Cash deposit additions on estimated basis were partly reduced after the explanation was only partially accepted.

Cash and cheque deposits treated as unexplained were examined on a fact-specific basis, with the assessee's plea of fraudulent bank transactions only partly accepted. The reopening challenge was not pressed and was not decided on merits. Although the lower authorities had already applied an estimated gross profit ratio, no market comparables supported the rate adopted. In the peculiar facts, the additions were further restricted to lump sum amounts for each assessment year, resulting in partial relief to the assessee.

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Issues: Whether the additions made on account of cash deposits and cheque deposits, assessed at 1.5% of the transactions, warranted interference and, if so, to what extent.

Analysis: The reopening challenge was not pressed and was therefore not adjudicated on merits. On the merits, the assessee attributed the deposits to fraudulent bank transactions allegedly carried out by his employer, but the explanation was not accepted in full. The material showed that the lower authorities had already proceeded on an estimated basis by applying a gross profit ratio, yet no market comparables were discussed in support of the rate adopted. In the peculiar facts, a further restricted lump sum addition was considered appropriate for each assessment year.

Conclusion: The additions were reduced to Rs. 5,00,000 for Assessment Year 2011-12 and Rs. 50,000 for Assessment Year 2012-13, and the assessee was granted partial relief.

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