PPF exemption

Well i was going through my past 2 returns and i found a small mistake going undetected.I dont know how it happened but is this practice valid...?

Ill try to explain with e.g

My old return had business income as say  1.5 lakh rupee and other income as 1 lakh rupee....Now i have deposited 40k from that  to ppf account...Now for better understanding say tax applies above 1.5l and from 1.5l to 3l it 10%...okk

So my total income  is 2.5l..and now 40k deducted so taxable income on 2.1l is 6k..right?

Now for 2nd year since i forgot to make PPF contribution and as last date appeared in a hurry and worried about cheque clearnce i made contribution of 5k as cash to the account...

Now say again this year my business income and other income remains same...
The taxing chap(Student at CA office)..Counted the ppf deduction as seperate in sense

1.5l business income 1 l other income total 2.5l And than 5k deducted from this total  And tax applied on 2.45l. to be 9500

Now here is the mistake the 5k which i contributed wasnt the part of the business income or other income but was the extra income(cash in hand) which i have to keep as i do business....So my tax liability should have been on 2.55l 5k deducted  and tax pay on 2.5l...but what here happened is something fishy...

Now say similarly if i deposit 70k into ppf account as cash and deduct the same ...last practice i m getting deduction on 1.4l whereas i should get it on 70k..

I receive assesement letter and  this mistake wasnt found.....

I want to know for business guy i know balance sheet is passed along with  return to IT office ..Do they pass all passbook entries too..Because thats the only source to identify this mistake..

Or is their any other method in balance sheet from where the person can come to know this type of  scrutiny can be done

I hope i have clarified the topic properly for the genius here to understand...Its like cash in hand of 70k deposited into account and deduction taken on white records..whereas it should have been the same 70k rather than on white records