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In trading cases involving alleged bogus purchases, accepted sales and bank-channel payments support a restricted profit estimate rather than full deletion of the addition, but the assessee still bears the primary burden to explain the purchases and source of payment. The ITAT noted that the sales were accepted and could not have been achieved without purchases, yet the assessee had not fully proved genuineness of the impugned transactions. It held that applying the gross profit rate from a later year was excessive because earlier years showed much lower margins and a different business model, so profit on the disputed transactions was fairly estimated at 1%, with the additions restricted accordingly.
In trading cases involving alleged bogus purchases, accepted sales and bank-channel payments support a restricted profit estimate rather than full deletion of the addition, but the assessee still bears the primary burden to explain the purchases and source of payment. The ITAT noted that the sales were accepted and could not have been achieved without purchases, yet the assessee had not fully proved genuineness of the impugned transactions. It held that applying the gross profit rate from a later year was excessive because earlier years showed much lower margins and a different business model, so profit on the disputed transactions was fairly estimated at 1%, with the additions restricted accordingly.
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