Unexplained expenditure under section 69C fails where deposits are traceable to undisputed cash withdrawals.

Where cash deposits are shown to have emanated from prior cash withdrawals and the revenue does not dispute the source of those withdrawals, an addition for unexplained expenditure under section 69C cannot stand. The Tribunal found that the withdrawals were not disproportionate to the declared gross receipts and that the lower authorities had not doubted the availability of cash with the assessee. On that factual basis, the deposits were treated as traceable to explained funds already in hand, and the addition was deleted.

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Issues: Whether the addition sustained under section 69C for unexplained expenditure was liable to be deleted where the deposits were sourced from cash withdrawals and the source of the withdrawals was not doubted.

Analysis: The appeal arose from an assessment made under section 144. The Tribunal noted that the cash withdrawals were not disproportional to the declared gross receipts and that the lower authorities had not questioned the source of the assessee's withdrawals. On that footing, the deposit in question was treated as traceable to withdrawals already available with the assessee, and the basis for treating it as unexplained expenditure was not made out.

Conclusion: The addition under section 69C was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The impugned addition did not survive judicial scrutiny, and the assessee succeeded in the appeal.

Ratio Decidendi: Where the revenue does not dispute the source of cash withdrawals and the deposits are shown to emanate from those withdrawals, an addition for unexplained expenditure under section 69C cannot be sustained.

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