Unaccounted business receipts require reasonable profit estimation, while search-related undisclosed income cannot absorb business losses.
Search material revealing unaccounted business receipts supported reassessment notices and the related sanctions under Sections 149 and 151. Approval under Section 148B was not mechanical where the record reflected consideration of the draft assessment order, relevant material and correspondence. Profit from unaccounted receipts requires a reasonable, case-specific estimate; a 10% rate applies after credit for additional income already offered, while Income Declaration Scheme disclosures cannot be fully telescoped against such receipts. Section 79A bars set-off of business losses against undisclosed income arising from a search.
Issues: (i) Whether the reassessment notices and sanctions under Sections 149 and 151 were valid; (ii) Whether the approval under Section 148B was mechanical and invalid; (iii) Whether profit on unaccounted business receipts should be estimated at 15% or at a lower rate, with credit for additional income already offered; and (iv) Whether business loss could be set off against search-related undisclosed income under Section 79A.
Issue (i): Whether the reassessment notices and sanctions under Sections 149 and 151 were valid.
Analysis: The search material disclosed unaccounted business receipts, furnishing the basis for reopening. The recorded reasons and the competent authority's sanction satisfied the conditions governing reassessment jurisdiction and the extended limitation provisions. The cited decisions did not assist because the validity of reopening turns on the facts and material of each case.
Conclusion: The reassessment notices and sanctions were valid, against the assessees.
Issue (ii): Whether the approval under Section 148B was mechanical and invalid.
Analysis: The mere short period taken for approval could not establish absence of independent application of mind. The approval record showed consideration of the draft assessment order, relevant material, and correspondence with the assessing authority.
Conclusion: The approval under Section 148B was valid and not mechanical, against the assessees.
Issue (iii): Whether profit on unaccounted business receipts should be estimated at 15% or at a lower rate, with credit for additional income already offered.
Analysis: The seized material contained both unaccounted receipts and expenditure. Estimation of income is permissible, but must rest on a reasonable and non-arbitrary basis. The 15% rate lacked a case-specific foundation, while the assessees' book results could not be accepted because transactions were conducted outside the books. The income declared under the Income Declaration Scheme, 2016 could not be wholly telescoped against the receipts, but remained relevant in determining the embedded profit and avoiding double taxation.
Conclusion: Profit must be estimated at 10% of the total unaccounted business receipts, after due credit for additional income already offered for the relevant years, in favour of the assessees.
Issue (iv): Whether business loss could be set off against search-related undisclosed income under Section 79A.
Analysis: Section 79A prohibits set-off of any loss, whether brought forward or otherwise, against undisclosed income included in total income consequent to a search under Section 132.
Conclusion: Set-off of the business loss against the undisclosed income was impermissible, against the assessee.
Final Conclusion: The jurisdictional challenges and the loss disallowance remain undisturbed, while the income from unaccounted business receipts requires recomputation by applying a 10% profit rate and granting credit for income already offered.