Cash deposits linked to business receipts taxed only at a reasonable profit element, with addition restricted to 10%.

Cash deposits and other bank credits linked to a tobacco business were not treated as fully taxable under section 69A. The Tribunal followed its own earlier year view that routed business receipts could not be taxed in full without allowing for purchases, and noted that the Revenue produced no contrary material. It therefore applied the same approach for the year in issue and restricted the addition to 10% of the deposits and credits, granting partial relief to the assessee.

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Issues: Whether the addition made on account of cash deposits and other credits in the assessee's bank account under section 69A of the Income-tax Act could be sustained in full, or whether only a reasonable profit element was taxable.

Analysis: The assessee was engaged in tobacco and the disputed bank entries were linked to business transactions. A coordinate bench in the assessee's own case for an earlier year had already restricted similar additions to 10% of the deposits after noting that the transactions were routed through the bank account and that the entire receipts could not be treated as income without allowing set-off for purchases. Following that view, and in the absence of any contrary material from the Revenue, the Tribunal held that the same approach should apply for the year in appeal.

Conclusion: The addition was not sustained in full. The Tribunal restricted the disallowance to 10% of the cash deposits and other credits, thereby granting partial relief to the assessee.

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