Bogus purchases addition limited to profit element estimate of 2.5%, rejecting a higher disallowance claim.

Where alleged bogus purchases are found to involve only an estimated profit element, the addition may be confined to the reasonable percentage attributable to that element. The Tribunal followed earlier orders in the assessee's own case and held that, on the facts recorded in the assessment and appellate orders, the addition should be restricted to 2.5% of the alleged bogus purchases. The Revenue's claim for 12.5% was rejected, and the assessment addition was sustained only to that limited extent in favour of the assessee.

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Issues: Whether the addition on account of alleged bogus purchases was to be restricted to 2.5% instead of 12.5%.

Analysis: The issue was treated as covered by earlier orders in the assessee's own case for subsequent assessment years. The Tribunal followed those orders and accepted that, in the facts noted in the assessment order and the appellate order, the addition should be confined to the estimated profit element of 2.5%.

Conclusion: The addition was restricted to 2.5% of the alleged bogus purchases and the Revenue's contention for 12.5% was rejected, in favour of the assessee.

Final Conclusion: The Revenue's appeals failed and the assessment addition was sustained only to the limited extent of 2.5%.

Ratio Decidendi: Where the facts show that only the profit element embedded in alleged bogus purchases requires estimation, the addition may be restricted to the percentage reasonably attributable to such profit element.

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