No addition can be made u/s 41(1) in respect of balance of creditors appearing in the books of accounts at the end of the relevant year:

AO made an addition u/s 41(1) in respect of sundry creditors on the count that the same remain unverifiable since the assessee failed to furnish PAN and evidences establishing identity and credit-worthiness of the said creditors. Hon’ble ITAT observed that AO had not brought any material on records indicating that the assessee had obtained any benefit in respect of the said liabilities. Further, the said liabilities still existed in assessee’s books of accounts at the end of the relevant assessment year. Hence, the said addition was deleted by the Hon’ble ITAT.

[ITO vs. Shri Jagmohansingh G. Dhiman – ITA No.1959/Ahd/2012]