Explained cash deposits deleted where bank records and accepted receipts established a proximate source for the funds.

Cash deposits were held to be explained where bank records showed a prior cash withdrawal and the first appellate premise that the withdrawal was by cheque was incorrect. The addition of Rs. 10,01,000 was deleted because the deposit was made shortly after the cash withdrawal from another account. A further deposit of Rs. 2,00,000 was also accepted as explained, as the assessment records had already accepted cash receipt from Ms. Swati and the surrounding banking entries supported the assessee's explanation. The substantive additions were therefore deleted, giving relief to the assessee.

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Issues: (i) Whether the cash deposit of Rs.10,01,000 in the bank account was satisfactorily explained from the cash withdrawal from another bank account. (ii) Whether the cash deposit of Rs.2,00,000 was satisfactorily explained from the cash receipt from Ms. Swati and related banking entries.

Issue (i): Whether the cash deposit of Rs.10,01,000 in the bank account was satisfactorily explained from the cash withdrawal from another bank account.

Analysis: The bank statement showed that the withdrawal of Rs.25,85,000 was by way of cash withdrawal and not by clearing of cheque, while the impugned deposit of Rs.10,01,000 was made shortly thereafter. The premise adopted in the first appellate order that the withdrawal was by clearing was found to be incorrect on the record.

Conclusion: The source of the cash deposit stood explained and the addition of Rs.10,01,000 was deleted, in favour of the assessee.

Issue (ii): Whether the cash deposit of Rs.2,00,000 was satisfactorily explained from the cash receipt from Ms. Swati and related banking entries.

Analysis: The assessment records accepted receipt of cash of Rs.6.50 lakhs from Ms. Swati, and there was no finding that the said cash had been deployed elsewhere. The surrounding bank entries also supported the assessee's explanation that the cash deposit of Rs.2,00,000 was traceable to the returned cheque transaction and the cash received from Ms. Swati.

Conclusion: The source of the cash deposit of Rs.2,00,000 was explained and the addition was deleted, in favour of the assessee.

Final Conclusion: The appeal succeeded on the substantive additions and failed only on the rejected challenge to the first appellate findings, resulting in relief on both disputed cash additions.

Ratio Decidendi: Where the bank records and accepted facts establish a direct or proximate source for a cash deposit, an addition for unexplained cash credit cannot be sustained.

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