Substantiation of Purchases: invoices, bank payments and suppliers' GST returns negate bogus-purchase additions; gross profit rate applied.

Where purchases were supported by invoices, bank payments and corroborated by suppliers' GST returns, disputed additions treating purchases as bogus were not sustained and the assessee's normal gross profit rate of 2.45% was applied to limit any estimation. Cash deposits and a time deposit were accepted as sourced from recent withdrawals shown in bank statements and by proximate re deposits or liquidation, so additions under the unexplained cash doctrine were deleted. Operative effect: estimation and section based additions were reversed where documentary bank and GST corroboration explained the transactions.

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Issues: (i) Whether additions on account of alleged bogus purchases could be sustained where purchases are supported by invoices, bank payments and reflected in suppliers' GST returns; (ii) Whether additions under section 68 in respect of cash deposits and time deposit could be sustained where deposits were sourced from earlier withdrawals and supported by bank statements.

Issue (i): Addition on account of alleged bogus purchases.

Analysis: The facts show the assessee is engaged in recycling lead with turnover and purchases reflected in books and bank payments. Suppliers were mainly mobile/kabadi vendors; many did not respond to section 133(6) notices. The assessee produced invoices, ledger extracts, sundry creditor lists, and bank statements; suppliers' GST returns reflected sales and input tax credit to the assessee was not denied. The assessing officer made ad hoc additions and applied an abnormal gross profit rate. The appellate authority applied the assessee's normal gross profit rate of 2.45% instead of the AO's higher estimate.

Conclusion: Addition on account of alleged bogus purchases is not sustained; addition limited by applying the assessee's gross profit rate of 2.45% (in favour of assessee).

Issue (ii): Addition of cash deposits and time deposit under section 68.

Analysis: Bank statements show withdrawals followed by re-deposits within days; time deposit was funded from recent withdrawal and prematurely liquidated within two days. Books of account and bank records were furnished and not controverted by the AO. The appellate authority accepted these explanations and deleted the additions.

Conclusion: Additions in respect of cash deposits and time deposit under section 68 are deleted (in favour of assessee).

Final Conclusion: The revenue's appeal is dismissed; the appellate authority's decisions upholding application of the assessee's gross profit rate for disputed purchases and deleting additions under section 68 are affirmed.

Ratio Decidendi: Where purchases are substantiated by invoices, bank payments and corroborated by suppliers' GST returns, mere non-response to summons does not justify treating purchases as bogus; additions based on estimation must align with the assessee's normal gross profit rate; unexplained cash additions under section 68 cannot be sustained where bank records show withdrawals and proximate re-deposits explaining the source.

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