Explained cash deposits during demonetisation accepted where land acquisition compensation and bank withdrawals showed a direct nexus.

Cash deposited during the demonetisation period was held to be explained where the assessee showed that the funds came from RTGS compensation for compulsory acquisition of agricultural land. Immediate cash withdrawals from the same bank account after receipt of compensation, coupled with no evidence from the Revenue that the cash was spent, invested, or otherwise diverted, established a direct nexus between withdrawal and later redeposit. On that factual basis, the deposit was not treated as unexplained money under section 69A of the Income-tax Act, 1961, and the addition was deleted.

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Issues: Whether cash deposited in the bank during the demonetisation period was liable to be treated as unexplained money under section 69A of the Income-tax Act, 1961 and taxed accordingly.

Analysis: The assessee established that the disputed cash originated from RTGS compensation received on compulsory acquisition of agricultural land. The record showed immediate cash withdrawals from the same bank account after receipt of the compensation and no material was brought by the Revenue to show that the withdrawn cash was spent, invested, or otherwise diverted. In the absence of contrary evidence, the explanation that the cash was retained and later redeposited was found to be supported by a direct link between withdrawal and redeposit.

Conclusion: The cash deposit was accepted as explained and the addition made under section 69A did not survive; the assessee succeeded.

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