Bogus purchase additions and supplier ledger discrepancies fail when books, stock records, and payment evidence remain unrebutted.

Where purchases and stock movement are supported by purchase documents, quantitative records and evidence of goods movement, an addition based only on suspicion, third-party non-response or later cancellation of registration is not justified; the absence of rejection of books or a best-judgment assessment also weakens any estimated profit addition, so the estimated 8% profit addition was deleted. Where a supplier ledger balance is supported by invoices, ledger entries and bank payment evidence, and the tax authority brings no contrary factual finding to show an unreconciled liability difference, an adverse excess-payable addition cannot stand, so that addition was also deleted.

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Issues: (i) Whether the addition made by estimating 8% profit on alleged bogus or unsubstantiated purchases was sustainable. (ii) Whether the addition made on account of alleged difference in ledger balance of a supplier was sustainable.

Issue (i): Whether the addition made by estimating 8% profit on alleged bogus or unsubstantiated purchases was sustainable.

Analysis: The purchase additions were based mainly on suspicion arising from third-party non-response and later cancellation of registration, while the assessee had produced purchase documents, stock records, quantitative details, and evidence of movement of goods. The sales and gross profit disclosed in the accounts were not rejected or shown to be unreasonable, and the assessment was made under section 143(3) without rejection of books or invocation of best judgment under section 144. In these circumstances, the purchases could not be treated as wholly bogus, and no estimation of profit at 8% was justified.

Conclusion: The addition on account of estimated profit from alleged bogus purchases was deleted, in favour of the assessee.

Issue (ii): Whether the addition made on account of alleged difference in ledger balance of a supplier was sustainable.

Analysis: The assessee supported the balance with invoices, ledger entries, and bank payment evidence, but the tax authorities did not dislodge that documentary material with contrary factual findings. In the absence of material showing that the liability difference remained unreconciled, the adverse inference drawn on the alleged excess liability could not be sustained. The addition made under the head of excess payable balance was therefore unsupported.

Conclusion: The addition on account of alleged difference in supplier ledger balance was deleted, in favour of the assessee.

Final Conclusion: The disputed additions were deleted and the assessee succeeded on the substantive issues, while the Revenue's challenge failed.

Ratio Decidendi: Where purchases and stock movement are supported by quantitative records and the books are not rejected, an addition cannot rest merely on suspicion or later third-party non-response, and a separate ledger disallowance cannot survive without contrary factual evidence against the assessee's documentary proof.

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