Uncorroborated digital material cannot sustain search additions or section 153C action without independent verification.

Uncorroborated loose papers and a WhatsApp-extracted Excel sheet were treated as insufficient to sustain additions for unexplained money and expenditure where the assessee produced sale agreements, cancellation deed, ledger extracts and banking records contradicting the alleged on-money and brokerage figures. The material from the search was not independently verified, and the device user denied knowledge of the document and explained the cash references as token amounts. On the same evidentiary deficiency, search-related action under section 153C also failed because untested third-party entries without supporting inquiry or corroboration could not provide a valid jurisdictional basis. The additions were deleted and the assessment action was quashed.

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Issues: (i) Whether additions under section 69A and section 69C could be sustained solely on the basis of loose papers and a WhatsApp-extracted Excel sheet without independent corroboration; (ii) Whether proceedings under section 153C could be supported on such unverified material.

Issue (i): Whether additions under section 69A and section 69C could be sustained solely on the basis of loose papers and a WhatsApp-extracted Excel sheet without independent corroboration.

Analysis: The additions were founded on unverified electronic and documentary material recovered in search, but the assessee produced sale agreements, cancellation deed, ledger extracts and banking records showing that the stated transactions did not support the alleged on-money and brokerage figures. The material relied upon by the Revenue was not independently confirmed, and the person from whose device it was recovered denied knowledge of the document and explained the reference to cash as token amounts. In the absence of corroborative evidence, the impugned material was treated as insufficient to establish unexplained money or unexplained expenditure.

Conclusion: The additions under section 69A and section 69C were not sustainable and were deleted.

Issue (ii): Whether proceedings under section 153C could be supported on such unverified material.

Analysis: The jurisdictional challenge was raised by way of Rule 27 on the footing that a loose paper or uncorroborated WhatsApp message, without independent inquiry or supporting evidence, cannot furnish a valid foundation for action under section 153C. Reliance was placed on the principle that material used for search-related action must have evidentiary worth and cannot rest on conjecture or untested third-party entries. Since the Revenue brought no corroborative evidence to connect the alleged figures with the assessee's actual transactions, the legal basis for the section 153C assessment failed.

Conclusion: The section 153C-based assessment was quashed on legal grounds.

Final Conclusion: The Revenue's appeals failed, the legal challenge under Rule 27 succeeded, and the additions and assessment action were set aside, leaving the merits otherwise academic.

Ratio Decidendi: Uncorroborated loose papers or electronic messages, without independent verification or supporting evidence, do not constitute a reliable basis for search-related additions or for sustaining action under section 153C.

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