Unexplained cash deposits: ad hoc percentage additions cannot substitute for cogent rebuttal; addition deleted on accepted explanation.

Where cash-deposit explanations supported by contemporaneous books, receipts and bank records are found substantially correct and not rebutted by cogent evidence, the deeming provision for unexplained money cannot be applied by way of ad hoc percentage uplift; the Tribunal rejected a sustained 10% estimation as unsupported and held that revenue must positively disprove the assessee's accountal, with any genuine adjustment in cooperative pass-through receipts to be traced to real recipients rather than imposed on the society; the addition was deleted and the appeal allowed.

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Issues: Whether the addition of Rs. 14,57,208 (10% of cash deposits of Rs. 1,45,72,081) as unexplained money under Section 69A of the Income-tax Act, 1961 is sustainable.

Analysis: The Tribunal examined whether the Assessing Officer and the Commissioner of Income Tax (Appeals) had positively disproved the assessee's explanation for the cash deposits. The assessee had furnished cash books, receipts, bank statements and other records showing the deposits arose from members' fresh deposits and loan recoveries, and the appellate authority accepted the overall explanation but sustained an ad hoc 10% addition without independent evidence. The Tribunal held that where the explanation for cash deposits is found to be substantially correct and is not rebutted by cogent evidence, the deeming provision cannot be invoked to make an addition merely on suspicion or by an unsubstantiated percentage uplift. The Tribunal also noted that ad hoc quantification and the invocation of a nebulous concept of "safeguarding revenue" cannot substitute for positive evidence disproving the assessee's accountal, and that, in the case of pass through receipts of a cooperative, any genuine addition, if at all, should be traced to the real recipients rather than imposed ad hoc on the society.

Conclusion: The addition of Rs. 14,57,208 made under Section 69A is deleted; the assessee's appeal is allowed in respect of the disputed addition.

Ratio Decidendi: Where the assessee's explanation for cash deposits is accepted as substantially correct and not disproved by the revenue with cogent evidence, no addition under the deeming provision for unexplained money may be made by way of ad hoc or estimated percentages.

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