Bogus purchase disallowance fails when documentary evidence and sales reconciliation support the assessee, with no independent enquiry.

An addition for alleged bogus purchases was held unsustainable where the assessee produced purchase bills, delivery challans and reconciliation of purchases with sales, and explained that goods were delivered directly to its godown. The accepted VAT sales turnover supported the assessee's explanation, while the Assessing Officer made no effective independent enquiry and identified no specific defect in the documents. The tribunal held that unverified third-party information alone cannot justify a disallowance when the assessee has discharged the evidentiary burden with supporting material. The purchase-related addition was therefore deleted in favour of the assessee.

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Issues: Whether the addition made on account of alleged bogus purchases was sustainable when the assessee produced purchase bills, delivery challans, reconciliation of purchases with sales, and the revenue relied mainly on unverified third-party information.

Analysis: The assessee furnished documentary evidence to support the purchases and explained the absence of transport charges by stating that the goods were delivered directly to its godown. The purchases were reconciled with corresponding sales, and the sales turnover was accepted by the VAT department. No effective enquiry was made by the Assessing Officer to test the veracity of the assessee's explanation, and no specific defect was found in the documents produced. An addition cannot be sustained merely on the basis of unverified information when the assessee has discharged the evidentiary burden by producing supporting material.

Conclusion: The addition on account of alleged bogus purchases was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The assessee succeeded on the merits of the purchase-disallowance issue, and the assessment addition was set aside.

Ratio Decidendi: A disallowance for alleged bogus purchases cannot stand when the assessee substantiates the purchases with documentary evidence and corresponding sales reconciliation, and the revenue fails to conduct independent enquiry or identify defects in the evidence.

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