DEEPA HEMANT HOON,MUMBAI vs. ITO WARD 15(1)(1), MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Assessee is directed against order dated 11.12.2025, passed by the learned Additional/Joint Commissioner of Income-Tax (Appeals) –2, Chennai [in short, “the learned CIT(A)”], for Assessment Year(AY) 2011-12, raising following grounds:

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“1. The Ld. CIT(A) erred in law and on facts in upholding the addition of 1. The Ld. CIT(A) erred in law and on facts in upholding the addition of Rs. 1. The Ld. CIT(A) erred in law and on facts in upholding the addition of 12,63,400/- as unexplained money u/s 69A of the Act, ignoring the detailed cash as unexplained money u/s 69A of the Act, ignoring the detailed cash as unexplained money u/s 69A of the Act, ignoring the detailed cash flow statement and documentary evidence submitted by the appellant. flow statement and documentary evidence submitted by the appellant. flow statement and documentary evidence submitted by the appellant. 2. The Learned CIT(A) has erred in law and on facts by not appreciating that the 2. The Learned CIT(A) has erred in law and on facts by not appreciating that the 2. The Learned CIT(A) has erred in law and on facts by not appreciating that the AO made 100% disallowan AO made 100% disallowance of expenses while accepting the gross receipts from ce of expenses while accepting the gross receipts from the same books of account. the same books of account. 3. The learned CIT has erred in not accepting the disallowance made by the AO of 3. The learned CIT has erred in not accepting the disallowance made by the AO of 3. The learned CIT has erred in not accepting the disallowance made by the AO of genuine business expenses incurred by the assessee during the year of Rs. genuine business expenses incurred by the assessee during the year of Rs. genuine business expenses incurred by the assessee during the year of Rs. 9,03,113 without proving the contrary. oving the contrary. 4. The Learned Assessing officer should have rejected the books of accounts and 4. The Learned Assessing officer should have rejected the books of accounts and 4. The Learned Assessing officer should have rejected the books of accounts and estimated a reasonable profit as per the provision of section 44AD. estimated a reasonable profit as per the provision of section 44AD. estimated a reasonable profit as per the provision of section 44AD. 5. The learned CIT has erred in disallowing an amount as unexplained money of 5. The learned CIT has erred in disallowing an amount as unexplained money of 5. The learned CIT has erred in disallowing an amount as unexplained money of Rs. 1,46,489/- without understanding the facts of the case without understanding the facts of the case. The applicant craves the right to adduce, add, amend, alter, or delete any of the The applicant craves the right to adduce, add, amend, alter, or delete any of the The applicant craves the right to adduce, add, amend, alter, or delete any of the grounds of appeal before or at the time of hearing of this appeal.” grounds of appeal before or at the time of hearing of this appeal. grounds of appeal before or at the time of hearing of this appeal. 2. The assessee has challenged, The assessee has challenged, inter-alia, the addition of , the addition of ₹12,63,400/- as unexplained money under section 69A of the as unexplained money under section 69A of the as unexplained money under section 69A of the Income-tax Act, 1961 [in short, ‘the Act’], disallowance of business tax Act, 1961 [in short, ‘the Act’], disallowance of business tax Act, 1961 [in short, ‘the Act’], disallowance of business expenditure of ₹9,03,018/ 9,03,018/- under section 37(1), the alleged non under section 37(1), the alleged non- consideration of the provisions of section 44A consideration of the provisions of section 44AD, and addition of D, and addition of ₹1,46,489/- towards unexplained credits. towards unexplained credits.

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card payments of ₹3,31,000/ 3,31,000/-. Since no return of income had been . Since no return of income had been furnished by the assessee, the case was identified through the Non- furnished by the assessee, the case was identified through the Non furnished by the assessee, the case was identified through the Non filers Monitoring System. On recording reasons that income filers Monitoring System. On recording reasons that income filers Monitoring System. On recording reasons that income chargeable to tax had escaped assessment, notice under section chargeable to tax had escaped assessment, notice under section chargeable to tax had escaped assessment, notice under section 148 was issued on 2 148 was issued on 27.03.2018. In response thereto, the assessee 7.03.2018. In response thereto, the assessee furnished her return of income on 01.08.2018 declaring total furnished her return of income on 01.08.2018 declaring total furnished her return of income on 01.08.2018 declaring total income of ₹3,17,060/ 3,17,060/-.

