Bogus purchase additions confined to profit element where binding precedent supports restriction, not full purchase value.

Where bogus purchases are established, the addition may be confined to the profit element embedded in the purchases rather than the full purchase value. Applying binding jurisdictional precedent, the appellate authority restricted the disallowance to 12.5% of the purchases, and that approach was upheld because the revenue offered no basis to depart from the settled view. The full disallowance was therefore not restored, and the relief granted to the assessee on the quantum of addition was sustained.

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Issues: Whether the addition made on account of alleged bogus purchases was to be sustained in full or restricted to 12.5% of such purchases.

Analysis: The appellate authority had restricted the disallowance to 12.5% of the purchases after following binding jurisdictional precedent and the view that only the profit element embedded in suspicious purchases was liable to tax. The revenue did not show any reason to depart from that approach, and the appellate authority's reliance on binding precedent remained unshaken.

Conclusion: The restriction of the addition to 12.5% of the purchases was upheld and the full disallowance was not restored.

Final Conclusion: The appellate order granting relief to the assessee on the quantum of addition for bogus purchases was sustained, and the revenue's challenge failed.

Ratio Decidendi: Where bogus purchases are found and the issue is covered by binding precedent, the addition may be confined to the profit element rather than the entire purchase value.

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