Cash deposits taxed as estimated business income at 8% where deposits appeared linked to seed trading activity.

Cash deposits in the assessee's bank accounts were not treated in full as unexplained income where the record indicated a seed trading licence and the deposits appeared linked to an agricultural input business. The assessment, made on best judgment under sections 144 and 147 because supporting material was not produced during assessment and first appeal, was found too broad on the available facts. The Tribunal held that only estimated business income could be brought to tax and adopted 8% of the cash deposits as a reasonable estimate for both years, giving the assessee partial relief and directing recomputation on that basis.

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Issues: Whether the cash deposits in the assessee's bank accounts for the relevant assessment years could be assessed in full as unexplained income, or whether only estimated business income could be brought to tax.

Analysis: The assessment had been framed on best judgment basis under sections 144 and 147, and the additions were made because the assessee could not furnish supporting material during assessment and first appellate proceedings. On the record before the Tribunal, the assessee had a licence for sale and purchase of seeds and the cash deposits appeared to have been used in the agricultural input business. In these circumstances, the whole of the deposits was not treated as taxable income. A reasonable estimate of business income at 8% of the cash deposits was found appropriate for both years.

Conclusion: The additions were reduced by directing the Assessing Officer to recompute income by applying 8% on the cash deposits, granting partial relief to the assessee.

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