3.1 During the reassessment proceedings, the Assessing Officer During the reassessment proceedings, the Assessing Officer During the reassessment proceedings, the Assessing Officer found that the assessee had receipts aggregating to ₹13,94,590/-, found that the assessee had receipts aggregating to found that the assessee had receipts aggregating to comprising tuition/coaching receipts of ₹12,21,600/ comprising tuition/coaching receipts of 12,21,600/-, commission receipts of ₹9,590/- and receipts from tour and travel business of and receipts from tour and travel business of ₹1,63,400/-. Against the tour and travel receipts, direct expenditure . Against the tour and travel receipts, direct expenditure . Against the tour and travel receipts, direct expenditure of ₹1,14,974/- was claimed. Against the balance gros was claimed. Against the balance gros was claimed. Against the balance gross profit of ₹12,79,616/-, the assessee claimed indirect expenditure of , the assessee claimed indirect expenditure of , the assessee claimed indirect expenditure of ₹9,23,616/-, comprising the following: , comprising the following:

Bank charges: Bank charges: Rs. 20,598 Office expenses: Office expenses: Rs. 6,03,768 Repairs and maintenance Repairs and maintenance Rs. 29,100 Salary: Rs. 2,51,150 Staff Welfare expenses: Staff Welfare expenses: Rs. 19,000 Total Rs. 9,23,616

3.2 Thus, after the aforesaid indirect expenditure, the assessee Thus, after the aforesaid indirect expenditure, the assessee Thus, after the aforesaid indirect expenditure, the assessee had disclosed net profit of ₹3,56,000/-. During the assessment had disclosed net profit of During the assessment proceedings, the Assessing Officer, vide notice under section 142(1) proceedings, the Assessing Officer, vide notice under section 142(1) proceedings, the Assessing Officer, vide notice under section 142(1) dated 10.09.2018, called upon the assessee to furnish details and dated 10.09.2018, called upon the assessee to furnish details and dated 10.09.2018, called upon the assessee to furnish details and

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supporting evidence in respect of the expenditure claimed in the supporting evidence in respect of the expenditure claimed in the supporting evidence in respect of the expenditure claimed in the Profit Profit and and Loss Loss Account, Account, including including bills bills and and vouchers vouchers demonstrating that the expenditure had been incurred wholly and demonstrating that the expenditure had been incurred wholly and demonstrating that the expenditure had been incurred wholly and exclusively for the purposes of business and was allowable under exclusively for the purposes of business and was allowable under exclusively for the purposes of business and was allowable under section 37(1) or section 57 of the Act. section 37(1) or section 57 of the Act. In response, the assessee In response, the assessee nditure of ₹1,14,974/-, furnished details of tour and travel expe furnished details of tour and travel expenditure of salary expenditure of ₹2,51,150/-, credit-card payments relating to salary expenditure of card payments relating to office expenditure of ₹6,03,768/- and details of bank charges of office expenditure of and details of bank charges of ₹20,598/-. On examination, the Assessing Officer found that, out of On examination, the Assessing Officer found that, out of On examination, the Assessing Officer found that, out of the office expenditure of ₹6,03,768/-, an amount of , an amount of ₹3,68,888/- the office expenditure of represented repayment of loan and, therefore, could not constitute represented repayment of loan and, therefore, could not constitute represented repayment of loan and, therefore, could not constitute allowable business expenditure. In respect of the remaining office allowable business expenditure. In respect of the remaining office allowable business expenditure. In respect of the remaining office expenditure, the Assessing Officer observed that the assessee had expenditure, the Assessing Officer observed that the assessee had expenditure, the Assessing Officer observed that the assessee had not established the nex not established the nexus between the expenditure and the us between the expenditure and the business activity of coaching or tuition income or tour and travel business activity of coaching or tuition income or tour and travel business activity of coaching or tuition income or tour and travel services. Likewise, in respect of salary expenditure of ₹2,51,150/-, services. Likewise, in respect of salary expenditure of services. Likewise, in respect of salary expenditure of the assessee did not furnish adequate evidence regarding the the assessee did not furnish adequate evidence regarding the the assessee did not furnish adequate evidence regarding the identity of the employe identity of the employees, PAN, income-tax particulars or the nature tax particulars or the nature of services rendered by them. of services rendered by them. The Assessing Officer accordingly he Assessing Officer accordingly allowed bank charges of ₹20,598/- but disallowed the balance allowed bank charges of but disallowed the balance expenditure of ₹9,03,018/ 9,03,018/- under section 37(1), holding that the under section 37(1), holding that the assessee had failed to establish that the same had been incurred assessee had failed to establish that the same had been incurred assessee had failed to establish that the same had been incurred wholly and exclusively for the purposes of business. wholly and exclusively for the purposes of business.

