Bank credits used for client tax remittances were not unexplained money where records showed matching debits and conduit activity.

Cash deposits in the assessee's bank accounts were held not to be unexplained money under section 69A where bank statements, challans and an affidavit showed the amounts were collected from clients only to remit their statutory tax dues. Matching debits in the accounts corresponded to payments made to government authorities, supporting the finding that the assessee acted merely as a conduit and that the deposits were not its own income. The addition treating the credits as unexplained was therefore deleted.

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Issues: Whether cash credits deposited in the assessee's bank accounts, stated to have been collected from clients and utilised for payment of their statutory dues, could be treated as unexplained money under section 69A of the Income-tax Act, 1961.

Analysis: The documentary material, including bank statements, challans and the affidavit, showed that the assessee received monies only for remittance of clients' tax liabilities and that the corresponding debits in the bank accounts matched the tax payments made to government authorities. The lower authorities had treated the credits as unexplained without giving due weight to the matching debits and the surrounding evidence demonstrating that the assessee acted only as a conduit. On the overall facts, the deposits were found not to represent the assessee's own income.

Conclusion: The addition made by treating the bank credits as unexplained could not be sustained and was directed to be deleted, in favour of the assessee.

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