Unexplained cash deposits cannot be partly disallowed without a reasoned basis when business receipts are otherwise accepted.

Cash deposits of Specified Bank Notes disclosed in business transactions could not be partly taxed as unexplained money under section 69A without a specific and reasoned basis. The assessee had shown the deposits in the income computation and was engaged in commission-based fruit supply business involving cash collections. The revenue accepted a substantial part of the same deposits as genuine business receipts but gave no cogent distinction for treating the balance as undisclosed income. On that footing, the addition was deleted and the assessee obtained relief.

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Issues: Whether the addition made under section 69A of the Income-tax Act, 1961, treating part of the cash deposit of Specified Bank Notes during demonetisation as unexplained money, was sustainable.

Analysis: The assessee had disclosed the impugned bank transactions in the computation of total income and was engaged in the business of supplying fruits on commission basis, a line of business involving cash collections. The Assessing Officer accepted a substantial portion of the deposit as probable business transaction but offered no cogent basis for treating the balance as undisclosed income. In the absence of any reasoned distinction between the accepted and rejected portions of the same deposit, the addition could not be sustained.

Conclusion: The addition under section 69A was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The assessment addition based on the demonetisation cash deposit did not survive and the assessee obtained complete relief in the appeal.

Ratio Decidendi: Where a cash deposit is disclosed as part of business transactions and the revenue accepts a substantial part of the same deposit as genuine, the remaining portion cannot be treated as unexplained money without a specific and reasoned basis.

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