Section 69A explanations supported by bank and cash-book records defeat unexplained-money additions; running-account withdrawals are not deemed dividends.
Cash supported by documented bank withdrawals, available cash balances and contemporaneous cash-book entries is not unexplained money where no contrary evidence establishes a different source. Once the taxpayer provides this explanation, the evidentiary burden shifts to the Revenue; an accountant's statement without cross-examination does not displace it. Business accruals may be assessed as business income rather than unexplained money. Withdrawals from a regularly maintained company-shareholder running account do not constitute deemed dividend when an adequate credit balance in favour of the shareholder supports the withdrawals.
Issues: (i) Whether cash of Rs. 50 lakh could be assessed as unexplained money under Section 69A where Rs. 44 lakh was supported by bank withdrawals and Rs. 6 lakh was claimed as internal business accruals; (ii) Whether withdrawals from a company's running account constituted deemed dividend under Section 2(22)(e) despite a sufficient credit balance; and (iii) Whether cash deposits recorded in the cash book during the demonetisation period could be treated as unexplained money under Section 69A.
Issue (i): Whether cash of Rs. 50 lakh could be assessed as unexplained money under Section 69A where Rs. 44 lakh was supported by bank withdrawals and Rs. 6 lakh was claimed as internal business accruals.
Analysis: Section 69A requires the assessee to explain the source of money found. Documentary evidence established withdrawals of Rs. 44 lakh from the stated bank accounts, and no cogent material established that the seized cash had a different source. Once this explanation was furnished, the evidentiary burden shifted to the Revenue. Reliance on an accountant's statement without affording cross-examination did not displace the explanation. As regards Rs. 6 lakh, no enquiry or material demonstrated an unexplained source; the amount was appropriately characterisable as business income rather than unexplained money.
Conclusion: The addition of Rs. 44 lakh under Section 69A is unsustainable; Rs. 6 lakh is assessable as business income and not as unexplained money.
Issue (ii): Whether withdrawals from a company's running account constituted deemed dividend under Section 2(22)(e) despite a sufficient credit balance.
Analysis: The account between the shareholder and the company was a regularly maintained running account with a sufficient credit balance in favour of the shareholder. The withdrawals were therefore attributable to that existing credit balance and normal account operations, rather than to a distribution of accumulated profits.
Conclusion: The withdrawals do not constitute deemed dividend under Section 2(22)(e), and the related addition is deleted in favour of the assessee.
Issue (iii): Whether cash deposits recorded in the cash book during the demonetisation period could be treated as unexplained money under Section 69A.
Analysis: The deposits were supported by the cash book, available cash balances, and cash received in the ordinary course of business. No contrary evidence rebutted the recorded availability of cash or established that the deposits were from unexplained sources.
Conclusion: The cash deposits cannot be treated as unexplained money under Section 69A, and deletion of the addition is upheld in favour of the assessee.
Final Conclusion: The documented bank withdrawals, established credit balance in the running account, and cash-book evidence sufficiently explain the respective amounts; the additions based on unexplained money and deemed dividend are therefore not sustainable, except for assessment of Rs. 6 lakh as business income.