Cash deposits explained as recorded business receipts cannot be added as unexplained income without concrete defects in books.

Cash deposits reflected in audited books as business receipts and cash sales cannot be treated as unexplained income under section 68 when the assessee supports them with vouchers, bills, regular records and software-based entries, and no adverse material, stock discrepancy or specific defect is found. Rejection of the cash book under section 145(3) requires concrete defects and cannot rest on suspicion or conjecture. On the facts noted, the addition was deleted because the source of the deposits was explained through recorded business receipts, and the Revenue's challenge failed.

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Issues: Whether the addition made on account of cash deposits in the bank account as unexplained income under section 68, after rejecting the cash book under section 145(3), was sustainable where the assessee claimed that the deposits represented duly recorded business receipts and cash sales.

Analysis: The accounts were audited and the cash receipts, sales, advances and related transactions were reflected in the regular books and supported by vouchers, bills and software-based records. The material on record did not disclose any adverse finding, defect in the books, discrepancy in stock, or evidence to show that the cash receipts were not business receipts. The rejection of the cash book under section 145(3) was held to be based on suspicion and conjecture rather than on identifiable defects, and the addition under section 68 could not be sustained when the source of cash deposits was explained through recorded business receipts.

Conclusion: The addition under section 68 was correctly deleted and the Revenue's challenge failed.

Ratio Decidendi: Where cash deposits are satisfactorily explained as recorded business receipts reflected in audited books, and no specific defect or adverse material is found, an addition under section 68 cannot be sustained merely on suspicion, nor can the books be rejected under section 145(3) without concrete basis.

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