Estimated profit rate on sale of material and unexplained loan evidence: tribunal reduces rate to 1.25% and deletes addition.

Tribunal applied prior assessment precedent to hold that the appropriate estimated profit rate on sale of material is 1.25% rather than 2%, thereby reducing taxable profit on material sales. The Tribunal retained the assessing officer's 6% estimation on gross contract receipts. Separately, the assessee produced the lender's bank statements showing funds advanced through banking channels and sourced from fixed deposit maturities; the Tribunal found this evidence discharged the onus in relation to unexplained receipts and deleted the Rs. 8,00,000 addition under the unexplained loan contention.

---

---

Issues: (i) Whether the appropriate estimated profit rate on sale of material should be 2% or 1.25% for assessment year under consideration; (ii) Whether addition of Rs. 8,00,000 made under Section 68 as unexplained unsecured loan is sustainable.

Issue (i): Appropriate estimated profit rate on sale of material.

Analysis: The Tribunal considered prior adjudication on substantially similar facts in the assessee's assessment for an earlier year where the appellate authority reduced the estimated profit rate from 2% to 1.25%. The Tribunal applied the same view to the present assessment year while upholding the estimation of 6% on gross contract receipts made by the assessing officer.

Conclusion: The estimated profit rate on sale of material is directed to be 1.25% (in favour of the assessee with respect to this issue).

Issue (ii): Validity of addition of Rs. 8,00,000 under Section 68 as unexplained investment/loan.

Analysis: The assessee furnished the lender's bank statement demonstrating that the loan funds were advanced through banking channels and sourced from fixed deposit maturities. The Tribunal found that such evidence discharged the onus under Section 68 and negated the basis for the addition.

Conclusion: The addition of Rs. 8,00,000 under Section 68 is deleted (in favour of the assessee with respect to this issue).

Final Conclusion: The appeal is partly allowed as the estimated profit rate on sale of material is reduced to 1.25% while the addition under Section 68 of Rs. 8,00,000 is deleted.

Ratio Decidendi: Where the assessee produces bank evidence showing receipt of funds through banking channels and that the lender sourced funds from fixed deposit maturities, the onus under Section 68 is discharged and additions under Section 68 cannot be sustained.

---