Explained cash deposits from accounted business receipts were not taxable as unexplained money under section 69A.

Cash deposits made during the demonetisation period were held not to be unexplained money under section 69A where the assessee showed, from regular books and surrounding records, that the deposits came from accounted business receipts. The record supported the explanation that the cash represented sale proceeds already reflected in the accounts, and there was no contrary material showing diversion of available cash to another source. On that basis, the addition was deleted, reinforcing that an explanation supported by books and business records cannot be rejected without adequate factual basis.

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Issues: Whether the addition made under section 69A of the Income-tax Act, 1961 in respect of cash deposited during the demonetisation period was sustainable when the assessee explained the deposits as sale proceeds duly reflected in the books of account.

Analysis: The assessee carried on business with regularly accounted sales and purchases, and the cash deposits were found to be made consistently from business receipts. The explanation that the deposits during the demonetisation period represented sale proceeds already recorded in the books was accepted on the basis of the record. In such circumstances, the deposits could not be treated as unexplained money merely because the explanation was rejected at the appellate stage without adequate basis. The reasoning also accords with the principle that where cash availability is established from accounted transactions and no contrary material shows diversion of withdrawn or available cash elsewhere, addition for unexplained cash deposit is not justified.

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

Ratio Decidendi: Cash deposits are not liable to be assessed as unexplained money where the assessee establishes, from the books and surrounding record, that the deposits represent accounted business receipts or otherwise explained cash availability.

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