Explained cash in hand defeated section 68 addition for demonetisation-period cash deposits.

Cash deposits made during the demonetisation period were held to be explained where the assessee's cash book showed substantial cash in hand before, during and after the period, with cash on hand exceeding the impugned deposits. The addition under section 68 was made only for the demonetised currency component, while the surrounding cash deposits were otherwise accepted. On the material recorded, the deposits were found to have come out of explained cash in hand duly reflected in the books, and the addition was deleted as unsustainable.

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Issues: Whether the addition made under section 68 of the Income-tax Act, 1961 on account of cash deposits during the demonetization period was sustainable when the assessee claimed to have sufficient cash in hand reflected in the cash book.

Analysis: The assessee had maintained substantial cash balances before, during, and after the demonetization period, and the cash book placed on record showed cash on hand far exceeding the impugned deposits. The addition was made only in respect of the demonetized currency component, while the surrounding cash deposits were otherwise accepted. On the material available, the deposits were found to have come out of explained cash in hand duly reflected in the books.

Conclusion: The addition under section 68 was held to be unsustainable and was deleted.

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