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Issues: (i) Whether the addition made on account of cash deposits in bank was sustainable when the assessee claimed the source as opening cash balance and gifts from parents; (ii) Whether the consequential addition relating to plot registration expenses was sustainable.
Issue (i): Whether the addition made on account of cash deposits in bank was sustainable when the assessee claimed the source as opening cash balance and gifts from parents.
Analysis: The assessee produced books of account showing an opening cash balance reflected in the balance sheet of the preceding year, along with gift deeds evidencing gifts from the mother and father. The donors were regularly assessed to tax and the amounts were within their declared income. The books were not rejected, and the source shown as opening cash balance pertained to the earlier year. The assessee thus discharged the onus of proving the source of the cash deposits, and the addition could not be sustained in the year under consideration.
Conclusion: The addition of cash deposits was deleted and the issue was decided in favour of the assessee.
Issue (ii): Whether the consequential addition relating to plot registration expenses was sustainable.
Analysis: The expenditure on plot registration was claimed to have been met from the same opening cash balance and the gifts accepted for the first issue. Once those sources were accepted, the consequential disallowance could not survive.
Conclusion: The consequential addition was deleted and the issue was decided in favour of the assessee.
Final Conclusion: The appeal succeeded in full, and the additions made by the lower authorities were set aside.
Ratio Decidendi: Where an opening cash balance is duly reflected in the books and the assessee substantiates gifts through gift deeds and tax-compliant donors, the source of cash deposits cannot be treated as unexplained in the current year absent rejection of the books or contrary verification.
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