Unexplained cash deposits and gifts fail when source, genuineness and creditworthiness are not proved by credible evidence.
Cash deposits claimed as land sale proceeds and cash gifts must be supported by credible evidence of source, genuineness and donor capacity; unsupported explanations may be rejected on the test of human probabilities. In the stated facts, absence of title and registered sale deeds, lack of reliable proof of transfer and receipt, and no convincing verification of the alleged donor's financial capacity led to adverse inference. The surrounding circumstances were found inconsistent with the assessee's explanation, so the cash deposit and the gift were treated as unexplained and the additions were sustained.
Issues: (i) Whether the cash deposit of Rs.11,60,000 was satisfactorily explained as sale proceeds of land so as to avoid addition as unexplained money; (ii) Whether the cash gift of Rs.1,00,000 from the assessee's mother-in-law was genuine and supported by the donor's creditworthiness.
Issue (i): Whether the cash deposit of Rs.11,60,000 was satisfactorily explained as sale proceeds of land so as to avoid addition as unexplained money.
Analysis: The assessee failed to produce the title deed, registered sale deed, or reliable evidence showing actual transfer and receipt of consideration. No effective proof was furnished to link the cash deposit with the alleged sale proceeds, and no summons or verification of the attorney holder was pursued by the assessee. The explanation based on an earlier capital gains return and a cash flow statement was found inconsistent with the surrounding circumstances, including the later sale deeds and the manner of cash deposit. Applying the test of human probabilities, the explanation was held to be unconvincing and the assessee failed to discharge the burden of proving the source of the cash deposit.
Conclusion: The cash deposit of Rs.11,60,000 was held to be unexplained and the addition was sustained, against the assessee.
Issue (ii): Whether the cash gift of Rs.1,00,000 from the assessee's mother-in-law was genuine and supported by the donor's creditworthiness.
Analysis: Mere identity of the donor and a gift certificate were found insufficient. The donor's bank balance and financial capacity did not support the claim, and no convincing material showed that the donor had the means to make the gift or that the cash came from any identifiable source. The explanation that the donor had received money from the attorney holder was also unsupported. The surrounding circumstances indicated that the gift was not a natural or genuine transaction.
Conclusion: The gift of Rs.1,00,000 was held not to be genuine and the addition was sustained, against the assessee.
Final Conclusion: The Revenue's appeal succeeded, and both additions made by the Assessing Officer were restored.
Ratio Decidendi: An assessee claiming that cash deposits or gifts are explained must prove the source, genuineness, and creditworthiness with credible material; where the explanation is unsupported and improbable on surrounding facts, the taxing authority may draw adverse inference and sustain the addition.