Presumptive taxation and bank deposits: estimated profit addition is unsustainable where receipt variation is not material.

Where income is already declared under the presumptive taxation scheme, further addition on estimated profit from bank deposits is not justified if the receipt variation is not material on the facts. In a cloth trading matter, the assessee had disclosed income at 8% of declared turnover under Section 44AD while deposits were found in two bank accounts. The ITAT Ahmedabad treated the disputed receipts as not amounting to a material turnover discrepancy and held that the estimated addition made by the Assessing Officer could not stand. The assessee's returned income was therefore accepted and no further addition survived.

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Issues: Whether any addition was warranted to the assessee's returned income on the basis of bank deposits and estimated profit, despite the income already being declared under the presumptive scheme.

Analysis: The assessee was engaged in cloth trading and maintained two bank accounts through which deposits were found. The income had already been offered under the presumptive taxation scheme at 8% of the declared turnover under Section 44AD of the Income-tax Act, 1961. The disputed receipts were treated as not constituting material turnover variation, and the difference was regarded as non-material in the facts of the case. On that basis, the estimated addition made by the Assessing Officer was held to be unsustainable.

Conclusion: No addition was called for, and the issue was decided in favour of the assessee.

Final Conclusion: The assessee's returned income was accepted and the addition based on the bank deposits did not survive.

Ratio Decidendi: Where income is already declared under the presumptive taxation provisions and the variation in receipts is not material on the facts, further addition on estimated profit from bank deposits is not justified.

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