Cash credits from bank deposits were only partly unexplained where creditors showed agricultural income and supporting records.

Cash credits arising from bank deposits in creditors' accounts were not fully sustainable as unexplained where the assessee produced confirmations, bank statements and material showing agricultural background. Although the explanation was not entirely satisfactory because similar cash deposits appeared shortly before the loans were advanced, the admitted agricultural income of the creditors could not be ignored altogether. On that basis, the addition was restricted rather than sustained in full, with 50% deleted and the balance maintained.

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Issues: Whether the addition of Rs. 17,51,000 towards cash credits made on account of deposits in the bank accounts of the alleged creditors was justified in full.

Analysis: The assessee furnished confirmations, bank statements and material relating to the agricultural background of the creditors. The lower authority accepted that the creditors had some agricultural income, but doubted the explanation because cash deposits of similar amounts were made shortly before the loans were advanced. On the record, the explanation was not wholly satisfactory, yet the admitted agricultural income of the creditors could not be ignored altogether. In these circumstances, the entire amount could not be sustained as unexplained.

Conclusion: The addition was not sustainable in full and was rightly restricted; 50% of the addition was deleted, and the remaining addition stood sustained. The issue was decided partly in favour of the assessee.

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