Bogus purchase additions can be limited to profit element where records and consumption evidence support the expenditure.

Alleged bogus purchase additions may be confined to the probable profit element where the assessee produces ledger accounts, tax invoices, delivery challans, dealer confirmations, bank statements, quantitative purchase details, and consumption evidence such as an architect's certificate. Comparable project cost data and acceptance of the project completion method supported the view that there was no basis to disallow the entire purchase amount. Non-service of section 133(6) notices and the characterization of some sellers as accommodation providers did not justify full addition in the absence of adverse findings against the supporting records. The addition was therefore restricted to 2% of the purchases, granting partial relief.

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Issues: Whether the addition made on account of alleged bogus purchases was to be sustained in full, deleted, or restricted to a reasonable percentage in view of the purchase records, consumption evidence, and the project completion method followed by the assessee.

Analysis: The assessee produced ledger copies, tax invoices, delivery challans, confirmations from dealers, bank statements, an architect's certificate certifying consumption of materials, and quantitative details of purchases. No adverse finding was recorded against these materials. The purchase cost per square foot was found comparable with that of an associate concern operating in the same vicinity, supporting the view that there was no abnormal inflation of cost or suppression of profit. The fact that notices under section 133(6) of the Income-tax Act, 1961 were not served and that some sellers were treated as accommodation providers did not justify addition of the entire purchase amount, particularly when the project completion method had been accepted and no expenditure had been claimed in the year under consideration.

Conclusion: The addition on account of alleged bogus purchases was not sustained in full and was restricted to 2% of such purchases. The Revenue's challenge failed, and the assessee obtained partial relief.

Ratio Decidendi: Where purchase evidence and consumption of materials are supported by records and comparable project costs, alleged bogus purchases may be estimated only to the extent of probable profit element, not disallowed in full.

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