Business sale proceeds in specified bank notes were not unexplained cash deposits when the source was established.

Cash deposits made during demonetisation were treated as business sale proceeds received in specified bank notes, and the factual finding on source was not displaced. The mere fact that the assessee was not authorised to collect those notes, or that the transactions breached the restrictions then in force, did not by itself make the deposits unexplained under the Income-tax Act. Where the source of cash is established as sales, the deposits cannot be brought to tax as unexplained money simply because of the manner in which the cash transactions were conducted. The addition under section 69A was deleted.

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Issues: Whether cash deposited in the assessee's bank account during the demonetisation period, being sale proceeds received in specified bank notes, could be treated as unexplained money under section 69A of the Income-tax Act, 1961.

Analysis: The sole adverse basis for the addition was that the receipts were in specified bank notes and that the assessee was not authorised to collect them. The factual finding that the cash deposits represented the assessee's sales was not dislodged. Merely because the assessee had transacted in breach of the restrictions applicable to specified bank notes did not justify treating the sale proceeds as unexplained under the Income-tax Act when the source of the deposits was otherwise established.

Conclusion: The addition under section 69A was deleted and the cash deposits were held not to be unexplained sources; the issue was decided in favour of the assessee.

Ratio Decidendi: Where the source of cash deposits is shown to be business sales, such deposits cannot be assessed as unexplained merely because the underlying cash transactions were carried out in a manner contrary to the restrictions applicable at the time.

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