On-money additions taxable only on income element; Tribunal restricted tax to a 10% estimate at normal rates.

Alleged on-money payments were held taxable only to the extent of the income element embedded in the transaction, not the entire gross amount. The Tribunal accepted that a full addition was unwarranted on the facts and sustained only a reasonable ad hoc estimate of 10% of the alleged on-money amount. It further held that the normal tax rate applied, and not the special rate under section 115BBE of the Income-tax Act, 1961, resulting in partial relief.

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Issues: Whether the addition made on account of alleged on-money payment required to be sustained in full, or whether only a reasonable estimated profit element could be brought to tax.

Analysis: The assessee's case involved an addition based on information from search-related material suggesting cash on-money payment for booking of a unit. The record showed that both sides accepted that, having regard to the smallness of the amount and the surrounding circumstances, a full addition was not warranted and an estimated addition would meet the ends of justice. The Tribunal noted that taxation must be confined to income and not the gross receipt or entire alleged outgo, and that only the income element embedded in such transaction could be assessed. It therefore directed adoption of a reasonable ad hoc estimate at 10% of the alleged on-money amount and further held that the normal rate of tax would apply, not the special rate under section 115BBE of the Income-tax Act, 1961.

Conclusion: The full addition was reduced and only 10% of the alleged on-money amount was held taxable at the normal rate, resulting in partial relief to the assessee.

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