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Issues: Whether the disallowance sustained by the first appellate authority in respect of alleged bogus purchases called for interference.
Analysis: The addition originated from reassessment proceedings based on third-party information regarding accommodation bills. The assessment record did not disclose independent enquiry by the Assessing Officer into the alleged bill providers. The sales were not disputed, the books of account were audited, and a substantial part of the impugned purchases had already been offered to tax in subsequent years under section 41(1) of the Income-tax Act, 1961. In these circumstances, the first appellate authority restricted the disallowance on an estimated basis, and no infirmity was found in that approach.
Conclusion: The restricted disallowance was upheld and the Revenue failed to establish any ground for enhancement.
Final Conclusion: The relief granted at the first appellate stage was sustained, and the Revenue's challenge to the estimated disallowance was rejected.
Ratio Decidendi: Where sales are not in dispute, books are audited, and the assessment is based only on third-party information without independent enquiry, an estimated restriction of disallowance in respect of alleged bogus purchases is sustainable, especially when part of the amount has already been taxed in later years.
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