2025 (4) TMI 479 - HC - Income Tax

WhatsApp chats with property transaction details validate Income Tax notice under Section 153C

The Rajasthan HC upheld the validity of a notice issued under Section 153C of the Income Tax Act based on WhatsApp chats discovered during search ... Validity of notice u/s 153C issued on the basis of WhatsApp chats - HELD THAT:- The law regarding Section 153C of the Act has a foundation of the search and seizure impact, the ‘other person’ and the record of the present case clearly indicates that the WhatsApp chat is completely corroborated, and the said Chat which could be considered to be falling in the definition of other documents totally corroborated by the specific transactions which have taken place regarding the assessee who had clearly purchased the plots from the Om Kothari Group such sale and purchase is directly established with specific information in a particular year whereas it has not been shown by the assessee and thus, the power under Section 153C has been rightly exercised by the respondent in the present case. The persons having the WhatsApp chats were connected with both the companies herein and the transactions were regarding specific plots and the details of cash payment were clearly contained in the WhatsApp chat, thus with such specific inputs, the same cannot be said to be vague or hit by the strict parameters of Section 153C of the Act of 1961. The images in the mobiles, laptops and personal computers were specific and statement of one of the employees was also recorded u/s 131 and the statement included deciphering of unrecorded accounts for transactions, in regard to which, code language was used. This Court also observes that the big size plots were purchased by the petitioner; the unaccounted money paid are reflected in the chats; the purchase of the said plots was also found from the extracted digital data; the on-money etc. are reflected in the WhatsApp chats and images; the unaccounted cash transactions were found as reflected in the pictures; the incriminating chats between the parties in question regarding the unaccounted cash component was clearly reflected; the WhatsApp Chats reflected the details of cash on 08.02.2019; the unaccounted cash and further cash transactions are also reflected in the satisfaction note. This Court does not find it a fit case so as to grant any relief to the petitioner in the instant petition. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the issuance of the notice under Section 153C of the Income Tax Act, 1961, based on WhatsApp chats, is valid.Whether the notice and subsequent proceedings under Section 153C require strict compliance with the conditions set forth in the statute.Whether the evidence presented, such as WhatsApp chats and related transactions, is sufficient to justify the proceedings under Section 153C.The interpretation and application of Section 153C concerning the term 'other person' and the requirement of incriminating material.ISSUE-WISE DETAILED ANALYSIS1. Validity of Notice under Section 153C based on WhatsApp ChatsThe legal framework under Section 153C of the Income Tax Act, 1961, allows for the assessment of income of a person other than the one searched, provided there is satisfaction that seized materials pertain to such other person. The petitioner argued that WhatsApp chats do not meet the statutory requirements as they do not constitute books of account or documents.The Court interpreted that Section 153C empowers the issuance of notice if the Assessing Officer is satisfied that the seized materials, including digital evidence like WhatsApp chats, have a bearing on the determination of the total income of the 'other person'. The Court found that the chats, corroborated by other evidence, were sufficient to initiate proceedings.Key evidence included WhatsApp chats indicating cash transactions related to specific plots, which were not reflected in the petitioner's books of account. The Court applied the law to these facts, concluding that the chats and corroborating evidence were sufficient under Section 153C.Competing arguments were addressed by emphasizing that the chats were corroborated by other evidence, such as images and statements, which supported the transactions.The Court concluded that the notice under Section 153C was validly issued based on the evidence presented.2. Strict Compliance with Section 153CThe petitioner contended that Section 153C requires strict compliance with its conditions, which were allegedly not met due to the reliance on WhatsApp chats. The Court noted that the statute mandates satisfaction that the seized materials pertain to the 'other person' and have a bearing on income determination.The Court observed that the satisfaction note recorded by the Assessing Officer clearly mentioned transactions matching the WhatsApp chats and images, fulfilling the statutory requirements.The Court concluded that the statutory conditions were met, and the notice was issued in compliance with Section 153C.3. Sufficiency of EvidenceThe petitioner argued that the WhatsApp chats did not directly implicate him, as they lacked specific identifiers like names or numbers. However, the Court found that the chats were corroborated by other evidence, such as images of documents and statements from employees, which substantiated the transactions.The Court emphasized that the evidence was specific and detailed, with transactions related to particular plots and amounts, thus meeting the evidentiary requirements under Section 153C.The Court concluded that the evidence was sufficient to justify the proceedings under Section 153C.4. Interpretation of 'Other Person' and Incriminating MaterialThe petitioner argued that he did not fall within the definition of 'other person' under Section 153C, as no incriminating material was found directly against him. The Court interpreted the statute as requiring satisfaction that the seized materials pertain to the 'other person' and have a bearing on income determination.The Court found that the evidence, including WhatsApp chats and corroborating documents, clearly pertained to the petitioner and justified the proceedings.The Court concluded that the petitioner was rightly considered an 'other person' under Section 153C.SIGNIFICANT HOLDINGSThe Court held that WhatsApp chats, when corroborated by other evidence, can constitute sufficient material under Section 153C. The core principles established include the validity of digital evidence in tax proceedings and the requirement of corroboration for such evidence.The final determination was that the notice under Section 153C was validly issued, and the petition was dismissed, with the Court finding no grounds to grant relief to the petitioner.