Unexplained cash deposits: Tribunal limits taxation to a 2% profit element, rejecting assessment of the full bank deposits.

Cash deposits in a bank account were examined to determine whether the full amount could be treated as unexplained money under section 69A and taxed under section 115BBE, or whether only an estimated profit element should be assessed. The Tribunal noted continuous deposits and withdrawals, but also found no corresponding lavish expenditure or investment and relied on comparable reasoning in connected matters involving the same banking channel. It held that the entire deposits could not be brought to tax as income and directed estimation of income at 2% of the deposits, granting partial relief.

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Issues: Whether the entire cash deposits in the assessee's bank account could be treated as unexplained money under section 69A and taxed under section 115BBE, or whether only a reasonable profit element should be brought to tax.

Analysis: The assessee's account showed continuous deposits and withdrawals, and the explanation that the deposits represented business receipts was not accepted by the lower authorities for want of supporting evidence. The Tribunal noted, however, that the record did not show any corresponding lavish expenditure or investment by the assessee, and that in similar matters involving the same banking channel, a percentage-based estimation of income had been adopted. Following the comparable reasoning already applied in connected facts, the Tribunal held that the entire deposits could not be taxed as income and that only a reasonable profit element was liable to be assessed.

Conclusion: The addition of the whole deposit amount was not sustained; the Assessing Officer was directed to estimate income at 2% of the deposits, resulting in partial relief to the assessee.

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