Cash deposits explained by earlier withdrawals and cash book entries cannot sustain an addition without contrary evidence.

Cash deposits were held not to justify an addition under section 68 where the assessee showed that identical sums had been withdrawn from the same bank account a few days earlier and recorded in the cash book. The Tribunal accepted that the cash balance existed before redeposit and noted that the Assessing Officer produced no contrary material to show the money had been spent elsewhere or that the books were unreliable. Mere suspicion about the deposit pattern was insufficient to discredit the explanation, so the addition for unexplained cash credits was deleted.

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Issues: Whether the addition made under section 68 on account of cash deposits of Rs. 27,00,000 was sustainable when the assessee explained that the deposits represented cash withdrawn from the same bank account a few days earlier and reflected in the cash book.

Analysis: The assessee produced the bank account and cash book to show withdrawal of identical amounts on earlier dates and redeposit of the same cash on subsequent dates. The record showed that the cash balance existed in the books before redeposit and the Assessing Officer did not bring any contrary material to show that the withdrawn cash had been spent elsewhere or that the books were unreliable. Mere suspicion about the pattern of deposit, without evidence rebutting the book entries and withdrawals, was insufficient to sustain the addition.

Conclusion: The addition under section 68 was not justified and was deleted. The issue was decided in favour of the assessee.

Ratio Decidendi: Where cash deposits are duly explained by earlier withdrawals from the same bank account and supported by the cash book, an addition for unexplained cash credits cannot be sustained in the absence of contrary evidence discrediting the explanation.

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