Bogus purchase and sales additions fail where income is not recomputed consistently from the alleged transactions.

Additions for alleged bogus purchases, bogus sales and presumed commission income were unsustainable where the assessment treated the transactions as ingenuine but still accepted the returned income and book results without rejecting the books or recomputing true income. The Tribunal found this approach internally inconsistent: if the transactions were genuinely considered bogus, the Revenue had to assess income on that basis rather than retain the declared results and add commission on the same transactions. The principle that one part of a transaction cannot be accepted for assessment while the corresponding part is rejected was applied. The additions were deleted and relief was granted to the assessee.

---

---

Issues: Whether the additions made on account of alleged bogus purchases, bogus sales and presumed commission income were sustainable where the Assessing Officer treated the transactions as ingenuine but retained the returned income and financial results without rejecting the books or reworking the actual income.

Analysis: The seized material and statements were relied upon to conclude that certain purchases and sales were not genuine. However, the assessment proceeded on the footing that the returned income and book results remained intact while simultaneously making additions for presumed commission from the same alleged bogus transactions. This approach was found internally inconsistent. If the transactions were to be treated as bogus, the true income had to be recomputed on that basis rather than by accepting the declared results and making an additional presumption of commission. The reasoning that the Revenue cannot accept one part of the transaction for assessment purposes and reject the corresponding part for another purpose was applied. On that footing, the additions were not justified.

Conclusion: The additions were deleted and the issue was decided in favour of the assessee.

---