Unexplained cash credit requires corroborative evidence; cash deposits linked to sale proceeds were treated as capital gains relief.

Delay in filing the appeal was condoned on the facts, the explanation being accepted as sufficient cause with no deliberate default or demonstrated prejudice. On the merits, cash deposits in the assessee's bank account were treated as part of the sale consideration of a capital asset, not as unexplained cash credit, because the deposits closely followed the sale transaction and the Revenue produced no rebuttal material. The decision applies the principle that suspicion cannot substitute for evidence, and that an addition as unexplained income requires corroborative material linking the deposits to untaxed receipts. The addition was deleted and the assessment was directed to be reframed accordingly.

---

---

Issues: (i) whether the delay in filing the appeal should be condoned; (ii) whether cash deposits in the assessee's bank account were to be taxed as unexplained cash credit or treated as part of the sale consideration of a capital asset and assessed under capital gains.

Issue (i): whether the delay in filing the appeal should be condoned.

Analysis: The explanation for the delayed filing was accepted on the facts and circumstances. The Court applied the settled approach that sufficient cause should receive a liberal construction where the delay is not deliberate and no prejudice is caused by considering the matter on merits.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): whether cash deposits in the assessee's bank account were to be taxed as unexplained cash credit or treated as part of the sale consideration of a capital asset and assessed under capital gains.

Analysis: The assessee's explanation was that the deposits represented on-money received in connection with the sale of a capital asset, and the deposits closely followed the sale transaction. The Revenue did not bring material to rebut this explanation. The finding was reached on the basis of preponderance of probability, with emphasis that suspicion, however strong, cannot replace evidence and that an addition as unexplained cash credit requires some corroborative material linking the deposits to untaxed income.

Conclusion: The cash deposits were directed to be treated as an integral part of the sale consideration and not as unexplained cash credit.

Final Conclusion: The addition was set aside and the assessment was to be reframed by treating the disputed deposits as part of the sale transaction, resulting in relief to the assessee.

Ratio Decidendi: An addition under the head unexplained cash credit cannot rest on suspicion alone; where surrounding facts and probabilities support the assessee's explanation and the Revenue fails to produce rebuttal evidence, the receipt may be treated in accordance with the proved transaction rather than as unexplained income.

---