Cash deposits explained by business records cannot be taxed as unexplained money without rebuttal or contrary evidence.

Cash deposits in the assessee's bank account were explained through business receipts, cash realised from debtors and redeposit of withdrawn cash, supported by month-wise cash flow statements, debtor details and sale records. The ITAT Raipur found that the Revenue did not independently verify the material or produce contrary evidence to show any undisclosed source. In the absence of rebuttal, the deposits could not be treated as unexplained money under section 69A merely on suspicion or because they were made during the demonetisation period. The addition under section 69A was therefore deleted.

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Issues: Whether cash deposits made in the assessee's bank account for the assessment years 2016-17 and 2017-18 could be assessed as unexplained money under section 69A of the Income-tax Act, 1961 despite the assessee furnishing cash flow statements, debtor details and sale records to explain the source of deposits.

Analysis: The assessee explained the deposits as arising from business receipts, cash realised from debtors and redeposit of cash withdrawn from the bank. The explanation was supported by month-wise cash flow statements and supporting transaction details. The Department did not carry out independent verification of the material produced and did not bring any contrary evidence to show an undisclosed source of income. In the absence of a rebuttal to the explanation offered, and having accepted the assessee's business activity, the cash deposits could not be treated as unexplained merely on suspicion or on the ground that the deposits were made during the demonetisation period.

Conclusion: The addition under section 69A was held unsustainable and was deleted.

Ratio Decidendi: Where the assessee furnishes a plausible and supported explanation for cash deposits and the Revenue fails to rebut it by enquiry or contrary evidence, the deposits cannot be taxed as unexplained money under section 69A of the Income-tax Act, 1961.

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