Estimated profit only from bogus sales and purchases; full additions on alleged accommodation entries were not sustained.

Alleged bogus sales and purchases routed through accommodation-entry entities were not treated as requiring full addition; only the profit element embedded in the suspicious turnover was considered taxable. The appellate authority had restricted the addition to 10% of the disputed turnover and deleted the balance made under unexplained cash credit and related heads. On further review, that approach was upheld in principle, but the estimated profit rate was found excessive on the facts. The taxable element was therefore reduced to 5%, and the remaining additions were not sustained.

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Issues: Whether the addition arising from alleged bogus sales and purchases was to be sustained in full, or whether only an estimated profit element was taxable.

Analysis: The disputed transactions were treated as accommodation entries routed through entities found to be involved in bogus sale and purchase activity. The appellate authority had sustained addition only to the extent of 10% of the suspicious turnover, deleting the balance additions made under the heads of unexplained cash credits and related adjustments. On further appeal, the Tribunal found no reason to interfere with the determination that only the profit embedded in the alleged bogus transactions could be brought to tax. However, it considered 10% to be excessive in the facts of the case and held that a lower estimation would better meet the ends of justice.

Conclusion: The taxable profit element from the impugned transactions was reduced to 5%, and the balance additions were not sustained.

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