Cash deposits backed by opening stock sales cannot be treated as undisclosed income when the explanation remains unrebutted.

Cash deposits in the assessee's bank account were held not to be unexplained income where they were supported by an explanation that the amounts represented sale proceeds from opening stock during business closure. The assessee's trading activity in artificial goods and flowers, the existence of opening stock, and corroboration from sales tax/VAT returns supported the source of deposits. As the Revenue did not rebut these facts or produce contrary material, the deposits could not be characterised as income from undisclosed sources, and the addition was deleted.

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Issues: Whether cash deposits in the assessee's bank account, claimed to arise from sale of opening stock and business closure sales, could be treated as income from undisclosed sources.

Analysis: The assessee explained that it was trading in artificial goods and flowers, had decided to discontinue the business, and had sold the opening stock at discounted rates, resulting in higher sales during the year. This explanation was supported by the existence of opening stock and by sales tax/VAT returns. The Revenue did not rebut the factual position regarding the opening stock and the source of sales. In the absence of any contrary material, the deposits could not be characterised as unexplained income.

Conclusion: The addition on account of cash deposits was unsustainable and was deleted in favour of the assessee.

Ratio Decidendi: Where cash deposits are shown to be derived from sale proceeds of opening stock and the explanation remains unrebutted, such deposits cannot be treated as undisclosed income.

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