Cash deposits and unexplained receipts: relief follows proved source, while unverified cash trail claims fail.

Cash deposit additions were deleted where the assessee showed that the amount was a distinct, explained receipt and not the same credit considered in an earlier year. For an alleged advance against agreement to sell, only the part supported by statements and documents was accepted; the balance was rejected because the agreement was unreliable and the payer was not produced. A further set-off against cash withdrawals was denied because no credible cash trail proved that the deposits were redeposited withdrawn cash. The note reflects the principle that explained sources cannot be taxed, but unsupported receipts and unproved withdrawal linkage remain taxable.

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Issues: (i) Whether the addition of Rs. 20,00,000/- towards cash deposits was sustainable when the amount had been explained as a separate transaction. (ii) Whether the cash receipts of Rs. 15,00,000/- claimed as advance against agreement to sell were fully or partly explainable. (iii) Whether benefit of cash withdrawals was allowable against the cash deposits.

Issue (i): Whether the addition of Rs. 20,00,000/- towards cash deposits was sustainable when the amount had been explained as a separate transaction.

Analysis: The remand material showed that the amount of Rs. 20,00,000/- referred to for the year under appeal was distinct from the amount considered in the earlier assessment year. The earlier credit could not be treated as the same receipt for the year in question, and the explanation supported the source of the deposit.

Conclusion: The addition of Rs. 20,00,000/- was deleted in favour of the assessee.

Issue (ii): Whether the cash receipts of Rs. 15,00,000/- claimed as advance against agreement to sell were fully or partly explainable.

Analysis: The agreement relied upon for Rs. 10,00,000/- was found unreliable on surrounding circumstances, including the timing of the stamp paper and the failure to produce the alleged payer, so that part of the claim was not accepted. However, the record did support receipt of Rs. 5,00,000/- from the other claimant through statements and documents, and there was no contrary material to dislodge that explanation.

Conclusion: The addition was sustained to the extent of Rs. 10,00,000/- and deleted to the extent of Rs. 5,00,000/- in favour of the assessee.

Issue (iii): Whether benefit of cash withdrawals was allowable against the cash deposits.

Analysis: The assessee did not establish with credible evidence that the deposits represented redeposit of the same withdrawn cash. In the absence of a proved cash trail, the claimed set-off against withdrawals was not accepted for the remaining unexplained amount.

Conclusion: The claim for further benefit of cash withdrawals was rejected.

Final Conclusion: The assessee obtained partial relief on the source of cash deposits, but the balance addition was sustained after allowing only the proved credits and rejecting the unsubstantiated cash-withdrawal set-off.

Ratio Decidendi: Where cash deposits are supported by reliable evidence of source, the corresponding addition cannot be sustained; but in the absence of credible proof linking deposits to withdrawn cash or proving the genuineness of a claimed receipt, the unexplained portion remains taxable.

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