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The ITAT held that the unexplained cash deposits in the assessee's bank account were attributable to the business of buying and selling mosquito nets, supported by purchase and sales records and bank statements. The Tribunal found that the CIT(A) erred in treating all credits as unexplained income under section 69A without considering the nature of the business. However, due to the absence of proper books of account, the Tribunal accepted an average net profit rate of 12% on the cash deposits, based on historical profit percentages from prior assessment years. Consequently, the addition of the entire amount as unexplained income was set aside, and only a proportionate addition reflecting 12% net profit was upheld, ensuring a fair and reasonable assessment in line with the principles of presumptive taxation.
The ITAT held that the unexplained cash deposits in the assessee's bank account were attributable to the business of buying and selling mosquito nets, supported by purchase and sales records and bank statements. The Tribunal found that the CIT(A) erred in treating all credits as unexplained income under section 69A without considering the nature of the business. However, due to the absence of proper books of account, the Tribunal accepted an average net profit rate of 12% on the cash deposits, based on historical profit percentages from prior assessment years. Consequently, the addition of the entire amount as unexplained income was set aside, and only a proportionate addition reflecting 12% net profit was upheld, ensuring a fair and reasonable assessment in line with the principles of presumptive taxation.
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