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Issues: Whether the Revenue was justified in challenging the estimation of profit at 22% on unaccounted on-money receipts and in denying the corresponding expenditure reflected in the seized material.
Analysis: The unaccounted cash receipts from sale of commercial units were accepted as business receipts, and the seized documents together with the statement recorded under section 132(4) showed that the receipts were linked with business expenditure. The attempt to tax the entire gross receipts by rejecting the expenditure merely for want of third-party corroboration was found unsustainable. It was held that in cases of unaccounted receipts, only the profit element embedded in the receipts can be brought to tax, and seized material cannot be read in a piecemeal manner. The estimation of profit at 22% was supported by the seized material, the admissions in statement, and the consistent approach followed in group cases.
Conclusion: The Revenue's challenge was rejected and the estimation of income at 22% was upheld, resulting in a decision in favour of the assessee.
Ratio Decidendi: Where unaccounted receipts are established from seized material, only the profit element embedded in such receipts can be taxed, and the corresponding material showing expenditure cannot be ignored by accepting the document only in part.
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