Estimated disallowance of non-genuine purchases sustained where suppliers were non-traceable and purchase inflation was inferred.

Where purchases are not fully genuine and surrounding circumstances indicate use of non-traceable or conduit suppliers, an estimated disallowance based on a reasonable percentage of the purchases can be sustained. The High Court upheld the Tribunal's 25% addition because the record supported actual procurement only to that extent and the apparent suppliers were not accepted as genuine. The separate section 40A(3) objection was not independently pursued and was treated as consequential to the factual findings, so no interference was warranted on that ground.

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Issues: Whether the Tribunal was justified in sustaining a disallowance of 25% of the purchases treated as not genuine, and whether any interference was called for on the related section 40A(3) objection.

Analysis: The purchases were found to be supported by the record only to the extent of actual procurement, but the apparent suppliers were not accepted as genuine. The Court found the controversy covered by its earlier decision upholding an estimated addition of 25% where the surrounding circumstances showed use of unidentified or non-traceable parties and the likelihood of inflated purchase value. The separate section 40A(3) objection was not independently pursued before the Tribunal and was treated as consequential in view of the factual findings already recorded.

Conclusion: The estimate of 25% addition was upheld and no interference was warranted on the section 40A(3) aspect.

Final Conclusion: The appeal failed and the assessment addition as restricted by the Tribunal stood confirmed.

Ratio Decidendi: Where purchases are found to be not fully genuine and the surrounding evidence shows non-traceable suppliers or conduit entities, an estimated disallowance based on a reasonable percentage of the purchases can be sustained.

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