The assessee, engaged in the hospitality business, was subjected to a search during which diaries and loose papers revealed unaccounted business receipts and corresponding unaccounted cash expenditure. The AO rejected the books of account under section 145, treated the entire unaccounted receipts as income and separately made additions under section 69C towards unexplained expenditure. The CIT(A) held that the expenditure had been incurred out of the unaccounted business receipts, allowed telescoping, deleted the addition under section 69C and estimated the profit at 12% of the unaccounted receipts. The Tribunal upheld the order of the CIT(A), holding that only the profit element embedded in unaccounted business receipts can be brought to tax and not the entire gross receipts. Since the seized material evidenced both unaccounted receipts and corresponding business expenditure arising from the same source, telescoping was rightly allowed to avoid double taxation. The Tribunal further held that the estimation of net profit at 12% was fair and reasonable in the facts of the case. Accordingly, the Revenue’s grounds were dismissed, and the assessee’s challenge to the 12% estimation was also rejected. [AY. 2013-14 to 2019-20]