TaxTMI 
TaxTMI 
2025 (11) TMI 1241
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....t, 1961 (for short 'the Act') based on third party search action u/s 132 of the Act carried out on 06.01.2021 in the case of HANS Group. During the course of search, digital data obtained from the mobile phone of Mr. Praveen Kumar Jain was analysed wherefrom a picture of envelops alleging names was found. Further, from examination of the contents of the WhatsApp chat found in the mobile phone of Mr. Praveen Kumar Jain and his son Mr. Vaibhav Jain, it was gathered that Mr. Praveen Kumar Jain was acting as an intermediary facilitating investment transactions for M/s. Mahagun (India) P. Ltd. which carried assured return. The image of envelops found in the mobile phone of Mr. Praveen Kumar Jain was alleged to be carrying the cheque/cash to be distributed to various parties as part of assured return from investment so made. The name of the assessee was alleged to be mentioned on one of the envelops and based on such information, the assessing officer was of the view the existence of transaction of unsecured loan and payment of assured income/interest to the assessee by M/s. Mahagun (India) P. Ltd. leading to initiation of action u/s 153C of the Act in the case of the assessee an....
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....resumption based on reverse working and in absence of any credible material or justification, the impugned addition is arbitrary and not sustainable. 2.3 That this being a case of unabated assessment and the scope of proceedings u/s 153C being limited to incriminating material, the impugned addition which is wholly unsupported and based on presumption/extrapolation is beyond scope and bad in law. 2.4 That in any case, in absence of any direct or indirect material in support of allegation of unexplained investment, the impugned addition based on conjectures and surmises is invalid and devoid of merits. 3. That in the absence of any independent corroboration or opportunity of cross examination or certificate u/s 65B of the Indian Evidence Act, the unauthenticated third party digital data has no evidentiary value and the adverse inference based on the same is arbitrary and unjustified. 4. That on the facts and circumstances of the case, the Ld. CIT(A) was not justified in confirming addition of Rs.22,50,750/- u/s 69A on the alleged ground of interest receipts in cash even though same is untenable and unsubstantiated. 5. That on the facts an....
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....sessment order: i. Sh. Vaibhav Jain ii. Sh. Amit Jain (Director of M/s. Mahagun India P. ltd.) iii. Sudam Jain c. Copy of summon u/s 131 issued to M/s. Mahahun India P. ltd. alongwith reply filed by the said party as referred at Page 6 Para 3b of the assessment order. d. Copy of panchnama and search warrant in the case of Praveen Kumar Jain and Vaibhav Jain. e. Certified copy of seized material based on which satisfaction u/s 153C was recorded including: i. Clear copy of envelops extracted at Page 3 of the assessment order ii. Complete whatsapp chat as referred at page 8 to 10 and 14 to 16 of the assessment order. f. Whether any certificate u/s 65B of the Indian Evidence Act, 1872 was obtained with respect of digital data found from the mobile phones of Sh. Parveen Kumar Jain and Sh. Vaibhav Jain? If yes, please provide the copy of the same. g. Copy of assessment order for AY 2020-21 and 2021-22 passed in the case of Sh. Praveen K. Jain h. Copy of assessment order for AY 2020-21 and 2021-22 passed in the case of Sh. Vaibhav Jain i. Copy of assessment order for AY 2020-21 and ....
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....s a case of unbated assessment where no assessment proceedings were pending as on the date of recording of satisfaction note u/s 153C i.e. 08/02/2023. ii. The satisfaction note is based on third party mobile phone data obtained during search at HANS Group on 10/01/2021 iii. Presumption regarding name of the appellant appearing in the image of alleged cash envelop is factually incorrect and is evident from the photograph extracted at Page 4 of the assessment order. iv. That other than digital data extracted from the Whatsapp chat of Mr. Praveen Kumar Jain's mobile phone, no incriminating or document was found relating/pertaining to the appellant. v. The digital data extracted from the Whatsapp chat of Mr. Praveen Kumar Jain has throughout remained uncorroborated and content of the same vis-à-vis the appellant has remained untested. vi. The assessment in the case of alleged investee company M/s. Mahagun (India) P. Ltd. for AY 2020-21 was completed u/s 153C based on the very same search vide order dated 15/03/2024 wherein returned income was accepted without any addition/disallowance. The copy of the assessment order is placed at....
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.... 3.4 In the above background, it may be appreciated that this being a case of unabated assessment, the requirement of existence of third-party incriminating material is sine qua non for valid assumption of jurisdiction u/s 153C of the Act. It is important to note that the term 'incriminating material' is specific and includes within its fold any material or evidence containing information regarding any undisclosed income or asset. However, the such material or evidence must be credible/specific/speaking and truthfulness of the same must be accepted/affirmed by the third party from whose possession such material/evidence was found. 3.5 In the present case, the inference drawn against the appellant from the whatsapp data obtained from the mobile phone data of Mr. Praveen Kumar Jain is outrightly fallacious and major infirmities in the satisfaction is highlighted as under: ⮚ The satisfaction note recorded by the assessing officer of the appellant is ad-verbatim the satisfaction note forwarded by the assessing officer of the searched person thus showing non-application of mind and exercise based on borrowed satisfaction. ⮚ Th....
