Unexplained cash credit fails where prior bank withdrawals support later deposits and Revenue shows no contrary use of funds.

Cash deposits during the demonetisation period were not treated as unexplained income where the assessee showed earlier withdrawals from his own bank account and linked the later deposits to those withdrawals. The Revenue's failure to produce positive material showing that the withdrawn cash had been spent, invested, or otherwise become unavailable meant the explanation remained unrebutted. A mere time gap between withdrawal and redeposit, or reliance on assumptions about normal conduct, was held insufficient. The addition for unexplained cash credit was therefore deleted in favour of the assessee.

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Issues: Whether cash deposits made in the assessee's bank account during the demonetisation period could be treated as unexplained income when the assessee showed earlier cash withdrawals from his own bank account and there was no finding that the withdrawn cash had been utilised elsewhere.

Analysis: The assessee established that cash had earlier been withdrawn from his bank account and that the later deposits were out of such withdrawn cash. The Department did not bring any positive material to show that the withdrawn cash was spent, invested, or otherwise unavailable with the assessee at the time of re-deposit. Mere reliance on the time gap between withdrawal and re-deposit, or on assumptions about normal human conduct, was held insufficient to displace the assessee's explanation. In the absence of contrary evidence, the addition could not be sustained as an unexplained cash credit.

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

Ratio Decidendi: Where an assessee substantiates that cash deposited in the bank came from prior withdrawals and the Revenue fails to show that the withdrawn cash was utilised for any other purpose, the deposit cannot be treated as unexplained income merely because of a time gap or suspicion.

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