Presumptive business income supported cash deposits, so unexplained income addition for bank deposits was deleted.

Cash deposits in a vegetable trader's bank account were treated as explainable business receipts where the assessee's return under presumptive taxation was accepted and the declared turnover was consistent with the deposits. Because the Assessing Officer had accepted the assessee's vegetable business and no alternative cash source or other cash activity was shown, attribution of the deposits as unexplained income was found unsustainable. The addition under section 69A was therefore deleted, on the stated facts, in favour of the assessee.

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Issues: Whether the cash deposits of Rs. 15,10,000 in the assessee's bank account were liable to be taxed as unexplained income under section 69A of the Income-tax Act, 1961, or were attributable to the assessee's vegetable business assessed on presumptive basis under section 44AD of the Income-tax Act, 1961.

Analysis: The assessee's return under section 44AD was accepted by the Assessing Officer, who also accepted that the assessee was engaged in vegetable business with gross receipts of Rs. 15,80,550. In a cash-based business such as vegetable trading, the deposits in the bank account of Rs. 15,10,000 were found to be commensurate with the accepted business turnover. No other cash activity or alternative source was shown by the Revenue. On these facts, the attribution of the bank deposits to unexplained sources was held to be unsustainable.

Conclusion: The addition made under section 69A was deleted and the issue was decided in favour of the assessee.

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