Cash trail verification and prospective tax rate application guide reassessment of unexplained deposits and profit estimation.

Cash deposits across multiple bank accounts required fresh verification of the cash trail, because the assessee relied on withdrawal and deposit charts and peak credit workings to explain the deposits from earlier cash withdrawals. The business profit estimate at 8% of gross receipts also required reconsideration, as the available audit papers and books suggested that the full material had not been examined by the lower authority. The enhanced tax rate under section 115BBE was held inapplicable to assessment year 2017-18, because the provision was treated as operating prospectively from 1 April 2017 for later assessment years.

---

---

Issues: (i) Whether the addition made on account of cash deposits as unexplained income required fresh examination on the basis of the assessee's cash flow and bank statements; (ii) Whether the estimation of business profit at 8% of gross receipts required reconsideration in view of the books and audit records; (iii) Whether the enhanced tax rate under section 115BBE could be applied to assessment year 2017-18.

Issue (i): Whether the addition made on account of cash deposits as unexplained income required fresh examination on the basis of the assessee's cash flow and bank statements.

Analysis: The dispute concerned cash deposits in multiple bank accounts. The assessee relied on withdrawal and deposit charts and peak credit workings to contend that the deposits were sourced from earlier cash withdrawals. The assessment had proceeded mainly on the deposits in one bank account, while the supporting material covered the overall cash movement across accounts. In these circumstances, the matter required verification of the cash trail and supporting records by the assessing authority.

Conclusion: The issue was remanded for de novo adjudication, with liberty to the assessee to produce evidence before the assessing authority.

Issue (ii): Whether the estimation of business profit at 8% of gross receipts required reconsideration in view of the books and audit records.

Analysis: The assessee challenged the application of an 8% profit rate on contract receipts. The material placed on record included audited financial statements and tax audit papers indicating maintenance of books, vouchers, and supporting records. Since the assessee had not earlier placed the complete material before the lower authorities, fresh examination of the books and related evidence was considered necessary to determine the correct business income.

Conclusion: The issue was remanded for fresh assessment of business income after examination of the books and supporting documents.

Issue (iii): Whether the enhanced tax rate under section 115BBE could be applied to assessment year 2017-18.

Analysis: The issue turned on the prospective operation of the enhanced rate of tax under section 115BBE. Reliance was placed on the view that the enhanced rate became applicable only from 01.04.2017, corresponding to assessment year 2018-19 onwards, and not to an earlier assessment year.

Conclusion: The enhanced rate under section 115BBE was held inapplicable to assessment year 2017-18.

Final Conclusion: The additions and profit estimation were sent back for fresh consideration, and the enhanced tax rate under section 115BBE was held not to apply for the year in question.

Ratio Decidendi: Where the cash trail and business profit computation are not fully verified from the available records, the proper course is fresh adjudication on the basis of complete evidence, and an enhanced tax provision cannot be applied retrospectively unless its prospective operation is clearly established.

---