Electronic records from third-party devices need section 65B compliance and corroboration before they can sustain tax additions.

Additions based solely on electronic images from third-party mobile devices require compliance with section 65B of the Indian Evidence Act and independent corroboration linking the material to the assessee. The Tribunal treated the presumptions under sections 132(4A) and 292C as rebuttable and confined to the person from whose possession the material was found. Where the assessee's name did not appear on the electronic record and no reliable independent evidence supported the entries, third-party statements and WhatsApp-type extracts could not by themselves sustain additions under sections 69A and 69C. On that basis, the disputed additions were held unsustainable and the deletion of the larger section 69C addition was upheld.

---

---

Issues: (i) Whether additions under sections 69A and 69C could be sustained solely on electronic images and third-party statements from mobile devices without compliance with section 65B of the Indian Evidence Act, 1872 and without independent corroboration; (ii) whether the deletion of the addition of Rs. 6,18,73,000 under section 69C based on third-party electronic material and statement was justified.

Issue (i): Whether additions under sections 69A and 69C could be sustained solely on electronic images and third-party statements from mobile devices without compliance with section 65B of the Indian Evidence Act, 1872 and without independent corroboration.

Analysis: The additions were founded on electronic images recovered from the mobiles of third parties. The assessee's name did not appear on the material, and the record did not contain reliable independent evidence linking the entries to the assessee. The Tribunal noted that the material was an electronic record, yet no certificate under section 65B was shown to have been obtained or relied upon. The Tribunal also treated the presumption under sections 132(4A) and 292C as rebuttable and confined to the person from whose possession the material was found. In the absence of corroboration, the third-party statements and WhatsApp-type extracts could not, by themselves, justify the additions.

Conclusion: The additions of Rs. 70,00,000 and the disputed expenditure-related addition of Rs. 14,00,000 were not sustainable in the hands of the assessee.

Issue (ii): Whether the deletion of the addition of Rs. 6,18,73,000 under section 69C based on third-party electronic material and statement was justified.

Analysis: The material relied upon was found from the mobile of a third party and did not contain the assessee's name or any clear identification linking it to the assessee or to the alleged transactions. The Tribunal held that the assessing authority had not conducted independent enquiry to establish the alleged expenditure or the identity of the parties involved. It further held that third-party electronic records, without compliance with section 65B and without corroboration by independent evidence, could not form the sole basis for an addition.

Conclusion: The deletion of the addition of Rs. 6,18,73,000 was in law and was upheld.

Final Conclusion: The Revenue's appeals failed on merits, the assessee obtained relief on the substantive additions, and the jurisdictional ground was left open without adjudication.

Ratio Decidendi: An addition based on electronic material recovered from a third party's device cannot be sustained unless the electronic record is properly admissible under section 65B of the Indian Evidence Act, 1872 and is independently corroborated by evidence linking it to the assessee.

---