Survey statement without corroboration cannot sustain unsecured-loan addition; only profit element in suppressed receipts is taxable.

A survey statement, without corroboration, could not by itself sustain an addition under section 68 where the assessee produced lender confirmations, returns and banking evidence; the assessee was held to have discharged the initial burden on identity, genuineness and creditworthiness, so the unsecured-loan addition and related interest disallowance were not sustainable. For booking receipts in a real-estate project, where the books were not rejected under section 145(3) and the percentage completion method was accepted, only the profit element embedded in suppressed receipts could be taxed, not the gross difference in receipts. The restricted profit-based addition was therefore upheld, and the assessment additions were not restored.

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Issues: (i) Whether the addition of unsecured loans under section 68 and the consequential disallowance of interest were justified on the basis of the partner's statement recorded during survey; and (ii) whether the entire difference in booking receipts could be treated as undisclosed income, or only the profit element thereon could be brought to tax.

Issue (i): Whether the addition of unsecured loans under section 68 and the consequential disallowance of interest were justified on the basis of the partner's statement recorded during survey.

Analysis: The addition rested principally on a survey statement, while the assessee had furnished lender confirmations, income-tax returns, and banking-channel evidence. The appellate authority found that the statement was recorded during survey, was not supported by independent enquiry or adverse material, and was not shown to relate to the year under appeal. It further held that a statement recorded in survey proceedings, without corroboration, could not by itself sustain an addition, and that the assessee had discharged the initial burden regarding identity, genuineness, and creditworthiness.

Conclusion: The addition under section 68 and the consequential disallowance of interest were not sustainable.

Issue (ii): Whether the entire difference in booking receipts could be treated as undisclosed income, or only the profit element thereon could be brought to tax.

Analysis: The assessee followed the percentage completion method in a real-estate project, and the appellate authority examined the working, the stage of completion, and the revenue already offered. It found that the books were not rejected under section 145(3) and that the assessment had proceeded by taxing the gross difference in receipts without proper rejection of the accounting method. The authority also applied the settled principle that in cases of suppressed sales or on-money receipts, only the profit embedded in such receipts is taxable, not the entire gross receipt. On that basis, it restricted the addition to an estimated profit rate on the unaccounted receipts.

Conclusion: Only the profit element in the suppressed receipts was taxable, and the restricted addition was justified.

Final Conclusion: The revenue failed to show any error in the appellate findings, and the additions made in assessment were not restored.

Ratio Decidendi: A survey statement, without corroboration, cannot alone sustain an addition; and where suppressed receipts are found but the books and accounting method are not rejected, only the embedded profit element, not the entire receipt, may be taxed.

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