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3.3 The Assessing Officer also examined the credits appearing in The Assessing Officer also examined the credits appearing in The Assessing Officer also examined the credits appearing in the various bank accounts of the a the various bank accounts of the assessee. The aggregate cash ssessee. The aggregate cash deposits were ₹24,85,000/ 24,85,000/- and other credits aggregated to and other credits aggregated to ₹6,39,452/-, resulting in total bank credits of , resulting in total bank credits of ₹31,24,452/ 31,24,452/-. As against these credits, the assessee had disclosed receipts of only against these credits, the assessee had disclosed receipts of only against these credits, the assessee had disclosed receipts of only ₹13,94,590/- in the Profit and Loss A in the Profit and Loss Account. The Assessing Officer ccount. The Assessing Officer accordingly called upon the assessee to explain the difference of accordingly called upon the assessee to explain the difference of accordingly called upon the assessee to explain the difference of ₹17,29,862/-. In response, the assessee explained that the cash In response, the assessee explained that the cash In response, the assessee explained that the cash deposits of ₹24,85,000/ 24,85,000/- were sourced from three components, were sourced from three components, namely: (i) tuition income tuition income – ₹12,21,600/-; (ii) cash withdrawals from cash withdrawals from bank accounts – ₹11,60,290/ 11,60,290/-; and (iii) opening cash savings opening cash savings – . The three components aggregate to ₹24,85,000/ 24,85,000/-. In ₹1,03,110/-. The three components aggregate to respect of the other credits, aggregating to approximately ₹6.40 respect of the other credits, aggregating to approximately respect of the other credits, aggregating to approximately lakh, the assessee expla lakh, the assessee explained them as comprising bank interest, ined them as comprising bank interest, income-tax refund, loans from relatives, amounts received towards tax refund, loans from relatives, amounts received towards tax refund, loans from relatives, amounts received towards expenses incurred on behalf of M/s Channels Information expenses incurred on behalf of M/s Channels Information expenses incurred on behalf of M/s Channels Information Technology Pvt. Ltd., miscellaneous receipts and collections from Technology Pvt. Ltd., miscellaneous receipts and collections from Technology Pvt. Ltd., miscellaneous receipts and collections from the tour and travel business. the tour and travel business. The assessee further explained that, The assessee further explained that, out of the tour and travel collections, only ₹1,72,990/ out of the tour and travel collections, only 1,72,990/- represented income, the balance having been refunded to customers on income, the balance having been refunded to customers on income, the balance having been refunded to customers on cancellation or non-execution of services. execution of services.

3.4 The The The Assessing Assessing Assessing Officer Officer Officer thereafter thereafter thereafter examined examined examined the the the bank statements to test the assessee's claim that the cash deposits were statements to test the assessee's claim that the cash deposits were statements to test the assessee's claim that the cash deposits were

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sourced from earlier cash withdrawals. In respect of the Citi Bank sourced from earlier cash withdrawals. In respect of the Citi Bank sourced from earlier cash withdrawals. In respect of the Citi Bank account, several withdrawals were found to have been made account, several withdrawals were found to have been made account, several withdrawals were found to have been made immediately after or on the same day as cash deposits, with immediately after or on the same day as cash deposits, wi immediately after or on the same day as cash deposits, wi negligible balances immediately preceding the deposits. For negligible balances immediately preceding the deposits. For negligible balances immediately preceding the deposits. For example, a withdrawal of example, a withdrawal of ₹1,23,790/- on 29.10.2010 followed a on 29.10.2010 followed a cash deposit of ₹1,50,000/ 1,50,000/- on the same day, when the preceding on the same day, when the preceding balance was only ₹19.19. Similarly, withdrawals of 19.19. Similarly, withdrawals of 19.19. Similarly, withdrawals of ₹2,00,000/-, ₹40,000/- and ₹9,000/ 9,000/- on 02.11.2010 followed a cash deposit of on 02.11.2010 followed a cash deposit of ₹2,49,000/- on the same day, with a preceding balance of only on the same day, with a preceding balance of only on the same day, with a preceding balance of only ₹677.69. The Assessing Officer also examined other withdrawals 677.69. The Assessing Officer also examined other withdrawals 677.69. The Assessing Officer also examined other withdrawals and found that the assessee had not established a satisfactory and found that the assessee had not established a satisfactory and found that the assessee had not established a satisfactory linkage between the withdrawals and subsequent deposits. ge between the withdrawals and subsequent deposits. In ge between the withdrawals and subsequent deposits. respect of the J&K Bank account, withdrawals aggregating to respect of the J&K Bank account, withdrawals aggregating to respect of the J&K Bank account, withdrawals aggregating to ₹39,000/- were examined, but the Assessing Officer found that the were examined, but the Assessing Officer found that the were examined, but the Assessing Officer found that the assessee had not established a direct nexus between the assessee had not established a direct nexus between the assessee had not established a direct nexus between the withdrawals and the subsequent cash deposits. e subsequent cash deposits.

