Search assessment additions require incriminating material, and on-money profit must be estimated on an evidence-based basis.

In unabated search assessments under section 153A of the Income-tax Act, additions can survive only on the basis of incriminating material found during search, so alleged accommodation-loan additions under section 68 were deleted where no such material existed. For alleged on-money receipts from flat sales, the profit element had to be estimated on a reasonable, evidence-based basis; the 15% rate was found unsupported by comparables or other evidence, and the lower net profit profile of the projects justified restriction to 9%. The assessee received partial relief on both issues.

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Issues: (i) Whether the profit element embedded in alleged on-money receipts from sale of flats could be estimated at 15% or should be restricted to a lower rate; (ii) Whether additions made in respect of alleged accommodation loans in unabated assessment years could survive in the absence of incriminating material found during search.

Issue (i): Whether the profit element embedded in alleged on-money receipts from sale of flats could be estimated at 15% or should be restricted to a lower rate.

Analysis: The estimation had to be reasonable and supported by material. The higher rate adopted by the Assessing Officer was not backed by comparable cases or other supporting evidence. The projects involved small-sized flats in a non-premium location, and the assessee's books reflected an average net profit of 9.01%. The circumstances indicated that the profit element in the alleged on-money receipts would be lower than 15%.

Conclusion: The profit element on the alleged on-money receipts was directed to be estimated at 9%, and the addition was modified accordingly, in favour of the assessee.

Issue (ii): Whether additions made in respect of alleged accommodation loans in unabated assessment years could survive in the absence of incriminating material found during search.

Analysis: For unabated assessments under section 153A of the Income-tax Act, 1961, additions can be sustained only on the basis of incriminating material found during search. The search material related to on-money receipts, but no incriminating material was found to show that the loans were accommodation entries. Mere suspicion or pre-search information was insufficient to justify the addition under section 68.

Conclusion: The additions relating to alleged accommodation loans for the unabated years were deleted, in favour of the assessee.

Final Conclusion: The appeals succeeded on the accommodation-loan issue for the unabated years and the on-money profit rate was reduced to 9%, resulting in partial relief overall.

Ratio Decidendi: In unabated search assessments, additions can be made only on the basis of incriminating material found during the search, and profit from alleged unaccounted receipts must be estimated on a reasonable and evidence-based basis.

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