Bogus purchase addition deleted where documentary evidence, accepted sales and unrejected books showed genuine purchases.

An addition for alleged ingenuine purchases was held unsustainable where the assessee produced purchase bills, transport receipts, sales bills, VAT returns, bank statements and stock records showing movement of goods and payment through banking channels. The corresponding sales were accepted, the books of account were not rejected, and there was no material fall in gross profit or net profit to suggest unexplained inflation of purchases. On that factual and evidentiary basis, the disallowance was deleted and the Revenue's challenge to the purchase addition failed.

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Issues: Whether the disallowance made on account of alleged ingenuine purchases was justified where the assessee produced purchase bills, transport receipts, sales bills, VAT returns, bank statements and stock records, and the corresponding sales were accepted.

Analysis: The assessee had furnished documentary evidence showing actual purchase and movement of goods, payment through banking channels, and corresponding outward sales recorded in the books. The reassessment material was founded mainly on the supplier's non-response and related investigation inputs, but the assessee's records were consistent and the sales arising from the impugned purchases were not disturbed. The books of account were not rejected and there was no material fall in gross profit or net profit to indicate any unexplained inflation of purchases.

Conclusion: The addition treating the purchases as ingenuine was not sustainable and the deletion of the disallowance was upheld in favour of the assessee.

Final Conclusion: The revenue's substantive challenge to the deletion of the purchase addition failed, and the appeal was dismissed.

Ratio Decidendi: Where purchases are supported by contemporaneous documentary evidence, the corresponding sales are accepted, and the books of account are not rejected, an addition merely on suspicion of bogus purchases is not justified.

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