Unexplained cash addition under section 69A fails where books are produced and only limited business suppression is indicated.

Unexplained cash under section 69A cannot be sustained where the assessee produces the cash book and other trading records, and the books of account are not rejected or the recorded transactions dislodged. On the facts stated, cash found in a locker was shown in the regular books, so treating the entire balance as unexplained cash was not justified. The lower net profit ratio for the year, however, indicated some suppression in trading results, so only a limited estimated business addition linked to cash sales was considered appropriate, with the balance deleted.

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Issues: Whether the addition made towards alleged unexplained cash under section 69A could be sustained when the cash book and other trading records were produced and the books of account were not rejected.

Analysis: The cash found in the locker was claimed to be reflected in the regular books and the assessee's trading records showed purchases, sales, stock and cash book entries. The assessment did not reject the books of account or dislodge the recorded transactions. In these circumstances, the invocation of section 69A for the entire cash balance was not justified. However, the lower net profit ratio in the relevant year, as compared with the immediately preceding year, indicated suppression in the trading results to a limited extent. The proper course was therefore to sustain only an estimated business addition relatable to the cash sales element, rather than to treat the entire balance as unexplained cash.

Conclusion: The addition under section 69A was not sustained in full. Only a limited addition representing estimated business income was upheld, and the balance addition was deleted.

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