Unexplained cash deposits under section 68 may be restricted to a reasonable estimate where business source is probable.

Cash deposits treated as unexplained under section 68 were not sustained in full because the assessee could not fully prove their source, yet the surrounding facts indicated a probable business origin from wholesale cloth sales. On that mixed evidentiary footing, a full addition was considered excessive and the addition was confined to a reasonable estimate. The tribunal restricted the addition to a limited amount and deleted the balance, granting partial relief to the assessee.

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Issues: Whether the cash deposits treated as unexplained cash credits under section 68 of the Income-tax Act, 1961 called for full addition or only a restricted addition in the assessee's hands.

Analysis: The assessee failed to fully explain the source of the cash deposits by establishing that they arose from cash sales in the wholesale cloth business. At the same time, the revenue authorities could not completely exclude the possibility that the deposits were linked to stock sales and business receipts. In these circumstances, a full addition was found to be excessive and a reasonable estimate was warranted.

Conclusion: The addition was restricted to Rs. 5,00,000 and the balance addition was deleted, resulting in partial relief to the assessee.

Final Conclusion: The dispute on unexplained cash deposits was decided by sustaining only a limited addition on estimate and granting substantial relief to the assessee.

Ratio Decidendi: Where cash deposits are not fully explained but the surrounding facts indicate a probable business source, the addition under section 68 may be confined to a reasonable estimated amount instead of being sustained in full.

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