3.5 The Assessing Officer accordingly rejected the assessee's The Assessing Officer accordingly rejected the assessee's The Assessing Officer accordingly rejected the assessee's explanation in respect of the balance cash deposits of ₹12,63,400/- explanation in respect of the balance cash deposits of explanation in respect of the balance cash deposits of . He further noted that the assessee's explanation regarding an He further noted that the assessee's explanation regarding an He further noted that the assessee's explanation regarding an opening cash balance of opening cash balance of ₹1,03,110/- was not supported by her past was not supported by her past income profile. For Assessment Year 2010 income profile. For Assessment Year 2010-11, the assessee had 11, the assessee had disclosed gross salary income of only disclosed gross salary income of only ₹1,89,660/ 1,89,660/-, and no substantial income had been disclosed in the preceding years. The substantial income had been disclosed in the preceding years. The substantial income had been disclosed in the preceding years. The Assessing Officer, therefore, conclude Assessing Officer, therefore, concluded that the availability of d that the availability of

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substantial earlier cash savings had not been established and substantial earlier cash savings had not been established and substantial earlier cash savings had not been established and treated ₹12,63,400/- - as unexplained money under section 69A. as unexplained money under section 69A.

3.6 As regards the other credits, the Assessing Officer accepted As regards the other credits, the Assessing Officer accepted As regards the other credits, the Assessing Officer accepted ₹1,72,990/- as business income already ac as business income already accounted for and counted for and ₹3,20,500/- as loans from relatives supported by confirmations. as loans from relatives supported by confirmations. as loans from relatives supported by confirmations. The balance amount of ₹1,46,489/- was treated as unexplained The balance amount of was treated as unexplained money under section 69A. money under section 69A.

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4.1 As regards the expenditure, the learned CIT(A) recorded that As regards the expenditure, the learned CIT(A) recorded that As regards the expenditure, the learned CIT(A) recorded that the assessee had disclosed receipts of the assessee had disclosed receipts of ₹13,94,590/ 13,94,590/- and had claimed direct tour and travel expenditure of claimed direct tour and travel expenditure of ₹1,14,974/ 1,14,974/-, which had been allowed by the Assessing Officer. Of the indirect had been allowed by the Assessing Officer. Of the indirect had been allowed by the Assessing Officer. Of the indirect expenditure of ₹9,23,616/ 9,23,616/-, the Assessing Officer had allowed bank , the Assessing Officer had allowed bank charges of ₹20,598/- and disallowed ₹9,03,018/-.

4.2 The learned CIT(A) concurred with the Assessing Officer on The learned CIT(A) concurred with the Assessing Officer on The learned CIT(A) concurred with the Assessing Officer on the ground that the assessee had not produced sufficient evidence ground that the assessee had not produced sufficient evidence ground that the assessee had not produced sufficient evidence establishing that the expenditure had been incurred wholly and establishing that the expenditure had been incurred wholly and establishing that the expenditure had been incurred wholly and exclusively for business purposes. In particular, the learned CIT(A) exclusively for business purposes. In particular, the learned CIT(A) exclusively for business purposes. In particular, the learned CIT(A) noted the absence of adequate supporting evidence in respect of noted the absence of adequate supporting evidence in respe noted the absence of adequate supporting evidence in respe salary, office expenditure, repairs and staff welfare expenditure. The salary, office expenditure, repairs and staff welfare expenditure. The salary, office expenditure, repairs and staff welfare expenditure. The disallowance of ₹9,03,018/ 9,03,018/- was accordingly confirmed. was accordingly confirmed.

