Business receipts in bank deposits taxed at profit rate only, while remand-based consideration of new evidence complied with procedural rules.

Cash deposits in a transport commission agent's bank account were treated as business receipts routed through banking channels, so only the profit element, estimated at 5 per cent, was taxed rather than the full amount as unexplained income under section 68. The appellate authority's consideration of additional evidence was upheld because a remand report was specifically called for and furnished before the material was examined, so Rule 46A was not breached. The Revenue's challenge to the restricted addition and the procedural objection both failed, and the estimated taxation of the receipts was sustained.

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Issues: (i) Whether cash deposits in the assessee's bank account were liable to be treated as unexplained income in full under section 68 of the Income-tax Act, 1961, or as turnover with profit estimated at 5 per cent. (ii) Whether the appellate authority violated Rule 46A of the Income-tax Rules, 1962 by considering additional evidence.

Issue (i): Whether cash deposits in the assessee's bank account were liable to be treated as unexplained income in full under section 68 of the Income-tax Act, 1961, or as turnover with profit estimated at 5 per cent.

Analysis: The assessee's business as a transport commission agent was not disputed. The appellate authority had called for a remand report, and the assessment record as well as the remand report showed that the assessee had relied on a comparable case where commission income was estimated at 5 per cent on freight receipts. The affidavits, cash-flow statement and banking material supported the view that the cash deposits represented business receipts routed through the bank and that only the profit element was exigible to tax. The finding that the deposits constituted turnover and that only estimated profit should be brought to tax was, therefore, upheld.

Conclusion: The estimate of income at 5 per cent of the cash deposits was sustained and the challenge to the restriction of the addition failed.

Issue (ii): Whether the appellate authority violated Rule 46A of the Income-tax Rules, 1962 by considering additional evidence.

Analysis: The appellate authority had specifically sought a remand report from the Assessing Officer before considering the additional material. The remand report was furnished, and the additional evidence was examined in that process. On these facts, there was no procedural breach of Rule 46A.

Conclusion: No violation of Rule 46A was found.

Final Conclusion: The appellate order sustaining estimated taxation of the business receipts and rejecting the procedural objection was affirmed, with both the Revenue appeal and the cross objection failing.

Ratio Decidendi: Where bank deposits are shown, on the basis of surrounding material and remand proceedings, to represent business receipts of a commission agent, only the profit element may be estimated to tax, and Rule 46A is not breached when additional evidence is considered after calling for a remand report.

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