Recorded cash sales cannot be taxed as unexplained money when books are maintained and no specific defect is proved.

Cash deposits during demonetization could not be treated as unexplained money under section 69A where the assessee's cash sales were recorded in regular books, supported by sales, purchase, VAT/GST and audited records, and the books were not rejected under section 145(3). The absence of a stock register, by itself, particularly in a jewellery business, did not establish a defect in the accounts or justify an addition when no specific infirmity in the cash book or sales records was shown. Recorded business receipts backed by maintained books therefore remained outside section 69A treatment.

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Issues: Whether addition under section 69A of the Income-tax Act, 1961 could be sustained on cash deposits made during the demonetization period when the cash sales were recorded in the books, the books were not rejected, and no specific defect was pointed out merely because no stock register was maintained.

Analysis: Section 69A applies only where money found with the assessee is not recorded in the books and the explanation offered is unsatisfactory. The assessee produced cash book, sales register, purchase register, VAT/GST records, audited accounts and related documents showing that the cash deposits were linked to recorded business receipts. The books of account were never rejected under section 145(3) of the Income-tax Act, 1961 and no specific defect in the cash book, sales register or purchase register was established. Absence of a stock register by itself, particularly in a jewellery business, does not render the accounts defective or justify treating recorded cash sales as unexplained money.

Conclusion: The addition under section 69A of the Income-tax Act, 1961 was not sustainable and was deleted.

Ratio Decidendi: Recorded cash sales supported by maintained books and accepted business records cannot be taxed as unexplained money under section 69A merely because of higher cash deposits during demonetization, especially when the books are not rejected and no specific defect is proved.

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