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In the case of Aradhna Oil Mills v. CIT (119TAX629) a raid was conducted on the assessee. During such raid it was found that the assessee has deposited cash in his bank account. On being questioned the assessee replied that the amount was withdrawn from the same account from time to time and re-deposited in the account after some time. All the three authorities viz. the assessing officer, the Commissioner (A) and the Tribunal did not accept the explanation of the assessee.

In an appeal preferred under the new section 260A the assessee sought interference of the MP High Court. But the High Court did not admit the appeal. The Court held that the instant question did not involve any question of law much less substantial question of law so as to empower it to admit the appeal. The Court in effect replied that the question whether a particular entry in the account books is genuine or not or whether the assessee is able to show its source is a question of fact and it involves appreciation of evidence tendered by the assessee. Only the first and the second appellate authorities are competent to examine such evidence further. But that exercise is not possible at third stage u/s 260A route.

An important learing can be drawn from the obvious conclusion made in this case that the assessee utilized the cash for purchasing the items in the earlier occasions and did not account for it in its books. It is thus advisable to desist from such actions of re-depositing cash in bank accounts.

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