Presumptive taxation and cash deposits: addition restricted to the profit element to avoid double taxation.

Cash deposits treated as unexplained under section 69A were held taxable only to the extent of the profit element already embedded in turnover disclosed under section 44AD. Because the same receipts had formed part of business turnover for presumptive taxation, taxing the full deposits again would duplicate the income already brought to tax on a profit basis. The addition was therefore restricted to 6.52% of the disputed cash deposits, and the assessee obtained partial relief from taxation of the entire amount.

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Issues: Whether the addition on account of cash deposits was to be sustained in full or restricted to the profit element already embedded in the business turnover disclosed under section 44AD.

Analysis: The impugned deposits were treated as unexplained cash under section 69A, but the disclosed turnover already included the same amount for the purpose of estimating business income under section 44AD. Since only the profit component of the disclosed receipts was subjected to tax under the presumptive scheme, taxing the entire deposits again would result in double taxation to that extent. Relief was therefore confined to the profit rate applied to the disputed deposits.

Conclusion: The addition was upheld only to the extent of 6.52% of the cash deposits, and the assessee obtained partial relief against taxation of the entire amount.

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