Estimated addition for unexplained cash deposits reduced where withdrawals and sales partly explained the deposits.

Cash deposits partly explained by cash sales and cash withdrawals may be assessed on an estimated basis where strict one-to-one correlation cannot be established. In this ITAT Delhi matter, the unexplained portion under section 69A was not treated in full as unexplained money because the explanation was partly accepted but no complete reconciliation was possible. The Tribunal found a further reduction in the estimated addition justified on the facts and in the interest of substantial justice, and restricted the addition to 5% of the balance cash deposits, thereby reducing the confirmed addition in favour of the assessee.

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Issues: Whether the addition made on account of cash deposits treated as unexplained money under section 69A was liable to be restricted further from 10% to 5% of the balance cash deposits.

Analysis: The assessed cash deposits were partly accepted as explained from cash sales and partly from cash withdrawals, but strict one-to-one correlation between deposits and withdrawals was found not possible. The appellate authority had already estimated the unexplained portion at 10% of the balance deposits. Considering the nature of the explanation, the absence of complete reconciliation, and the facts of the case, a further reduction in the estimated disallowance was found justified in the interest of substantial justice.

Conclusion: The addition was reduced to 5% of the balance cash deposits, resulting in a lower confirmed addition in favour of the assessee.

Final Conclusion: The appeal succeeded only to the extent of further reduction of the estimated addition, and the remaining addition stood sustained on a restricted basis.

Ratio Decidendi: Where cash deposits are partly supported by explanation but exact one-to-one linkage with withdrawals cannot be established, the unexplained portion may be estimated on a reasonable basis rather than treated in full as unexplained money.

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