No addition can be made u/s 68 in respect of cash deposited in bank a/c out of earlier cash withdrawals:

AO made an addition u/s 68 in respect of cash deposited in bank account considering it to be unexplained. Hon’ble ITAT observed that the assessee had received sale proceeds of shares of ONGC on two occasions which were deposited in a bank account. On the very next of the said sale proceeds being credited in the bank account, sizable sum out of the same was withdrawn by the assessee. After few months, assessee re-deposited certain cash in the very same bank account and assessee claimed that the said deposit was out of the cash withdrawal made earlier. AO made addition u/s 68 in respect of the said cash deposit. Further, Hon’ble ITAT also observed that assessee was an employee of ONGC, had no other occupation and had already offered long term capital gain on sale of shares for tax. It was held that there could be various reasons for an assessee to keep liquid cash in his possession which is not unnatural. Moreover, revenue had not brought any material on record to establish that the assessee had deposited cash other than what he had withdrawn from his bank account. Since the addition u/s 68 was made merely on the basis of presumptions and assumptions, it was harsh and not justifiable. Accordingly, the addition was deleted by the Hon’ble ITAT.

[NAVINCHANDRA RAVJIBHAI CHAVDA Vs. ITO – ITA No.2335/Ahd/2012]