Business-linked cash deposits taxed on estimated profit basis; section 115BBE held inapplicable for the relevant period.

Where cash deposits are prima facie linked to business turnover already subjected to profit estimation, the tax effect should be computed on that estimated profit basis rather than treated as a full unexplained addition under section 68. The Tribunal directed assessment of the impugned deposits at 5% in line with the existing profit estimate. It also held that section 115BBE could not be applied to these deposits because that special rate provision was not applicable to the relevant period and circumstances, so the computation had to proceed under the normal provisions.

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Issues: (i) Whether the cash deposits treated as unexplained under section 68 required reassessment as part of business turnover and could be taxed only to the extent of estimated profit; (ii) whether section 115BBE could be applied to the impugned cash deposits.

Issue (i): Whether the cash deposits treated as unexplained under section 68 required reassessment as part of business turnover and could be taxed only to the extent of estimated profit.

Analysis: The assessee had already suffered estimation of net profit on the business turnover. In that factual setting, the cash deposits were treated as prima facie forming part of the business receipts, though not separately reconciled by the lower authorities. The existing profit estimation was taken as the proper basis for computing the tax effect on the deposits.

Conclusion: The addition was not sustained in full and the Assessing Officer was directed to assess the impugned cash deposits at 5% in line with the profit estimation.

Issue (ii): Whether section 115BBE could be applied to the impugned cash deposits.

Analysis: The Tribunal followed the view that section 115BBE applies only to transactions on or after 01.04.2017. The relevant assessment year and the nature of the deposits did not justify invoking that provision for the impugned computation.

Conclusion: The consequential computation was directed to be made under the normal provisions and not under section 115BBE.

Final Conclusion: The appeal succeeded in part, with relief granted on the treatment of cash deposits and on the applicability of the special rate provision, while the ground not pressed was not adjudicated.

Ratio Decidendi: Where cash deposits are prima facie linked to business turnover already subjected to profit estimation, the tax effect should follow that estimated business profit basis, and section 115BBE cannot be invoked for transactions outside its applicable temporal scope.

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