Bogus purchase additions fail when invoices, bank records and GST evidence support genuineness; suspicion alone is insufficient.

Alleged bogus purchase additions could not be sustained where the assessee produced invoices, bank statements, confirmations, GST records and stock details, and the record showed no defects in the books or supporting evidence. The reassessment and addition were based on a Suspicious Transaction Report and suspicion, which was insufficient without cogent proof that the purchases were non-genuine. Estimation of disallowance by restricting the addition to a gross profit percentage was also unjustified because the Revenue did not establish actual inflation of purchase value. The full addition was deleted.

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Issues: (i) Whether the addition made towards alleged bogus purchases could be sustained on the basis of a Suspicious Transaction Report and related inferences when the assessee produced purchase invoices, bank statements, confirmations, GST records and stock details. (ii) Whether the restriction of the disallowance to 7.37% by estimating gross profit was justified, or whether the entire addition deserved deletion.

Issue (i): Whether the addition made towards alleged bogus purchases could be sustained on the basis of a Suspicious Transaction Report and related inferences when the assessee produced purchase invoices, bank statements, confirmations, GST records and stock details.

Analysis: The assessment was reopened on the basis of a suspicious transaction report suggesting accommodation entries. However, the assessee furnished documentary evidence in support of the purchases, including invoices, ledger extracts, confirmations, bank statements, GST returns and stock records. The material on record did not show defects in the books of account or in the evidences produced. The reopening and the addition were founded on suspicion and assumptions rather than cogent material establishing that the purchases were not genuine.

Conclusion: The addition on the basis of alleged bogus purchases was not sustainable and was liable to be deleted.

Issue (ii): Whether the restriction of the disallowance to 7.37% by estimating gross profit was justified, or whether the entire addition deserved deletion.

Analysis: The gross profit estimate adopted by the first appellate authority proceeded on the possibility of accommodation entries and grey-market purchases, without disproving the assessee's evidence or establishing actual inflation of purchase value. Where the Revenue failed to prove that the purchases were bogus, estimation of profit on a percentage basis was not warranted. The accepted sales and the absence of defects in the assessee's records did not justify sustaining any part of the addition on a pure estimation basis.

Conclusion: The gross profit restriction was unsustainable, and the entire addition was directed to be deleted.

Final Conclusion: The Revenue's challenge failed, the assessee succeeded in getting the disallowance deleted in full, and the reassessment addition could not be sustained on the materials relied upon by the Revenue.

Ratio Decidendi: An addition for alleged bogus purchases cannot be sustained, nor can profit be estimated on suspicion alone, when the assessee produces credible purchase and payment records and the Revenue fails to establish the purchases as non-genuine by cogent evidence.

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