Sundry creditor additions cannot rest only on balance differences where purchases, sales and books are otherwise accepted.

Where purchases and sales are accepted and the assessee supports creditor balances with ledgers, confirmations and other records, an addition cannot be sustained merely from the difference between opening and closing sundry creditor balances. The record did not show rejection of the purchases as a whole or any finding disproving the underlying trading activity, so the discrepancy in creditor balances alone was insufficient to justify the addition. The addition on account of sundry creditors and alleged bogus purchases was therefore deleted in favour of the assessee.

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Issues: Whether the addition of Rs. 1,03,09,347 made on account of sundry creditors and alleged bogus purchases was sustainable.

Analysis: The assessee produced ledgers, confirmations and other supporting material for the creditor accounts. The record showed that the purchases and sales were accepted, and the turnover was substantial. The addition was made only by comparing the opening and closing balances of sundry creditors, without rejecting the entire purchases or disproving the underlying trading activity. In these circumstances, the discrepancy in creditor balances by itself was not a sufficient basis to sustain the addition.

Conclusion: The addition was not sustainable and was deleted in favour of the assessee.

Ratio Decidendi: Where purchases and sales are accepted and the trading results are supported by books and confirmations, an addition based merely on the difference between opening and closing sundry creditor balances, without rejecting the purchases as a whole, cannot be sustained.

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