Bank cash deposits treated as business credits, with profit estimated at 8% and the addition sustained.

Unexplained cash deposits during the demonetisation period were assessed ex parte after non-compliance with notice under section 142(1). The first appellate authority treated the cash withdrawals and deposits in the bank account as part of business transactions and considered that the deposits could have arisen from cash sales. On that basis, the total bank credits were taken into account and profit was estimated at 8%. The sustained addition on that estimate was found justified, and the assessee's challenge was rejected.

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Issues: Whether the addition sustained by the first appellate authority by estimating the profit element at 8% on the total bank credits, including cash deposits treated as business transactions, called for interference.

Analysis: The assessment arose from unexplained cash deposits during the demonetisation period and was completed ex parte after non-compliance with notice under section 142(1). The first appellate authority recorded that the cash withdrawals and cash deposits in the bank account formed part of the assessee's business transactions and also considered the possibility that the deposits were generated from cash sales. On that basis, the total credits in the bank account were taken into account and profit was estimated at 8%.

Conclusion: The addition sustained on estimation of 8% of the total credits was held justified and the assessee's challenge was rejected.

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