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between every withdrawal and subsequent deposit where the overall between every withdrawal and subsequent deposit where the overall between every withdrawal and subsequent deposit where the overall availability of cash is demonstrated. Reliance was placed upon availability of cash is demonstrated. Reliance was placed upon availability of cash is demonstrated. Reliance was placed upon various decisions of the Tribunal in support of this proposition. various decisions of the Tribunal in support of this proposition. various decisions of the Tribunal in support of this proposition.

5.1 In respect of the disallowance of In respect of the disallowance of ₹9,03,018/ 018/-, the learned counsel submitted that the expenses had actually been incurred in counsel submitted that the expenses had actually been incurred in counsel submitted that the expenses had actually been incurred in the course of the assessee's coaching and tour and travel activities the course of the assessee's coaching and tour and travel activities the course of the assessee's coaching and tour and travel activities and that the payments were substantially made through banking and that the payments were substantially made through banking and that the payments were substantially made through banking channels or credit card. It was contende channels or credit card. It was contended that the Assessing Officer d that the Assessing Officer could not accept the receipts and simultaneously disallow the entire could not accept the receipts and simultaneously disallow the entire could not accept the receipts and simultaneously disallow the entire expenditure without establishing that the expenditure was either expenditure without establishing that the expenditure was either expenditure without establishing that the expenditure was either non-genuine or unrelated to business. genuine or unrelated to business. Specific submissions were Specific submissions were also made regarding salary pa also made regarding salary payments of ₹2,51,150/ 2,51,150/-, office expenditure of ₹6,03,768/ 6,03,768/-, staff welfare expenditure of , staff welfare expenditure of ₹19,000/- and repairs and maintenance expenditure of and repairs and maintenance expenditure of ₹29,100/ 29,100/-. Details of individual salary payments, including payments of ₹1,63,150/- to individual salary payments, including payments of individual salary payments, including payments of Bela Soni, ₹64,000/- - to Lata Gupta and ₹24,000/- - to Ramesh P., were furnished.

5.2 In respect of the addition of In respect of the addition of ₹1,46,489/-, the learned counsel , the learned counsel submitted that the amount represented, inter alia, bank interest of submitted that the amount represented, inter alia, bank interest of submitted that the amount represented, inter alia, bank interest of ₹29/-, income-tax refund of tax refund of ₹3,350/-, reimbursement , reimbursement of ₹20,700/- by M/s Channels Information Technology Pvt. Ltd. and ₹1,22,410/- by M/s Channels Information Technology Pvt. Ltd. and by M/s Channels Information Technology Pvt. Ltd. and representing the balance of tour and travel collections which, representing the balance of tour and travel collections which, representing the balance of tour and travel collections which, according to the assessee, had subsequently been refunded to according to the assessee, had subsequently been refunded to according to the assessee, had subsequently been refunded to

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customers on cancellation of bookings. It was accordingly customers on cancellation of bookings. It was accordin customers on cancellation of bookings. It was accordin submitted that the said credits did not constitute unexplained submitted that the said credits did not constitute unexplained submitted that the said credits did not constitute unexplained income of the assessee. income of the assessee.

Addition of ₹12,63,400/ 12,63,400/- under section 69A

6.1 The assessee's explanation is that the cash deposits of The assessee's explanation is that the cash deposits of The assessee's explanation is that the cash deposits of ₹24,85,000/- were sourced from tuition income of were sourced from tuition income of ₹12,21,600/-, were sourced from tuition income of cash withdrawals of cash withdrawals of ₹11,60,290/- and opening cash savings of and opening cash savings of ₹1,03,110/-. We find that the Assessing Officer has already . We find that the Assessing Officer has already . We find that the Assessing Officer has already accepted the tuition income as a source. The controversy, therefore, tion income as a source. The controversy, therefore, tion income as a source. The controversy, therefore, essentially relates to the availability of essentially relates to the availability of ₹11,60,290/ 11,60,290/- claimed to have been withdrawn from the bank accounts and ₹1,03,110/- have been withdrawn from the bank accounts and have been withdrawn from the bank accounts and claimed as opening cash savings. claimed as opening cash savings. The mere fact that cash was The mere fact that cash was withdrawn from a bank account does not, by itself, establish that bank account does not, by itself, establish that bank account does not, by itself, establish that the same cash continued to remain available until the date of a the same cash continued to remain available until the date of a the same cash continued to remain available until the date of a subsequent deposit. Equally, the mere time gap between withdrawal subsequent deposit. Equally, the mere time gap between withdrawal subsequent deposit. Equally, the mere time gap between withdrawal and redeposit cannot, by itself, lead to the conclusion that the and redeposit cannot, by itself, lead to the conclusion that the and redeposit cannot, by itself, lead to the conclusion that the explanation is false. What is required is an examination of the is false. What is required is an examination of the is false. What is required is an examination of the overall cash position and the intervening utilisation of cash, if any. overall cash position and the intervening utilisation of cash, if any. overall cash position and the intervening utilisation of cash, if any.

