Bogus purchase additions limited to profit element where sales are accepted and only purchase side is disputed.

Where sales are accepted and only purchases are disputed as bogus, the addition is ordinarily confined to the profit element embedded in the disputed purchases rather than the full purchase value. The assessee had produced trading records and the sales were not disturbed, so the disputed purchases were treated as warranting only an estimated gross profit addition. The addition was restricted to 6.19% of the disputed purchases, giving the assessee partial relief.

---

---

Issues: Whether the addition on account of alleged bogus purchases was required to be restricted to the profit element where the sales were accepted and only the purchase side was disputed.

Analysis: The assessee had produced trading records, and the sales were not disturbed. The dispute related only to a part of the purchases. Following the principle applied in cases where sales are accepted and only purchases are doubted, the addition was confined to the gross profit element relatable to the disputed purchases.

Conclusion: The addition was restricted to 6.19% of the disputed purchases, and the assessee obtained partial relief.

Final Conclusion: The appeal was disposed of by sustaining only the estimated profit component on the disputed purchases, instead of the entire purchase amount.

Ratio Decidendi: Where sales are accepted and purchases are found to be bogus, the addition is ordinarily confined to the profit element embedded in such purchases, not the entire purchase value.

---