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Issues: (i) Whether additions under section 69A could be sustained solely on the basis of third-party statements and uncorroborated material, without providing cross-examination to the assessee. (ii) Whether incomplete whatsapp chats could be treated as reliable evidence for sustaining an addition under section 69A and invoking the presumptions under sections 132(4A) and 292C.
Issue (i): Whether additions under section 69A could be sustained solely on the basis of third-party statements and uncorroborated material, without providing cross-examination to the assessee.
Analysis: The additions were founded on statements of third parties and on documents recovered from their mobile phones, while the assessee denied the alleged transactions and sought cross-examination. No independent evidence was brought to connect the assessee with those materials. In such circumstances, reliance only on third-party statements and uncorroborated material was not permissible. Denial of cross-examination, despite specific request, also violated natural justice and undermined the additions.
Conclusion: The additions based on the statements of the three third parties were not sustainable and the deletion was upheld in favour of the assessee.
Issue (ii): Whether incomplete whatsapp chats could be treated as reliable evidence for sustaining an addition under section 69A and invoking the presumptions under sections 132(4A) and 292C.
Analysis: The whatsapp chats did not show completed transactions and lacked the necessary context to establish actual receipt or payment of money. Such incomplete material could not, by itself, prove the alleged cash transactions. A document that does not disclose a complete transaction cannot be treated as sufficient evidence for invoking presumptions under sections 132(4A) and 292C, and corroboration was required before making an addition.
Conclusion: The addition sustained by the first appellate authority was deleted and relief was granted to the assessee.
Final Conclusion: The Revenue's appeal failed, while the assessee succeeded in obtaining deletion of the sustained addition, resulting in substantial relief to the assessee on all disputed issues.
Ratio Decidendi: Additions under section 69A cannot be sustained on the basis of uncorroborated third-party statements or incomplete digital material, particularly where cross-examination is denied and no independent evidence links the assessee to the alleged transactions.
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