6.2 In the present case, however, the assessee was specifically In the present case, however, the assessee was specifically In the present case, however, the assessee was specifically called upon to demonstrate the availability of cash on the relevant called upon to demonstrate the availability of cash on the relevant called upon to demonstrate the availability of cash on the relevant

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dates. The Assessing Officer examined the bank statements and dates. The Assessing Officer examined the bank statements and dates. The Assessing Officer examined the bank statements and found several instances where substantial cash withdrawals found several instances where substantial cash withdrawals found several instances where substantial cash withdrawals immediately followed cash deposits and the balances preceding immediately followed cash deposits and the balances preceding immediately followed cash deposits and the balances preceding such transactions were negligible. The assessee has not brought such transactions were negligible. The assessee has not brought such transactions were negligible. The assessee has not brought before us the complete bank statements which, despite being the complete bank statements which, despite being the complete bank statements which, despite being specifically sought during the hearing, would enable us to specifically sought during the hearing, would enable us to specifically sought during the hearing, would enable us to independently examine the movement of cash and test the cash- independently examine the movement of cash and test the cash independently examine the movement of cash and test the cash flow statement against the actual bank transactions. We also find flow statement against the actual bank transactions. flow statement against the actual bank transactions. that the assessee's claim of opening cash savings of s claim of opening cash savings of ₹1,03,110/- is s claim of opening cash savings of not supported by any contemporaneous evidence placed before us. not supported by any contemporaneous evidence placed before us. not supported by any contemporaneous evidence placed before us. The Assessing Officer has noted that the assessee had disclosed The Assessing Officer has noted that the assessee had disclosed The Assessing Officer has noted that the assessee had disclosed salary income of only salary income of only ₹1,89,660/- in the immediately preceding year in the immediately preceding year and no substantial income in earlier years. In the absence of stantial income in earlier years. In the absence of stantial income in earlier years. In the absence of evidence establishing accumulation of such cash savings, the claim evidence establishing accumulation of such cash savings, the claim evidence establishing accumulation of such cash savings, the claim cannot be accepted merely on assertion. cannot be accepted merely on assertion. More importantly, the More importantly, the assessee's own explanation requires reconciliation. On one hand, assessee's own explanation requires reconciliation. On one hand, assessee's own explanation requires reconciliation. On one hand, tuition income of ₹12,21,600/ 12,21,600/- was stated to have been received in was stated to have been received in cash and, on the other, cash withdrawals of cash and, on the other, cash withdrawals of ₹11,60,290/ 11,60,290/- from bank accounts were claimed as another source of the same cash bank accounts were claimed as another source of the same cash bank accounts were claimed as another source of the same cash deposits. The learned Departmental Representative rightly pointed deposits. The learned Departmental Representative rightly pointed deposits. The learned Departmental Representative rightly pointed out that the cash-flow position requires examination in the context flow position requires examination in the context flow position requires examination in the context of the assessee's actual utilisation and redeposit of cash. In the of the assessee's actual utilisation and redeposit of cash. In the of the assessee's actual utilisation and redeposit of cash. In the absence of the underlying bank statements before us, we are unable absence of the underlying bank statements before us, we are unable absence of the underlying bank statements before us, we are unable

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to find that the assessee has satisfactorily demonstrated availability to find that the assessee has satisfactorily demonstrated avail to find that the assessee has satisfactorily demonstrated avail of the entire cash claimed as the source of the deposits. of the entire cash claimed as the source of the deposits. of the entire cash claimed as the source of the deposits.

