Presumptive taxation under section 44AD limited an unexplained cash deposit addition to an estimated balance amount.

Cash deposits were examined against business receipts claimed under the presumptive taxation scheme in section 44AD of the Income-tax Act, 1961. The direct nexus between the trading turnover and the deposits was not fully established, but the complete treatment of the deposits as unexplained income was considered unjustified on the facts. The addition was therefore restricted on an estimated basis to a reasonable balance amount instead of sustaining the entire cash deposit addition, resulting in partial relief to the assessee.

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Issues: Whether the assessee's cash deposits could be fully sustained as unexplained income, or whether the presumptive taxation scheme under section 44AD of the Income-tax Act, 1961 warranted partial relief by restricting the addition on an estimate basis.

Analysis: The assessee had been assessed under the presumptive scheme of section 44AD on total sales and relied on the same business results to explain the cash deposits. The direct nexus between the trading receipts and the deposits was not fully established, but complete denial of the presumptive benefit was found unjustified on the facts. The addition was therefore moderated by estimating a reasonable balance amount instead of sustaining the entire cash deposit addition.

Conclusion: The full addition treating the cash deposits as unexplained was not upheld, and the addition was confined to Rs. 2,87,500, granting the assessee relief of Rs. 10 lakhs.

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