Retractions and third-party chats alone cannot sustain tax additions without corroboration or valid electronic evidence.

Retractions, third-party tally data and WhatsApp messages, without independent corroboration and with no section 65B certificate for electronic records, were treated as insufficient to support an alleged commission-income addition. Reopening beyond three years under section 149(1)(b) required material showing escapement of income of fifty lakh rupees or more, and the jurisdictional threshold was not met on the record described. Alleged unaccounted cash sales based on third-party data required factual verification to avoid duplication, so the matter was sent back for de novo examination. Commission expenditure supported by invoices, bank records and TDS details could not be disallowed outright on an accountant's statement and chats alone, and was remanded for fresh adjudication.

---

---

Issues: (i) Whether the addition of alleged commission income, made only on the basis of retracted statements, third-party tally data and WhatsApp communications, was sustainable; (ii) Whether reassessment initiated beyond three years under section 149(1)(b) of the Income-tax Act, 1961 was valid in the absence of material showing escapement of income of fifty lakh rupees or more; (iii) Whether the addition of gross profit on alleged unaccounted cash sales, based on third-party tally data, was sustainable or required factual verification; (iv) Whether the disallowance of commission expenditure as non-genuine was justified on the material available.

Issue (i): Whether the addition of alleged commission income, made only on the basis of retracted statements, third-party tally data and WhatsApp communications, was sustainable.

Analysis: The addition was founded on statements recorded during search and on third-party electronic material. Those statements were subsequently retracted, and the material relied upon did not show any direct or specific evidence of receipt of commission by the assessee. The electronic material also lacked the statutory certificate contemplated under section 65B of the Indian Evidence Act, 1872. In the absence of an unbroken chain of corroboration, the revenue failed to establish actual receipt of commission income.

Conclusion: The addition of alleged commission income was unsustainable and stood deleted.

Issue (ii): Whether reassessment initiated beyond three years under section 149(1)(b) of the Income-tax Act, 1961 was valid in the absence of material showing escapement of income of fifty lakh rupees or more.

Analysis: The notice under section 148 was issued after the expiry of three years from the end of the relevant assessment year. For such reopening, the Assessing Officer had to possess books, documents or evidence revealing escapement of income represented in the specified form and amounting to, or likely to amount to, fifty lakh rupees or more. The material on record did not satisfy this jurisdictional threshold, since the proposed addition itself was far below the statutory limit.

Conclusion: The reassessment proceedings for the concerned year were without jurisdiction and liable to be quashed.

Issue (iii): Whether the addition of gross profit on alleged unaccounted cash sales, based on third-party tally data, was sustainable or required factual verification.

Analysis: The impugned addition rested on parallel tally data recovered from third parties and on statements later retracted. The record indicated that the same transactions may already have been assessed in the hands of the Sunrise Group entities, but that factual aspect required verification. Since the addition could not safely be sustained without checking duplication and the evidentiary basis of the ledger attribution, the matter required a fresh factual examination.

Conclusion: The issue was restored to the Assessing Officer for de novo adjudication and the addition was not finally sustained at this stage.

Issue (iv): Whether the disallowance of commission expenditure as non-genuine was justified on the material available.

Analysis: The assessee had produced invoices, ledger accounts, bank statements and tax deduction records in support of the expenditure. The revenue did not identify any specific defect in those documents, and the disallowance was mainly based on an accountant's statement and WhatsApp chats. As the actual rendering of services by the commission agents had not been properly verified, the matter required further enquiry rather than outright disallowance.

Conclusion: The disallowance was set aside and the issue was remanded for fresh adjudication.

Final Conclusion: The appeals were disposed of with substantial relief to the assessee in respect of the commission additions and with remand on the cash-sales and commission-expenditure issues, while the reassessment was held invalid for the relevant year where the jurisdictional threshold was not met.

Ratio Decidendi: A retracted statement or third-party electronic material, without independent corroborative evidence and statutory compliance for electronic records, cannot by itself sustain an income addition; likewise, reopening beyond three years must satisfy the statutory fifty-lakh jurisdictional threshold under section 149(1)(b).

---