Cash deposits explained by earlier withdrawals: Revenue must rebut the presumption before treating them as unexplained income.

Where an assessee shows that earlier cash withdrawals exceeded later cash deposits, a reasonable presumption may arise that the deposits were sourced from those withdrawals. The assessee's plausible explanation shifts the burden to the Revenue to rebut it with positive material showing the withdrawn cash was used elsewhere. In the absence of such evidence, cash deposits cannot be treated as unexplained under section 69A of the Income-tax Act, 1961, and the addition is unsustainable. On these facts, the impugned addition was deleted.

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Issues: Whether cash deposits in the assessee's bank account could be treated as unexplained under section 69A of the Income-tax Act, 1961 when earlier cash withdrawals exceeded the deposits.

Analysis: The assessee established that cash withdrawals from the bank had been made before the deposits and that the withdrawals were more than the deposits. On these facts, a reasonable presumption arose that the deposits were made out of the earlier withdrawals. The Revenue did not produce any material to show that the withdrawn cash had been used elsewhere. Once a plausible explanation was offered, the burden shifted to the Revenue to disprove it with evidence. In the absence of such evidence, the adverse inference drawn by the lower authorities could not be sustained.

Conclusion: The addition under section 69A was held to be unsustainable and was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned addition was set aside.

Ratio Decidendi: Where an assessee shows that earlier cash withdrawals exceeded later cash deposits, a reasonable presumption may be drawn that the deposits came from those withdrawals, and the Revenue must rebut that explanation with positive material before treating the deposits as unexplained.

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