The assessment was reopened under section 148 of the Income-tax Act, 1961 based on information from the Sales Tax Department that the assessee was a beneficiary of accommodation entries, leading the Assessing Officer to disallow the entire value of certain purchases. The assessee, however, produced documentary evidence like purchase bills and proof of payment by cheque. The High Court upheld the Tribunal’s decision, observing that the Assessing Officer had not disputed the corresponding sales made by the assessee from these very purchases. The Court held that where sales are accepted, the underlying purchases cannot be deemed entirely bogus merely because the suppliers could not be produced. In such circumstances, only the profit element embedded in the alleged bogus purchases should be estimated and added to the income. The Tribunal’s estimation of such profit at 12.5 per cent of the purchases was affirmed as a reasonable finding of fact not requiring any interference. (AY. 2006-07 to 2009-10)