Consistent net profit rate governs unaccounted turnover, while explained cash sales defeat unexplained-money additions.

Unaccounted turnover was to be estimated at the assessee's consistently disclosed 8% net profit rate, not at a higher gross margin, because the same benchmark was reflected in earlier returns and supported by admission and surrounding material; the addition was therefore reduced accordingly. Cash deposits made during the demonetization period, when explained as proceeds of recorded cash sales and unsupported by contrary material, could not be treated as unexplained money; the related addition was deleted. The document applies a profit-estimation approach based on consistent past disclosure and rejects unexplained-money treatment for duly explained cash deposits.

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Issues: (i) Whether the profit on unaccounted turnover was to be estimated at the gross margin adopted by the Assessing Officer or at the consistent net profit rate of 8% reflected in the assessee's earlier returns and admission. (ii) Whether cash deposits made during the demonetization period out of cash sales were liable to addition as unexplained money.

Issue (i): Whether the profit on unaccounted turnover was to be estimated at the gross margin adopted by the Assessing Officer or at the consistent net profit rate of 8% reflected in the assessee's earlier returns and admission.

Analysis: The assessee had consistently disclosed net profit at 8% in the regular returns, and the search statement also referred to 8% net profit on the admitted turnover. The estimation of income on unaccounted sales had to reflect the actual profit element and not merely the gross margin, especially where purchases and expenditure relatable to such turnover were also to be given effect. The adoption of varying rates by the Assessing Officer for different purposes was found to be inconsistent and without proper basis. The same benchmark of 8% was therefore held applicable for the unaccounted turnover as well as for telescoping.

Conclusion: The profit on unaccounted turnover was directed to be computed at 8% net profit, in favour of the assessee.

Issue (ii): Whether cash deposits made during the demonetization period out of cash sales were liable to addition as unexplained money.

Analysis: The deposits were supported as receipts from cash sales already routed through the books and financial statements. In the absence of material showing the deposits to be unexplained money, and in view of the explanation that they represented sale proceeds, the addition could not be sustained. The statutory framework relating to specified bank notes was also noted, and the deposits were treated as legally valid sale proceeds rather than unexplained cash.

Conclusion: The addition on account of demonetization-period cash deposits was deleted, in favour of the assessee.

Final Conclusion: The assessee succeeded on the estimation of profit and on the cash-deposit addition, resulting in partial relief overall.

Ratio Decidendi: Where an assessee has consistently disclosed a particular net profit rate in regular returns and the same is supported by admission and surrounding material, profit on unaccounted turnover should ordinarily be estimated on that consistent net profit basis rather than on gross margin; cash deposits explained as recorded cash sales cannot be taxed as unexplained money absent contrary material.

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