2026 (4) TMI 92 - AT - Income Tax

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 ... Unexplained money u/s 69A - cash deposit of Specified Bank Notes during demonetisation - AO accepted and rejected portions of the same deposit - Part addition - Business receipts reflected in regular accounts - assessee is supplying fruits on commission basis to various persons HELD THAT: - The Tribunal found that the Assessing Officer himself accepted that the assessee was carrying on fruit business on commission basis, that sale proceeds were collected through staff from retailers, and that a part of the specified bank note deposits represented normal business transactions. Once the entire bank transactions had already been taken into account by the assessee while computing total income, the same stream of receipts could not, without stated reasons, be split so that one portion was accepted as business receipts and the balance was treated as undisclosed income. In the absence of any reason for treating the balance deposits differently, the addition was not sustainable. [Paras 5] The addition made in respect of the balance cash deposits was deleted. Final Conclusion: The Tribunal allowed the appeal and deleted the addition, holding that the impugned cash deposits during demonetisation were part of business transactions already reflected in the computation of income and could not be partly treated as unexplained without any supporting reason. 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.