Demonetisation cash deposits explained by prior bank withdrawals; section 68 addition deleted where records supported the source.

Cash deposits made during the demonetisation period were treated as prima facie explained where the assessee produced bank statements showing earlier cash withdrawals from the same disclosed account, and the Revenue did not dispute those withdrawals. In the absence of material showing that the withdrawn cash had been spent elsewhere or was unavailable at the time of redeposit, the source of the deposits was not treated as unexplained. A mere time gap between withdrawal and redeposit, or a minor variation in the explanation, was insufficient to sustain an addition when documentary evidence supported the assessee's version. On those facts, the section 68 addition was deleted.

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Issues: Whether cash deposits made during the demonetisation period, stated to be out of earlier cash withdrawals from the same disclosed bank account, could be treated as unexplained cash credit under section 68 of the Income-tax Act, 1961.

Analysis: The assessee produced bank statements showing cash withdrawals of Rs. 63.50 lakhs between April and July 2016 and subsequent cash deposits of Rs. 57 lakhs during the demonetisation period. The withdrawals were not disputed by the Revenue. In the absence of any material to show that the withdrawn cash had been utilised elsewhere or was otherwise unavailable at the time of redeposit, the source of the deposits stood prima facie explained. A mere time gap between withdrawal and redeposit, or minor variation in the explanation, was insufficient to sustain the addition when documentary evidence supported the assessee's version.

Conclusion: The addition made under section 68 was not sustainable and was deleted; the appeal was allowed in favour of the assessee.

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