Cash deposits treated as unexplained only after credit for accepted withdrawals and declared business income is given.

Cash deposits in the assessee's bank account could not be treated as wholly unexplained where earlier cash withdrawals had been accepted and were found to have a substantial nexus with the deposits. The tribunal also recognised declared business income from dairy activity under section 44AD as an additional source for part of the cash. On that factual basis, the full addition was unsustainable and credit had to be given for both withdrawals and declared income. The addition was therefore confined only to the balance remaining after such adjustment.

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Issues: Whether the addition made on account of cash deposits as unexplained money was sustainable in full, and whether the assessee was entitled to set off cash withdrawals and declared business income against the deposits.

Analysis: The assessee's bank account reflected both cash withdrawals and cash deposits during the relevant period, and the withdrawals were accepted as having a nexus with medical exigencies. On the material available, the deposited cash was found to be linked to earlier withdrawals to a substantial extent. The excess remaining after matching deposits against withdrawals was further examined with reference to declared income from dairy business under section 44AD, which provided an additional source for part of the deposits. In these circumstances, the entire deposit could not be treated as unexplained.

Conclusion: The addition was restricted to the balance amount after giving credit for cash withdrawals and declared income, and the assessee succeeded only to that extent.

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