6.3 We, therefore, find no reason to interfere with the concurrent We, therefore, find no reason to interfere with the concurrent We, therefore, find no reason to interfere with the concurrent findings of the Assessing Officer and the learned CIT(A) insofar as findings of the Assessing Officer and the learned CIT(A) insofar as findings of the Assessing Officer and the learned CIT(A) insofar as the addition of ₹12,63,400/ 12,63,400/- under section 69A is concerned. The under section 69A is concerned. The same is accordingly sustained. same is accordingly sustained. The relevant ground is dismissed. The relevant ground is dismissed.

Disallowance of ₹9,03,018/ 9,03,018/- under section 37(1)

7.1 The assessee has contended that the expenditure was incurred The assessee has contended that the expenditure was incurred The assessee has contended that the expenditure was incurred through banking channels and that the Assessing Officer, having nking channels and that the Assessing Officer, having nking channels and that the Assessing Officer, having accepted the gross receipts, could not disallow the entire accepted the gross receipts, could not disallow the entire accepted the gross receipts, could not disallow the entire expenditure. We are unable to accept the proposition in such broad expenditure. We are unable to accept the proposition in such broad expenditure. We are unable to accept the proposition in such broad terms. The fact that a payment has been made through a bank or terms. The fact that a payment has been made through a bank or terms. The fact that a payment has been made through a bank or credit card establishes the mode of payment; it does not, by itself, stablishes the mode of payment; it does not, by itself, stablishes the mode of payment; it does not, by itself,

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establish the business purpose or allowability of the expenditure establish the business purpose or allowability of the expenditure establish the business purpose or allowability of the expenditure under section 37(1).

7.2 In the present case, the Assessing Officer specifically In the present case, the Assessing Officer specifically In the present case, the Assessing Officer specifically examined the office expenditure of examined the office expenditure of ₹6,03,768/- and f and found that ₹3,68,888/- represented repayment of loan. Such repayment represented repayment of loan. Such repayment represented repayment of loan. Such repayment cannot be allowed as revenue expenditure merely because it was cannot be allowed as revenue expenditure merely because it was cannot be allowed as revenue expenditure merely because it was routed through a credit card. In respect of salary expenditure of routed through a credit card. In respect of salary expenditure of routed through a credit card. In respect of salary expenditure of ₹2,51,150/-, the assessee did furnish details of payments, , the assessee did furnish details of payments, but the , the assessee did furnish details of payments, material available before the Assessing Officer did not establish the material available before the Assessing Officer did not establish the material available before the Assessing Officer did not establish the nature of services rendered or the business necessity thereof. nature of services rendered or the business necessity thereof. nature of services rendered or the business necessity thereof. Similar deficiency existed in respect of repairs and maintenance Similar deficiency existed in respect of repairs and maintenance Similar deficiency existed in respect of repairs and maintenance and staff welfare expenditure. and staff welfare expenditure. The assessee has The assessee has now furnished additional particulars regarding the recipients of salary and the additional particulars regarding the recipients of salary and the additional particulars regarding the recipients of salary and the dates and amounts of payments. However, the mere fact that dates and amounts of payments. However, the mere fact that dates and amounts of payments. However, the mere fact that payments were made by account payments were made by account-payee cheques does not payee cheques does not conclusively establish that the recipients rendered services to the conclusively establish that the recipients rendered services to conclusively establish that the recipients rendered services to assessee's business. The primary requirement under section 37(1) assessee's business. The primary requirement under section 37(1) assessee's business. The primary requirement under section 37(1) is that the expenditure should have been incurred wholly and is that the expenditure should have been incurred wholly and is that the expenditure should have been incurred wholly and exclusively for the purposes of business. exclusively for the purposes of business.

7.3 We therefore find that the assessee has not discharged the We therefore find that the assessee has not discharged the We therefore find that the assessee has not discharged the primary burden of est primary burden of establishing the business nexus of the ablishing the business nexus of the expenditure. Nor is this a case where the Assessing Officer, while expenditure. Nor is this a case where the Assessing Officer, while expenditure. Nor is this a case where the Assessing Officer, while accepting the expenditure as genuine in principle, made an accepting the expenditure as genuine in principle, made an accepting the expenditure as genuine in principle, made an

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arbitrary estimate of disallowance. The disallowance represents arbitrary estimate of disallowance. The disallowance represents arbitrary estimate of disallowance. The disallowance represents expenditure which remained uns expenditure which remained unsupported on the essential test of upported on the essential test of business purpose. Accordingly, the disallowance of Accordingly, the disallowance of Accordingly, the disallowance of ₹9,03,018/- is upheld. The relevant grounds are dismissed. The relevant grounds are dismissed.

