Bogus purchase additions limited to profit element where no basis supported the higher percentage applied.

Alleged bogus purchases were treated as non-genuine on the basis of departmental investigation, GST registration cancellations and inconsistencies between the suppliers' stated business and the assessee's trading activity, but only the profit element embedded in those purchases was liable to tax. The 25% addition was found excessive because no comparable basis supported that rate and the assessee's audited books already reflected disclosed profit. On the facts, the disputed purchases were brought to tax only to the extent of an estimated margin, and the addition was restricted to 10% with the balance deleted, giving partial relief to the assessee.

---

---

Issues: Whether the addition on account of alleged bogus purchases was to be sustained in full or restricted to the profit element embedded in such purchases.

Analysis: The purchases were treated as non-genuine on the basis of departmental investigation and surrounding circumstances, including cancellation of GST registrations and inconsistency between the declared business of the suppliers and the assessee's trading activity. However, the addition at 25% was found to be excessive because no comparable basis was shown to justify that rate, and the record indicated that the assessee's books were audited and profit had already been disclosed. On the facts, only an estimated margin attributable to the disputed purchases was required to be brought to tax.

Conclusion: The addition was restricted to 10% of the alleged bogus purchases and the balance was deleted, resulting in partial relief to the assessee.

Ratio Decidendi: In cases of alleged bogus purchases, only the profit element embedded in the disputed purchases may be added where the purchases are not fully accepted, and the percentage adopted must be supported by the facts and a reasonable basis.

---