Bank deposits treated as unexplained money under section 69A overturned where withdrawals explain deposits; appeal allowed

Addition treating bank deposits as unexplained money under section 69A was rejected because documentary records showed the deposits were cash re-deposits traceable to prior withdrawals, establishing nexus between withdrawals and deposits; onus on revenue to prove prior withdrawals were not available at time of deposit was unmet, so deeming fiction could not be invoked. Reliance solely on the deeming provision without adjudicating the assessee's documentary explanation was held unjustified. Consequently the addition under unexplained money provisions was disallowed and the taxpayer's appeal was allowed.

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Issues: (i) Whether the addition of Rs. 1,03,00,000/- made under Section 69A of the Income-tax Act, 1961 treating certain bank deposits as unexplained money was justified.

Analysis: The Tribunal examined the documentary material, including bank statements showing large cash withdrawals from one bank account immediately prior to the cash deposits into another account, and the records of receipts into the withdrawing account from a partnership firm. The Tribunal considered the scope of Section 69A and the settled legal principle that unexplained bank deposits may be taxed as income unless the assessee satisfactorily explains nature and source. The Tribunal contrasted the factual matrix of the present case - direct, proximate and contemporaneous bank entries evidencing withdrawals and subsequent deposits and evidence of credits into the withdrawing account - with cases where no such documentary nexus existed. The Tribunal found that the lower authorities relied on the deeming fiction of Section 69A without adequately addressing the documentary trail relied upon by the assessee and that where documentary evidence establishes that deposits are from earlier withdrawals, the deeming provision cannot be invoked.

Conclusion: The addition of Rs. 1,03,00,000/- under Section 69A is not sustainable and is deleted; the appeal is allowed in favour of the assessee.

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