Unexplained expenditure and presumptive taxation applied to estimate turnover and net profit, resulting in Rs.1.60 lakh taxable income.

Unexplained expenditure was addressed by applying presumptive taxation to estimate taxable income: the assessee's retail cattlefeed business turnover was inferred from purchase records and an affidavit, fixed at about Rs. 20 lakh, and net profit was adopted at 8% under presumptive taxation. The tribunal applied that estimate to compute taxable income at Rs. 1.60 lakh and sustained the addition of Rs. 1.60 lakh, partly allowing the assessee's grounds on merits. The decision therefore resolves income estimation by adopting presumptive profit where detailed turnover records were unavailable.

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Issues: Whether the addition of purchases of Rs. 12,06,959/- as unexplained expenditure under Section 69C should be sustained in full or whether only net profit on the assessee's retail cattlefeed business should be assessed by invoking presumptive taxation.

Analysis: The appeal concerns reassessment proceedings initiated after information about cash purchases from a supplier. The assessee, a small village retail trader, filed an affidavit and appellate submissions explaining purchase and retail sale of cattle feed, daily turnover estimates, closure of the supplier, and absence of contrary material. The proceedings involved provisions relating to reassessment and assessment (Sections 147, 148, 148A(d), 144, 144B) and additions under Section 69C. The assessee relied on the exception under Rule 6DD and submitted that Section 40A(3) is not applicable. In the absence of complete turnover particulars but having regard to the purchases and the affidavit statements about daily sales, the income is estimated by applying presumptive taxation (Section 44AD) to an approximated turnover of Rs. 20.00 lakh, adopting net profit at 8% to arrive at assessed income of Rs. 1.60 lakh. The record contains no material contradicting the assessee's claim of a small retail business or the stated sales range.

Conclusion: The addition under Section 69C is not sustainable in full; the quantum of income is to be determined on a presumptive basis and the appeal is partly allowed in favour of the assessee by sustaining an assessed income of Rs. 1.60 lakh.

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