Bogus purchase additions require independent rebuttal when primary documents, stock records and sales support the assessee's claim.

Once an assessee substantiates purchases with invoices, confirmations, bank records, affidavits, tax acknowledgements and quantitative reconciliation, the Revenue must rebut that material with independent inquiry and cogent evidence. Mere third-party information or general allegations of accommodation entries is insufficient where stock movement, sales and export realisation are not disputed and no cash backflow or non-receipt of goods is shown. On that evidentiary footing, reassessment objections did not sustain a separate adverse finding, and the addition treating the purchases as bogus was deleted.

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Issues: (i) Whether the reassessment jurisdiction under section 147 of the Income-tax Act, 1961 was invalid; (ii) whether the addition made by treating the purchases as bogus was sustainable.

Issue (i): Whether the reassessment jurisdiction under section 147 of the Income-tax Act, 1961 was invalid.

Analysis: The reopening was based on information from the Investigation Wing relating to alleged accommodation entries in the guise of purchases. The order, however, proceeds principally on the merits of the additions and records that the assessee had placed extensive documentary material before the authorities. The jurisdictional challenge was raised, but the final relief turned on the evidentiary sufficiency of the purchases and the absence of adverse verification by the Revenue.

Conclusion: The reassessment challenge did not survive to sustain the addition, and no separate adverse finding was maintained against the assessee on this issue.

Issue (ii): Whether the addition made by treating the purchases as bogus was sustainable.

Analysis: The assessee furnished purchase invoices, confirmations, bank statements, affidavits, income-tax acknowledgements, and quantitative reconciliation linking purchases with sales, stock movement, and exports. The Revenue did not dispute the stock tally, corresponding sales, export realisation, or bring any independent material to show cash backflow or non-receipt of goods. In such circumstances, the evidentiary burden lay on the Revenue to rebut the assessee's material through inquiry and tangible evidence, which was not done. Mere third-party information and general allegations were held insufficient to displace the contemporaneous evidence, particularly where the declared gross profit and export-linked turnover supported the trading results.

Conclusion: The addition treating the purchases as bogus was deleted and the assessee succeeded on the merits.

Final Conclusion: The assessment addition was set aside because the purchase transactions were supported by contemporaneous evidence and were not discredited by independent inquiry or contrary material.

Ratio Decidendi: Once an assessee substantiates purchases with primary documentary evidence, quantitative reconciliation, and accepted sales or exports, the Revenue must rebut that material by independent inquiry and cogent evidence; suspicion or third-party information alone cannot justify disallowance of the entire purchases.

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