Documentary proof of earnest money refund explained cash deposits, leading to deletion of the unexplained investment addition.

Documentary evidence showing that cash deposits came from the return of earnest money on cancellation of a property agreement was accepted as a satisfactory source explanation. The agreement bore a cancellation endorsement signed by the parties and a witness, and the additional evidence was sent to the Assessing Officer in remand without rebuttal. On that basis, the material on record was held sufficient to explain the bank deposits, and the addition as unexplained investment was deleted.

---

---

Issues: Whether the cash deposits of Rs. 18 lakhs in the assessee's bank account constituted unexplained investment or stood explained by the refund of earnest money on cancellation of an earlier agreement to purchase property.

Analysis: The assessee produced additional evidence showing that the cash deposits were sourced from the return of earnest money received on cancellation of the agreement dated 09.01.2005. The agreement itself carried a cancellation endorsement on its reverse side, signed by the parties and a witness, stating that the earnest money of Rs. 25 lakhs had been taken back and the agreement stood cancelled. The additional evidence was forwarded to the Assessing Officer in remand, but there was no rebuttal of the assessee's explanation. In these circumstances, the material on record was sufficient to explain the source of the deposits, and the view taken by the lower authorities was found unsustainable.

Conclusion: The addition of Rs. 18 lakhs as unexplained investment was deleted and the explanation of the assessee was accepted.

Ratio Decidendi: Where documentary evidence satisfactorily establishes the source of a cash deposit and the Revenue does not rebut it in remand proceedings, the deposit cannot be treated as unexplained income or investment.

---