Books and GST mismatch, and non-response to creditor notices, cannot by themselves justify additions without proper verification.

An addition for alleged bogus purchases based only on a mismatch between books and GST data was not upheld because the assessee's explanation that the figures arose from agency transactions and stock transfers had not been properly verified; the matter was remanded for fresh examination. Additions under section 68 for loan creditors and sundry creditors were also not sustained merely because notices under section 133(6) elicited no response, since creditor-wise evidence and the assessee's supporting material required proper consideration. The impugned order was set aside and the matter sent back for fresh adjudication after hearing the assessee.

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Issues: (i) whether the addition made as alleged bogus purchases under section 69C on account of mismatch between books and GST data was sustainable; (ii) whether additions under section 68 in respect of loan creditors and sundry creditors could be sustained solely on account of non-response to notices under section 133(6).

Issue (i): whether the addition made as alleged bogus purchases under section 69C on account of mismatch between books and GST data was sustainable.

Analysis: The assessee's business was as a C&F agent and the difference was claimed to arise from agency transactions and stock transfers rather than actual purchases. The reconciliation explaining the mismatch was not properly verified, and the addition had been made on the basis of the data mismatch alone without examining the nature of the business or the supporting material.

Conclusion: The addition under section 69C was not sustained and the issue was restored for fresh verification.

Issue (ii): whether additions under section 68 in respect of loan creditors and sundry creditors could be sustained solely on account of non-response to notices under section 133(6).

Analysis: The additions were made primarily because notices issued under section 133(6) did not elicit responses. Such non-response, by itself, was not treated as sufficient to fasten an addition without examining the evidences the assessee could furnish regarding the creditors. The matter also required reconsideration because effective representation before the first appellate authority had not been made.

Conclusion: The additions under section 68 were not sustained and the issue was restored for fresh adjudication.

Final Conclusion: The impugned order was set aside and the matter was remanded to the first appellate authority for fresh decision after affording opportunity of hearing and examining the reconciliation and creditor-wise evidence.

Ratio Decidendi: An addition cannot be sustained merely on a books-versus-GST mismatch or on non-response to section 133(6) notices without proper verification of the assessee's explanation and supporting evidence.

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