Banking trail evidence can explain cash payment source and defeat an addition for unexplained income under section 69.

Banking records showing the trail of funds can rebut an addition for unexplained income under section 69. The assessee supported the cash payment of LIC premium with his and his father's bank statements, showing withdrawal from the assessee's NRE account, transfer to the father's account, prior available balance, and later cash withdrawal for the premium. The Tribunal found that this contemporaneous evidence was not properly appreciated by the lower authorities and that the explanation was not a bare assertion. On that basis, the source of the cash payment was treated as explained and the addition as unexplained income was deleted.

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Issues: Whether the cash payment of Rs. 8,45,000 towards LIC premium was satisfactorily explained so as to avoid addition as unexplained income under section 69 of the Income-tax Act, 1961.

Analysis: The assessee produced bank statements of his own account and his father's account to show the source of cash that ultimately funded the LIC premium. The material on record showed withdrawal from the assessee's NRE account, transfer into the father's bank account, availability of earlier balance in that account, and subsequent cash withdrawal for the insurance payment. The Tribunal found that these documents were not properly appreciated by the Assessing Officer or the Dispute Resolution Panel, and that the explanation was supported by contemporaneous banking evidence rather than being a bare assertion. On that basis, the Tribunal held that the source of the cash payment stood explained and that the adverse inference drawn below could not be sustained.

Conclusion: The addition made as unexplained income was deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: Where the assessee substantiates the source of a cash payment through reliable banking records showing the trail of funds, an addition for unexplained income cannot be sustained merely on suspicion or incomplete appreciation of the evidence.

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