Cash deposits and bank credits must be tested against earlier withdrawals before treating them as unexplained income.

Cash deposits and bank credits in the same account cannot be treated as unexplained income under section 69A without first considering earlier withdrawals from that account, unless the Revenue shows that the withdrawn cash was used elsewhere or was otherwise unavailable for redeposit. The assessee did not produce adequate documentary support for business activity or the source of the deposits, but the governing principle required verification of the cash flow before the addition could be sustained. The additions were therefore not finally upheld and the matter was remanded to the Assessing Officer for fresh verification and decision according to law.

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Issues: Whether the additions made on account of cash deposits and bank credits as unexplained income under section 69A required deletion or fresh verification, especially in light of the claim that earlier cash withdrawals from the same bank account could explain subsequent deposits.

Analysis: The assessee failed to furnish documentary evidence showing genuine business activity, supply details, transportation evidence, or a satisfactory explanation for the cash deposits and credits. However, the core legal contention was that the entire deposits and credits in the bank account could not be treated as undisclosed income without first giving credit for withdrawals from the same account, unless the Revenue showed that such withdrawals were used elsewhere or were otherwise unavailable for re-deposit. That principle was accepted as applicable, and the matter required verification of the cash flow in the bank account before the addition could be finally sustained.

Conclusion: The additions were not finally sustained and the matter was sent back to the Assessing Officer for fresh verification and decision according to law.

Ratio Decidendi: Where deposits and credits in the same bank account are in issue, withdrawals from that account must be duly considered before treating the entire amount as unexplained income, unless the Revenue establishes that the withdrawn cash was not available for redeposit.

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