Presumptive taxation under section 44AD applied to business cash deposits, reducing an excessive profit estimate.

Cash deposits treated as business receipts were required to be assessed on a presumptive basis under section 44AD, which contemplates an 8% profit rate. The 30% estimate adopted by the lower authority was held excessive on the facts, so income was directed to be computed at 8% of the cash deposits. Once the deposits were accepted as business receipts, the alternative plea on peak credit did not survive.

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Issues: Whether the estimate of business income at 30% of cash deposits was justified, or whether income should be computed by applying the presumptive rate under section 44AD.

Analysis: The cash deposits were treated as arising from the assessee's business activities. In that situation, the applicable statutory framework for estimation of profit was section 44AD of the Income-tax Act, 1961, which contemplates a presumptive profit rate of 8%. The estimate adopted by the lower authority at 30% was found to be excessive in the facts of the case. The assessee's alternative plea regarding peak credit did not survive once the deposits were accepted as business receipts and income was to be estimated on a presumptive basis.

Conclusion: The profit was directed to be computed at 8% of the cash deposits, and the assessee succeeded partly on this issue.

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