Unexplained cash deposit additions fail where the assessee's explanation is plausible and penalty direction becomes infructuous.

Cash deposits were held not to be assessable as unexplained money under section 69A where the assessee, assessed under the presumptive scheme and not maintaining regular books, offered a plausible explanation based on past savings and business receipts. The absence of a cash book was not, by itself, enough to reject that explanation on the facts. The direction to initiate penalty proceedings under section 270A was also set aside as premature and infructuous because no enhancement of income was made by the appellate authority and the underlying addition itself did not survive.

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Issues: (i) Whether the addition made on account of cash deposit treated as unexplained money under section 69A was sustainable; (ii) Whether the direction to initiate penalty proceedings under section 270A was valid.

Issue (i): Whether the addition made on account of cash deposit treated as unexplained money under section 69A was sustainable.

Analysis: The assessee was assessed under the presumptive scheme and was not maintaining regular books of account. The explanation that the cash deposit came from past savings and business receipts was accepted as plausible on the totality of facts, and there was no sufficient basis to disbelieve the explanation merely because supporting cash-book evidence was not available.

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

Issue (ii): Whether the direction to initiate penalty proceedings under section 270A was valid.

Analysis: The appellate direction to initiate penalty was held to be premature and infructuous since no enhancement of income had been made by the appellate authority, and the substantive addition itself did not survive.

Conclusion: The penalty direction was set aside and the issue was decided in favour of the assessee.

Final Conclusion: The tax addition and the penalty direction did not survive, and the appeal succeeded in full.

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