Presumptive taxation under section 44AD requires business cash deposits to be assessed consistently, not as full unexplained credits.

Where income is estimated under the presumptive taxation scheme of section 44AD, business-linked cash deposits in the assessee's bank account must be assessed consistently with that estimation and not treated as unexplained credits in full. Since the lower authorities had already applied the presumptive rate to estimate turnover, the cash deposits were inferable as part of the same business activity. The peak cash credit could therefore not be sustained at the full credited amount and was directed to be taxed only on the presumptive basis, giving partial relief to the assessee.

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Issues: Whether, after application of presumptive taxation under section 44AD, the cash deposits found in the assessee's account could be treated as business receipts and the peak balance could be assessed at the presumptive rate of 8%.

Analysis: The appeal was confined to the merits of the additions, as the legal challenge to reopening was not pressed. Once the lower authorities themselves applied the presumptive scheme under section 44AD for estimating turnover, the cash deposits were inferable as arising from the same business activity. In that situation, the peak credit balance could not be sustained at the full amount and had to be brought to tax only on the presumptive basis.

Conclusion: The addition relating to the peak cash deposits was directed to be assessed at 8% instead of the full credited amount, resulting in partial relief to the assessee.

Final Conclusion: The order granted relief on the addition relating to cash deposits while leaving the presumptive approach under section 44AD intact, and the appeal was allowed only to that extent.

Ratio Decidendi: Where income is estimated under the presumptive taxation scheme, business-linked cash deposits must be assessed consistently with that estimation and not as unexplained credits in full.

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