The AO added back the entire credit entries (deposits) as unexplained income under section 68 because the assessee could not provide documentary evidence to explain the source of the deposits.

Held that there were equivalent withdrawals and immediate transfers of the same amounts to another entity. This indicates that the deposits may have been related to routine business operations or cash flow movements rather than unexplained or illegal income. The account was opened for business purposes, the deposits could represent business receipts or cash inflows, and the corresponding withdrawals might indicate business expenses or other operational costs. Instead of treating the entire deposit as unexplained income, the proper course of action would be to add back the withdrawals, which represent the business expenses or transfers, or to apply a net profit rate on the total deposits (since they could reflect business activities and not personal income). The entire deposit should not be treated as unexplained income, as the corresponding withdrawals and transfers suggest a legitimate business activity or cash flow.(AY.. 2009-10)