Unexplained Income under Section 69A cannot be sustained where bank withdrawals and utilisation are satisfactorily documented.

Where cash withdrawals originate from disclosed bank accounts and the assessee furnishes bank-wise withdrawal records, cash books, site-wise utilisation summaries and vouchers which the revenue does not rebut with specific adverse material, additions under the deeming provision treating such withdrawals as unexplained money are unsustainable; accordingly the contested addition was deleted. Similarly, an unparticularised ad hoc disallowance based on a fixed percentage is impermissible where books and supporting vouchers are produced on remand and no concrete defects are identified; the ad hoc disallowance was deleted.

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Issues: (i) Whether the addition of Rs. 35,87,16,800/- under Section 69A of the Income-tax Act, 1961 treating bank cash withdrawals as unexplained money was unsustainable; (ii) Whether the ad hoc disallowance of Rs. 12,09,21,303/- (5% of claimed expenditure) was permissible in absence of specific defects in books of account.

Issue (i): Whether the Assessing Officer could treat cash withdrawals from disclosed bank accounts as unexplained money under Section 69A when the assessee subsequently furnished documentary evidence of source and utilisation.

Analysis: The Tribunal examined the statutory requirement under Section 69A that addition can be made only where the assessee is owner of money not recorded in books and fails to offer a satisfactory explanation of its source. The assessee produced bank-wise withdrawal charts, main and petty cash books, site-wise and head-wise utilisation summaries, sample vouchers and bills, creditor ledgers and RA bills which were examined in remand proceedings. The Assessing Officer, after perusal, did not point to any specific discrepancy or adverse material to displace the explanations. The Tribunal also relied on consistent authority distinguishing source (withdrawals from disclosed bank accounts) from mere doubt about subsequent utilisation, and noted that if utilisation or genuineness of expenditure is in question, those matters must be examined under relevant provisions rather than by invoking the deeming provision of Section 69A.

Conclusion: In favour of Assessee. The addition of Rs. 35,87,16,800/- under Section 69A is deleted.

Issue (ii): Whether an ad hoc disallowance of 5% of total expenditure is sustainable when the assessee produced books of account and supporting vouchers on remand and the Assessing Officer raised no specific adverse findings.

Analysis: The Tribunal noted that the Assessing Officer made the ad hoc disallowance without identifying particular items as non-genuine or unsupported and while the assessee later furnished comprehensive supporting documents which the AO examined in remand proceedings without recording any specific defect. Established principles prohibit ad hoc disallowances in absence of concrete findings or rejection of books of account. The AO's remand report confirmed cash payments and that payments were within permissible limits under applicable provisions concerning cash payments.

Conclusion: In favour of Assessee. The ad hoc disallowance of Rs. 12,09,21,303/- is deleted.

Final Conclusion: The Tribunal affirms that where withdrawals are from disclosed bank accounts and the assessee furnishes satisfactory documentary evidence of source and utilisation which the revenue does not successfully rebut, additions under Section 69A and unparticularised ad hoc disallowances cannot be sustained; accordingly, the Revenue appeals are dismissed.

Ratio Decidendi: Where the source of cash is established by withdrawals from disclosed bank accounts and the assessee provides satisfactory documentary evidence of utilisation which the Assessing Officer does not rebut with specific adverse material, additions under Section 69A and ad hoc disallowances without targeted findings are unsustainable.

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