Unexplained cash deposits during demonetisation failed on lack of evidence and improbable cash trail, sustaining the addition.

Cash deposits made during the demonetisation period were held to be unexplained because the assessee failed to substantiate the claim that the funds came from earlier withdrawals meant for an immovable property transaction. The explanation was rejected for want of documentary support, including any agreement to sell, advance receipt, sale deed, or proof of related payments. Applying sections 68 and 69A, the burden to prove the nature and source of the cash remained on the assessee, and a mere oral explanation was found insufficient. The surrounding circumstances, including repeated borrowings, multiple withdrawals, long retention of cash, and redeposit of the same amount, were treated as inconsistent with normal commercial conduct and human probabilities, so the addition was sustained.

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Issues: Whether the cash deposits of Rs. 80,00,000 made during the demonetisation period were satisfactorily explained so as to escape addition as unexplained cash credit under section 68 of the Income-tax Act, 1961.

Analysis: The explanation that the cash represented earlier withdrawals intended for an immovable property transaction was found to be unsupported by any documentary evidence, such as an agreement to sell, advance receipt, sale deed, or proof of charges paid. The burden under sections 68 and 69A lay on the assessee to establish the nature and source of the money, and a mere oral explanation was held insufficient. The surrounding circumstances, including repeated borrowings, multiple cash withdrawals, long retention of cash, and re-deposit of the identical amount, were treated as inconsistent with normal commercial conduct and contrary to human probabilities. The invocation of cash dealings for property purchase was also found untenable in the light of statutory restrictions on large cash transactions.

Conclusion: The cash deposits were not satisfactorily explained, and the addition under section 68 was upheld in favour of the Revenue.

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