Bogus purchases and alleged on-money additions must rest on evidence; only profit element may be taxed where sales are accepted.

Alleged bogus purchases are generally not taxed at the full purchase value where sales or consumption are otherwise accepted; the embedded profit element is the proper basis for addition, so the matter may be remitted for recomputation on a gross profit basis. Alleged on-money in flat and shop sales cannot be sustained merely because different buyers paid different rates unless there is cogent evidence of unrecorded consideration; for builder stock-in-trade, the stamp duty value deeming provision was noted as inapplicable to the assessment year concerned. On that footing, the rate-difference addition was deleted.

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Issues: (i) Whether the addition made on account of alleged bogus purchases was to be sustained in full or restricted to the gross profit element. (ii) Whether the addition made on account of alleged on-money / rate difference in sale of flats and shops could be sustained in absence of cogent evidence and whether the provisions relating to stamp duty value applied to the assessment year in question.

Issue (i): Whether the addition made on account of alleged bogus purchases was to be sustained in full or restricted to the gross profit element.

Analysis: The dispute concerned purchases treated as non-genuine on the basis of third-party information and a supplier statement. The assessee produced purchase records, invoices, delivery documents, confirmations and bank evidence, and contended that only a profit element could be brought to tax where sales and consumption were not disturbed. The Tribunal followed the principle that, in such cases, the correct approach is not to tax the entire purchase value but to bring to tax the profit embedded in the disputed purchases by aligning the gross profit rate with genuine purchases. Since the matter required recomputation on that basis, the earlier addition was set aside and the issue was sent back to the Assessing Officer.

Conclusion: The full addition was not sustained; the issue was restored to the Assessing Officer for restriction of addition to the gross profit element.

Issue (ii): Whether the addition made on account of alleged on-money / rate difference in sale of flats and shops could be sustained in absence of cogent evidence and whether the provisions relating to stamp duty value applied to the assessment year in question.

Analysis: The addition was made only because different flats were sold at different rates and the tax authority inferred undisclosed receipts. The Tribunal held that no corroborative material had been brought on record to show receipt of cash over and above the recorded sale consideration. It also noted that the property sold was stock-in-trade of a builder and developer, and that the deeming provision based on stamp duty value for such stock-in-trade was not applicable to the assessment year under appeal. In the absence of evidence of understatement of consideration, the estimated addition could not stand.

Conclusion: The addition on account of rate difference / alleged on-money was deleted.

Final Conclusion: The group of appeals was disposed of with relief to the assessee on the on-money issue, remand on the bogus purchase issue for profit-element recomputation, and dismissal of the corresponding revenue challenges where the assessee succeeded.

Ratio Decidendi: Where alleged bogus purchases are accepted as leading to corresponding sales or consumption, only the profit element embedded in the disputed purchases can be brought to tax; and an addition for alleged understatement of sale consideration cannot be sustained merely on rate variation between buyers in the absence of cogent evidence, particularly where the relevant deeming provision is not applicable to the assessment year.

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