Cash deposits under section 69A were partly explained by cash withdrawals and records, leading to major deletion of the addition.

Cash deposits could not be treated as wholly unexplained under section 69A where the assessee supported the deposits with cash book entries, month-wise cash summary, bank withdrawals and an explanation for demonetisation-period deposits. The Tribunal accepted that the negative balances in the cash summary arose from computational or recording errors, and found no material showing that withdrawn cash had been diverted elsewhere. It also held that the alleged geographical mismatch and differences between disclosure figures and bank-account level deposits did not justify sustaining the entire addition. The full addition was therefore reduced, with only a restricted addition of Rs. 5 lakhs upheld and the balance deleted.

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Issues: Whether the addition made under section 69A of the Income-tax Act, 1961 on account of cash deposits was liable to be sustained in full or required reduction in view of the assessee's cash withdrawals, cash book, cash flow summary, and explanation of the demonetisation-period deposits.

Analysis: The assessee's explanation for the cash deposits was examined with reference to the cash book, month-wise cash summary, bank withdrawals, and the deposits made during the relevant period. The rejection of the cash book and cash summary by the lower authority rested mainly on alleged negative balances and discrepancies, but the Tribunal accepted the assessee's explanation that the negative figures arose from computational or recording errors. It was also noted that substantial cash withdrawals were shown in the bank records and were not disproved by any material showing diversion of the withdrawn cash elsewhere. The Tribunal further found that the alleged geographical discrepancy and the difference between figures reflected in the firm's disclosure and other bank-account level deposits did not, on the record, justify treating the entire amount as unexplained. The Tribunal declined to admit the additional evidence at that stage, but considered the existing record sufficient to hold that the full addition could not stand.

Conclusion: The addition under section 69A was not sustained in full, and only a restricted addition of Rs. 5 lakhs was upheld; the balance addition was deleted.

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