Undisclosed cash purchases treated as turnover, with tax limited to estimated profit instead of full addition.

Cash purchases found during search were treated as undisclosed business turnover, not as the entire amount of unexplained expenditure under section 69C. The Tribunal noted that the assessee did not maintain regular books and that departmental material indicated unaccounted purchases, but it accepted that the proper tax treatment was to estimate profit from the suppressed turnover. Applying the trade practice and case facts, it directed income to be computed at 5% of the undisclosed turnover, so the full addition was not sustained and relief followed for the assessee.

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Issues: Whether the addition of the entire cash purchases as unexplained expenditure under section 69C was justified, or whether only an estimated profit element on undisclosed turnover should be brought to tax.

Analysis: The assessee was confronted with cash purchases reflected in material gathered during search proceedings. The record showed that the assessee did not maintain regular books of account and relied upon computerized ledger details, while the departmental material indicated unaccounted cash purchases. On these facts, the Tribunal treated the disputed amount as undisclosed business turnover rather than accepting the entire amount as unexplained expenditure. Considering the trade practice and the facts of the case, it directed estimation of income at 5% of the undisclosed turnover.

Conclusion: The addition of the full amount was not sustained; only 5% of the undisclosed turnover was held taxable, resulting in relief to the assessee.

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