Bogus purchase additions fail when books, bank payments, and supporting records show genuine recorded transactions.

Where purchases were recorded in the books, paid through banking channels, and supported by material not found unreliable, additions for alleged bogus purchases were treated as unsustainable. The note also emphasises that an ex parte disposal by the first appellate authority does not require remand where the existing record is sufficient, and that an addition as unexplained expenditure cannot stand when the books of account, financial statements, and stock movement are not doubted on substance. The jurisdictional High Court view was followed to confirm that properly recorded expenditure with an explained source cannot be disallowed merely on suspicion.

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Issues: Whether the addition made on account of alleged bogus purchases and the consequential reassessment could be sustained when the purchases were recorded in the books, payments were made through banking channels, and the assessee's explanation and supporting materials were not found unacceptable on the merits.

Analysis: The appeal before the first appellate authority had been disposed of ex parte. The Tribunal proceeded to decide the matter on the existing record and relied on the principle that where material is already available, the appeal should be decided on merits without remand. On the merits, the disputed purchases were reflected in the books, the transactions were supported by banking payments, and the Assessing Officer had not doubted the books of account or the financial statements. The Tribunal also noted that the addition was made by treating the purchases as unexplained, even though the recorded transactions and corresponding stock movement were not denied in substance. Following the jurisdictional High Court's view that such additions cannot be sustained where the expenditure and purchases are duly recorded and the source of expenditure is explained, the Tribunal found no basis to sustain the impugned addition.

Conclusion: The addition on account of alleged bogus purchases was not sustainable, and the assessee succeeded on the merits of the appeal.

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