Trade liability additions fail where regular books and supporting freight records substantiate outstanding mercantile payables.

Regular books maintained on a mercantile basis, supported by freight memos, consignment notes and delivery challans, were treated as sufficient to explain outstanding freight and route liabilities. Mere non-response to notices under Section 133(6) did not by itself justify rejection of the accounts or conversion of trade payables into unexplained credits. In the absence of defective books or concrete material showing the liabilities to be bogus or fictitious, the conditions for disturbing the accounts under Section 145(3) or making an addition under Section 68 were not met. Subsequent payment of the liabilities in later years further supported their genuineness.

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Issues: Whether the addition made by treating freight and route expenses payable as unexplained liabilities was justified when the assessee maintained regular books of account, produced supporting freight memos and delivery documents, and the outstanding amounts were paid in subsequent years.

Analysis: The assessee maintained its accounts on a mercantile basis and explained the commercial mechanism for booking freight payable through truck numbers, freight memos, consignment notes and delivery challans. The books of account were not found defective, and no cogent material showed that the liabilities were bogus or fictitious. Mere non-response to notices under Section 133(6) did not, by itself, justify rejection of the accounts or conversion of trade liabilities into unexplained credits. The liabilities were also shown to have been discharged in subsequent years and accepted in later assessments. In these circumstances, the conditions for disturbing the accounts under Section 145(3) or treating the amounts as unexplained under Section 68 were not satisfied.

Conclusion: The addition was rightly deleted and the revenue's challenge failed.

Final Conclusion: The assessee's recorded freight liabilities were held to be genuine business obligations supported by the regular books of account, and the assessment addition was sustained neither in law nor on facts.

Ratio Decidendi: Where an assessee maintains regular books on a mercantile basis and substantiates outstanding trade liabilities with contemporaneous business records, an addition cannot be sustained merely because third-party confirmations are not received under Section 133(6), absent concrete evidence that the accounts are incorrect, incomplete, or fictitious.

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