Unexplained cash credits must be treated as income only if explanations are unsatisfactory; documentary proof can defeat such additions.

Addition under the Income-tax Act treating cash deposits during demonetisation as unexplained cash credits was examined on the basis of produced books, sale bills, land records, farm income ledgers and evidence of prior cash deposits; the legal principle applied required that unexplained credits be treated as income only where explanation is unsatisfactory. Because the assessee furnished documentary evidence and prior deposit history addressing the source, the impugned addition was found to rest on assumption rather than non-explanation and was set aside in the assessee's favour.

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Issues: Whether the addition of Rs. 11,60,000 made under section 69A of the Income-tax Act, 1961 as unexplained cash deposits during the demonetisation period is sustainable.

Analysis: Section 69A targets unexplained cash credits or deposits which, if not satisfactorily explained, can be treated as income. The record shows production and examination of books of account, supporting documents for agricultural receipts (including sale bills, 7/12 extracts, farm income ledger and cash book) and evidence of prior years' cash deposits. The assessee demonstrated land holdings and agricultural receipts corresponding to part of the deposits and provided ledgers showing earlier cash deposits. Although returns for multiple assessment years were filed after demonetisation, the documentary trail and prior deposit history directly addressed the source of the cash. On the available material the addition under section 69A was based on an assumption of unexplained cash rather than a finding of non-explanation in the face of produced records.

Conclusion: The addition of Rs. 11,60,000 under section 69A is not sustained and is set aside in favour of the assessee.

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