Bogus purchase additions limited to profit element only; 12.5% restriction upheld on accepted sales and past consistency.

Where sales were accepted and the assessee's own earlier years showed a consistent approach, only the profit element embedded in disputed purchases could be taxed. On identical facts, the first appellate authority's restriction of the addition to 12.5% was held to accord with the settled method of making a limited disallowance in bogus purchase cases, and that restriction was upheld. The Revenue's challenge therefore failed.

---

---

Issues: Whether the addition on account of alleged bogus purchases was to be restricted to 12.5% of the purchases.

Analysis: The assessee's sales were accepted, and the consistent approach taken in the assessee's own case as well as in the earlier assessment years supported the view that only the profit element embedded in the disputed purchases could be brought to tax. The finding of the first appellate authority limiting the addition to 12.5% was found to be in line with the settled approach on identical facts.

Conclusion: The restriction of the addition to 12.5% was upheld and the Revenue's challenge failed.

---