2025 (2) TMI 1422 - AT - Income Tax

Admissibility of electronic evidence in tax assessments: pendrive data lacked necessary authenticity and led to disallowance of addition.

Admissibility of electronic evidence was determinative: the tribunal held that digital data extracted from a pendrive seized during search lacked the ... Addition made on payment of interest on the loan - Addition made by relying on digital evidence obtained in the form of pendrive - Admissibility of electronic evidence u/s 65B of the Indian Evidence Act - HELD THAT:- Revenue has not brought any cogent evidence corroborating the Incriminating documents to support the payment of interest in cash by the assessee. Tribunal in POLISETTY SOMASUNDARAM [2023 (8) TMI 1019 - ITAT VISAKHAPATNAM] observed that the Pendrive seized in the search operation in the case of M/s. Polisetty Somasundaram as inadmissible evidence as per the provisions of section 65B of the Indian Evidence Act and hence any detail extracted from such unsustainable digital evidence cannot be considered for the purpose of making additions in the case of assessee. AO that he has relied upon the unaccounted cash book of M/s. Polisetty Somasundaram seized A/PSS/CORP/18 for making the addition of interest payment by cash which was held as inadmissible evidence by the Tribunal in the case of M/s. Polisetty Somasundaram v. DCIT [2023 (8) TMI 1019 - ITAT VISAKHAPATNAM] Assessee appeal allowed. Issues: Whether additions made by the Assessing Officer to the assessee's income by relying upon entries in a pen drive / unaccounted cashbook (digital evidence) seized during search operations are admissible and sustainable in view of the requirements of section 65B of the Indian Evidence Act, 1872, and whether the addition of Rs.16,47,945/- (interest) deserves to be sustained.Analysis: The appeals concern reliance by the Assessing Officer on data extracted from a seized pen drive and related unaccounted cashbook entries to make additions for cash loans and interest. The Tribunal has previously considered the procedure followed in seizure and certification of the pen drive and concluded that the certificate obtained and the material did not satisfy the cumulative conditions prescribed by section 65B(2) and the certification requirements of section 65B(4) of the Indian Evidence Act, 1872. The test for admissibility requires identification of the primary device/system, particulars of devices involved, and compliance with the conditions about regular use and reproduction of information. In the absence of cogent corroborative material independent of the impugned digital extract, the impugned entries cannot be treated as admissible evidence for making additions.Conclusion: The addition of Rs.16,47,945/- being the alleged interest payment, which was based on the inadmissible digital material, is deleted and the appeals are allowed in favour of the assessee.Ratio Decidendi: Where electronic records seized in search proceedings are relied upon, admissibility depends on strict compliance with section 65B(2) and (4) of the Indian Evidence Act, 1872; failure to satisfy those conditions renders the digital evidence inadmissible and incapable of sustaining additions to income.