Addition of ₹1,46,489/ 1,46,489/- under section 69A

8.1 Unlike the issue of Unlike the issue of ₹12,63,400/-, the explanation in respect of , the explanation in respect of ₹1,46,489/- is capable of direct verification from independent is capable of direct verification from independent is capable of direct verification from independent documentary material. In documentary material. In particular, the income-tax refund can be tax refund can be verified from the departmental record; the reimbursement of verified from the departmental record; the reimbursement of verified from the departmental record; the reimbursement of ₹20,700/- can be verified from the books and bank account of M/s can be verified from the books and bank account of M/s can be verified from the books and bank account of M/s Channels Information Technology Pvt. Ltd.; and the claim regarding Channels Information Technology Pvt. Ltd.; and the claim regarding Channels Information Technology Pvt. Ltd.; and the claim regarding ₹1,22,410/- can be tes can be tested with reference to the relevant customer ted with reference to the relevant customer accounts, booking records, cancellation details and corresponding accounts, booking records, cancellation details and corresponding accounts, booking records, cancellation details and corresponding refunds.

ITA 1191/Mum/2026 15 Deepa Hemant Hoon

8.2 We, therefore, consider it appropriate that the aforesaid We, therefore, consider it appropriate that the aforesaid We, therefore, consider it appropriate that the aforesaid material be examined at the assessment stage. The learned counsel material be examined at the assessment stage. The learned counsel material be examined at the assessment stage. The learned counsel has also undertaken to furnish the supporting evidence. In the undertaken to furnish the supporting evidence. In the undertaken to furnish the supporting evidence. In the interest of substantial justice and for a proper determination of the interest of substantial justice and for a proper determination of the interest of substantial justice and for a proper determination of the real nature of the credits, we restore this issue to the file of the real nature of the credits, we restore this issue to the file of the real nature of the credits, we restore this issue to the file of the Assessing Officer. The Assessing Officer shall verify each comp The Assessing Officer shall verify each comp The Assessing Officer shall verify each component of ₹1,46,489/- independently and decide the issue afresh in independently and decide the issue afresh in independently and decide the issue afresh in accordance with law after affording adequate opportunity to the accordance with law after affording adequate opportunity to the accordance with law after affording adequate opportunity to the assessee. We clarify that we have expressed no opinion on the We clarify that we have expressed no opinion on the We clarify that we have expressed no opinion on the merits of the assessee's explanation in respect of the aforesaid merits of the assessee's explanation in respect of the aforesaid merits of the assessee's explanation in respect of the aforesaid amount. The Assessing Officer shall decide the issue uninfluenced amount. The Assessing Officer shall decide the issue uninfluenced amount. The Assessing Officer shall decide the issue uninfluenced by any observation contained in this order. by any observation contained in this order.

Section 44AD

ITA 1191/Mum/2026 16 Deepa Hemant Hoon

entire income under consideration. The ground is accordingly re income under consideration. The ground is accordingly re income under consideration. The ground is accordingly rejected.

In the result, the addition of ₹12,63,400/- under section 69A 10. In the result, the addition of under section 69A and disallowance of ₹9,03,018/- under section 37(1) and disallowance of under section 37(1) are upheld. The addition of ₹1,46,489/ 1,46,489/- is restored to the file of the Assessing is restored to the file of the Assessing Officer for verification and fresh adjudication in terms of paragraph Officer for verification and fresh adjudication in terms of paragraph Officer for verification and fresh adjudication in terms of paragraph 28 above. The ground relating to section 44AD is dismissed. 28 above. The ground relating to section 44AD is dismissed. 28 above. The ground relating to section 44AD is dismissed.

Order pronounced in the open Court Order pronounced in the open Court on 17/ /08/2026. Sd/- Sd/- (ANIKESH BANERJEE ANIKESH BANERJEE) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 17/08/2026 Kunal Kumar, P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, BY ORDER, //True Copy// (Assistant Registrar) (Assistant Registrar) ITAT, Mumbai ITAT, Mumbai