Sundry creditor additions fail where identity and genuineness are supported, and PAN absence alone is not enough.

Sundry creditor additions could not be sustained merely because some creditors did not furnish PAN or file returns where the assessee had supplied names and addresses, responses were obtained to notices under section 133(6), and some creditors appeared and confirmed the transactions under section 131. For the relevant assessment year, PAN was not mandatory under Rule 115B, and a substantial part of the balances consisted of opening balances already examined in earlier years. In the absence of tangible material or corroborative evidence showing the creditors to be bogus, the addition was deleted as unsustainable.

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Issues: Whether the addition made on account of sundry creditors could be sustained merely because some creditors did not furnish PAN or file returns of income, and whether the assessee had otherwise established the identity, creditworthiness and genuineness of the creditors.

Analysis: The assessee had supplied names and addresses of the creditors, notices under section 133(6) of the Income-tax Act, 1961 were issued to the creditors and replies were received, and three creditors also appeared in response to summons under section 131 of the Income-tax Act, 1961 and their statements and documents were recorded. The addition was based only on the absence of PAN or filing of returns in respect of some creditors, but for the assessment year in question furnishing of PAN was not mandatory under Rule 115B of the Income-tax Rules, 1962. A substantial part of the disputed balances represented opening balances from earlier years which had already been examined, and no tangible material or corroborative evidence was brought to show that the creditors were bogus.

Conclusion: The addition of Rs. 60,45,315/- was not sustainable and was deleted in favour of the assessee.

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