Audited books and corroborative records can defeat additions for cash deposits and alleged bogus purchases.

Audited books, a cash book and quantitative stock records supported the assessee's explanation that bank deposits arose from regular cash sales, and no defect was found in the accounts; the cash-deposit addition was therefore deleted. Purchases were also accepted where the assessee produced ledger entries, invoices, supplier confirmation and stock tally, because mere non-response to a section 133(6) notice and absence from Form 26AS did not outweigh the documentary record; the bogus-purchase addition was deleted. The note states that where accounts and corroborative records support the transactions, an addition cannot rest only on suspicion or third-party non-response.

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Issues: (i) Whether cash deposits treated as unexplained could be added to income when the assessee maintained audited books, cash book, quantitative stock records and claimed the deposits arose from regular cash sales; (ii) Whether purchases could be treated as bogus merely because the supplier did not respond to notice under section 133(6) and the purchases were not reflected in Form 26AS, despite supporting ledger, invoices, confirmation and stock tally.

Issue (i): Whether cash deposits treated as unexplained could be added to income when the assessee maintained audited books, cash book, quantitative stock records and claimed the deposits arose from regular cash sales.

Analysis: The assessee's turnover was not disputed, the books were audited, and no defect was pointed out in the books or cash records. The business involved regular cash sales, and the cash receipts and expenditure were reflected in the cash book. On these facts, the source of the bank deposits was supported by the surrounding records and the deposits could not be treated as unexplained.

Conclusion: The addition on account of cash deposits was deleted and the issue was decided in favour of the assessee.

Issue (ii): Whether purchases could be treated as bogus merely because the supplier did not respond to notice under section 133(6) and the purchases were not reflected in Form 26AS, despite supporting ledger, invoices, confirmation and stock tally.

Analysis: The assessee produced the supplier's ledger, confirmation, invoices and stock-related material showing that the purchases formed part of the stock tally. Mere non-response to the notice under section 133(6), by itself, was held insufficient to dislodge the documentary evidence supporting the purchases.

Conclusion: The addition for bogus purchases was deleted and the issue was decided in favour of the assessee.

Final Conclusion: Both additions were deleted, resulting in partial relief to the assessee and disposal of the appeal accordingly.

Ratio Decidendi: Where audited books and corroborative records support the cash source or purchase transaction, and no defect is shown in the accounts, an addition cannot rest solely on suspicion, third-party non-response, or absence of Form 26AS reflection.

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