Unexplained money addition under section 69A failed on third-party material; presumptive taxation limited the tax effect.

An addition for alleged unaccounted cash purchases could not be sustained under section 69A on third-party material alone where no direct nexus with the assessee was established, and the assessee had replied to the allegation. Given that the assessee was a small trader assessed under section 44AD, the disputed amount was brought to tax only to the extent of presumptive business income at 20% of the amount on the peculiar facts. Section 115BBE was held inapplicable to the sustained addition, and the balance addition was deleted.

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Issues: Whether the addition of alleged unaccounted cash purchases as unexplained money under section 69A was sustainable, and whether the amount could instead be assessed only to the extent of presumptive income under section 44AD with section 115BBE held inapplicable.

Analysis: The addition was founded on an invoice standing in the name of a third party and on a statement recorded in search proceedings of another person, without any material establishing a direct nexus with the assessee. The assessee had also filed a reply addressing the allegation. The assessee was a small trader declaring income under the presumptive scheme under section 44AD, under which maintenance of books and detailed transaction-wise explanation is not required in the same manner as under regular assessment. On the peculiar facts, the Tribunal accepted the alternative plea to bring the disputed amount to tax only to the extent of presumptive business income at 20% of the amount.

Conclusion: The addition was sustained only to the limited extent of Rs. 48,190 and the balance was deleted. Section 115BBE was held inapplicable to the sustained addition. The appeal was partly allowed.

Ratio Decidendi: An addition under section 69A cannot be sustained solely on third-party material lacking a direct nexus with the assessee, and where the assessee is assessed under section 44AD, the disputed amount may, on the peculiar facts, be brought to tax only as presumptive business income rather than as unexplained money.

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