Unexplained cash deposit claim fails where demonetisation cash is traced to disclosed silver bullion sales and accepted evidence.

Cash deposits during the demonetisation period were not treated as unexplained under section 69A because the assessee substantiated that they came from sale proceeds of silver bullion disclosed and taxed under the Income Disclosure Scheme, 2016. The disclosure form, sale pattern in tranches, and computation of short-term capital gains supported the explanation, and the fact that the assessee was not engaged in bullion trading did not by itself make the sale implausible. The ITAT Agra therefore deleted the addition and directed taxation of the short-term capital gains on substantive basis.

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Issues: Whether the cash deposits made during the demonetisation period were unexplained so as to justify addition under section 69A of the Income-tax Act, 1961, or whether the assessee's explanation that the cash originated from sale of silver bullion disclosed under the Income Disclosure Scheme, 2016 was acceptable.

Analysis: The assessee produced evidence of disclosure and taxation of 131.442 kgs of silver bullion under the Income Disclosure Scheme, 2016 and showed that the bullion was sold in tranches during the year, with the resulting cash deposited in the bank account. The explanation was supported by the disclosure form and the computation of short-term capital gains. The fact that the assessee was not engaged in bullion trading did not, by itself, render the sale unbelievable, since ownership of bullion is sufficient to effect a sale. On these facts, the explanation for the cash deposits was found to be reasonable and the basis for treating the deposits as unexplained was rejected.

Conclusion: The addition of Rs. 57 lakhs as unexplained cash deposit was deleted, and the short-term capital gains offered by the assessee were directed to be taxed on substantive basis.

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