Manish Pahwa Vs ITO (ITAT Delhi)
Bank Trail Can Save, Mere Invoices Can’t: ITAT Partly Sustains Additions, Remands Property Investment Issues
The Delhi Bench of the Income Tax Appellate Tribunal partly allowed the assessee’s appeal for AY 2011-12, arising from a reassessment under section 147, dealing with multiple additions relating to property investment, improvement cost, alleged bogus expenditure and cash deposits.
On unexplained investment in property (₹26.50 lakh) under section 69, the Tribunal noted that the assessee claimed funding through a bank overdraft facility, supported by bank statements. Since the fund flow linking the OD withdrawals with the property payment required verification, the issue was remanded to the Assessing Officer for fresh examination, granting the assessee an opportunity to reconcile the trail.
Similarly, with respect to cost of improvement of property (₹24.15 lakh) under section 69C, although an invoice from the contractor was produced, contradictions existed regarding whether the work was done on credit or paid through banking channels. In the absence of clear payment evidence, the Tribunal held that the matter required deeper factual enquiry and restored the issue to the AO for verification.
However, the Tribunal confirmed the disallowance of ₹7.50 lakh paid to Gopal IT International towards website services, holding that the Assessing Officer had brought concrete material on record showing the vendor to be a non-existent accommodation entry provider, supported by bank analysis, field enquiries and cash withdrawals immediately after receipts. Mere invoices and cheque payments, without proof of actual service delivery, were held insufficient.
The addition of ₹7.50 lakh towards unexplained cash deposits was also upheld, as the assessee failed to substantiate the claim that the cash was generated from business receipts. The Tribunal observed that bald assertions without supporting evidence such as client details or service records could not explain large cash deposits.
Accordingly, the appeal was partly allowed:
