallowed part of sales for certain days solely because bills lacked proper name and address and treated the residual as unexplained cash credit, applying provisions relating to unexplained cash and section 115BBE. The tribunal evaluated documentary evidence including audited accounts, VAT filings and stock sufficiency and found no material to conclude the sales were not genuine. The tribunal observed that treating sales already offered to tax as unexplained cash would amount to double taxation and that the assessee's explanation that deposits originated from cash-in-hand in books was supported by records.

Conclusion: Addition of unexplained cash deposits deleted and the assessee's explanation accepted; assessing officer directed to recompute income accordingly.

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