Bogus purchase additions: estimated disallowance sustained, but already disclosed gross profit must be excluded on verification.

Bogus purchase additions were not deleted in full where the purchases were not accepted as fully genuine on the material before the ITAT. The Tribunal approved estimation of the addition at 8% and held that the profit element already reflected in the books on the impugned purchases should be excluded to avoid an excessive addition. For that limited purpose, the matter was remanded to the Assessing Officer to verify the corresponding sales and quantify the gross profit already disclosed, after giving the assessee an opportunity to produce supporting material.

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Issues: Whether the addition made on account of alleged bogus purchases could be deleted in full, and whether the gross profit already disclosed on such purchases was required to be reduced while sustaining the addition.

Analysis: The purchases were not accepted as fully genuine on the material before the Tribunal, and the assessee's plea for deletion of the entire addition was rejected. The Tribunal accepted the lower authority's estimation of the addition at 8% and held that, on the peculiar facts, the profit element already reflected in the books on the impugned purchases should be excluded to avoid an excessive addition. For that limited purpose, the matter was sent back to the Assessing Officer to verify the corresponding sales and quantify the gross profit already disclosed on those purchases after giving the assessee an opportunity to furnish supporting material.

Conclusion: The entire addition was not deleted. The addition was sustained at 8% subject to reduction of the gross profit already shown on the related purchases, with the matter remanded for fresh verification on that limited aspect.

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