Accepted sales and unrejected books limit cash-deposit additions to estimated profit, while reassessment approval defects do not invalidate reopening.
Reassessment objections based on alleged defective approval under section 151 were rejected, as the approval was treated as administrative and supervisory and defects in reasons, authentication, or communication did not invalidate the reopening. On the cash-deposit issue, accepted trading sales, import records, invoices, inventory details, bank payments, and audited accounts showed that the books were not rejected under section 145(3), so the entire bank deposits could not be taxed as unexplained credits under section 68. The proper approach was to estimate profit embedded in the turnover; a 1.00% gross profit rate was applied and only the balance addition was deleted.
Issues: (i) Whether the reopening challenge based on alleged defective approval under section 151 of the Income-tax Act, 1961 could be sustained in view of section 292BC of the Income-tax Act, 1961; (ii) whether the entire cash deposits in bank accounts could be added as unexplained credits under section 68 of the Income-tax Act, 1961 when the assessee's trading sales and import records were accepted.
Issue (i): Whether the reopening challenge based on alleged defective approval under section 151 of the Income-tax Act, 1961 could be sustained in view of section 292BC of the Income-tax Act, 1961
Analysis: The additional challenge to reassessment was founded on the alleged defect in approval. Section 292BC of the Income-tax Act, 1961 was treated as clarifying that such approval is administrative and supervisory in nature and that insufficiency in recorded reasons or defects in authentication or communication do not invalidate it.
Conclusion: The reopening challenge was rejected and the additional grounds assailing the approval were dismissed.
Issue (ii): Whether the entire cash deposits in bank accounts could be added as unexplained credits under section 68 of the Income-tax Act, 1961 when the assessee's trading sales and import records were accepted
Analysis: The assessee produced import documents, sale invoices, inventory details, IEC registration, bank channel payments for imports, and audited accounts showing turnover from mobile trading. The books were not rejected under section 145(3) of the Income-tax Act, 1961. Once sales were accepted, the corresponding cash realised from those sales could not be treated as wholly unexplained. The proper course was to estimate profit on the turnover to cover possible leakage.
Conclusion: The addition of the entire cash deposits was not sustained. A gross profit rate of 1.00% was applied on the turnover, and the balance addition was deleted, resulting in partial relief to the assessee.
Final Conclusion: The appeal succeeded only to the extent that the cash-deposit addition was restricted by estimation of profit, while the reassessment challenge failed.
Ratio Decidendi: Where sales supported by contemporaneous business records are accepted and books are not rejected, the corresponding bank deposits cannot be treated in full as unexplained credits; at most, profit embedded in such turnover may be estimated and added.
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