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....have remained untested and uncorroborated. Further, the AO has not even recorded statement of the appellant in order to verify the nature and context of the chat. ⮚ Page 11 contains reference to an image found from the Mobile phone of Praveen Kumar Jain containing alleged reference to the name of appellant with figure '30.01'. It is submitted that there is no ground or basis for identifying the name mentioned in the sheet with appellant. Further, the sheet is unsigned, without context and is incoherent about the nature of the transaction. The same does not bear any date and basis of figures mentioned therein. Additionally, no question or query was asked from Praveen Kumar Jain regarding this sheet. It is clearly a dumb document. ⮚ The reference to third party whatsapp chat between Praveen Kumar Jain and Amit Jain at Page 13 to 14 of the satisfaction note is extraneous and patently irrelevant to the case of the appellant. It is clarified that such chat does not contains any reference to the name of the appellant. ⮚ At Page 15 of the satisfaction note, the AO has extracted reply received from M/s. Mahagun Real Estate P. Ltd. whe....
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....lly denied having any sort of transaction with the appellant and this fact having duly been accepted by the assessing officer while completing u/s 153C based on very same search, there remains no ground or basis for presuming any cash investment as the same is grossly inconsistent and irrational. 3.8 It is thus clear that the allegation of unexplained investment and income thereon is merely a figment of imagination based on unfounded interpretation of vague and uncorroborated whatsapp chat and as such in absence of any incriminating material, the assumption of jurisdiction u/s 153C is dehors of valid basis and may kindly be quashed. 3.9 Reference is made to following judicial precedents: i. DCIT vs. Sunil Kumar Sharma [2024] 469 ITR 271 (SC) Section 153C, read with section 153A, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Recovery of loose sheets of paper) - Assessment years 2012-13 to 2018-19 - High Court by impugned order held that it is established in law that a sheet of paper containing typed entries and in loose form, not shown to form part of books of account regularly maintained by assessee or his bus....
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....aking a view that assessee had failed to explain source of money from which property was purchased, added said amount to her taxable income - Subsequently, 'L' retracted his statement made in search proceedings and submitted that document in question might belong to any other broker - Tribunal having formed an opinion that said document did not belong to assessee, deleted impugned addition - High Court in impugned order noted that no attempt was made by Assessing Officer to enquire into matter to find out if at all there was any such other broker who had prepared document in question - Moreover, there were internal contradictions and inconsistencies in document in as much as document specified that rent for property in question was payable by assessee from year 2006 onwards whereas according to revenue, said property had already been purchased by assessee - High Court held that in view of aforesaid facts, addition made on basis of single document whose genuineness itself was in doubt, was rightly deleted by Tribunal - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [Para 27] [In favour of assessee] iv. Pr. CIT v. Ankush S....
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....ti speciality hospital - A search action was conducted in case of one TJR, who was a supplier of medical, surgical equipment and other accessories to hospital - On basis of certain documents seized during search, Assessing Officer concluded that assessee had siphoned off funds through said TJR allegedly resorting to huge inflation of expenses - Accordingly, a notice under section 153C was issued against assessee - It was noted that Tribunal found that materials seized did not indicate any inflation of purchase expenses by assessee trust - Tribunal further noted that TJR approached Settlement Commission and submitted an application wherein Commissioner stated that there was no supporting evidence of returning cash withdrawn by TJR to hospital - Whether, thus, in absence of any incriminating documents or evidence discovered against assessee, during search upon TJR, jurisdiction under provisions of section 153C could not be assumed against assessee - Held, yes [Paras 9 and 10] [In favour of assessee] In view of the above, the assessing officer having failed to record valid satisfaction note in terms of section 153C and there being no case of any incriminating material pertain....
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....xistence of alleged cash investment or interest income. It is emphatically submitted that the additions made by erroneous inference drawn from the third party digital data obtained from the mobile phone of Mr. Parveen Kumar Jain is not supported from any corroborative evidence and as such the same has no relevance or bearing to the case of appellant. The following points deserves Your Honor's attention: ⮚ The images of unsigned sheets/slips as appearing at Page 6 and 11 of the assessment order in absence of any corroboration have no evidentiary value. In fact, these being third party documents, no presumption u/s 292C could be raised against the appellant. ⮚ There is no direct or indirect evidence showing payment of alleged cash in the form of investment or interest payments. Even after search, the AO has not found any signed slip or payment receipt or diary showing records of any cash transaction. ⮚ The whatsapp chat between Mr. Parveen Kumar Jain or his son Mr. Vaibhav Jain with the son of appellant is vague, non-specific and does not provide the context of conversation. In fact, the chat does not even show existence of any cash....
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.... corroboration and it is incumbent upon the assessing officer to bring on record positive material to prove the transaction mentioned in the whatsapp chart. It is emphatically submitted that in the present case, leaving aside any corroborative material, there is no whatsapp chat between the appellant and Mr. Parveen Kumar Jain regarding any cash investment or interest income and as such the hypothetical presumption drawn by the assessing officer from some unauthenticated dumb sheets found from the third party mobile phone is patently erroneous and devoid of merits. In this regard, reference is made to following decisions wherein it has been held that whatsapp chat/digital data from mobile phone without corroboration has no evidentiary value. i. ACIT v. Shanker Nebhumal Uttamchandani [2024] 161 taxmann.com 536 (Surat-Trib.) I. Section 69A of the Income-tax Act, 1961 - Unexplained moneys (Illustrations) - Assessment year 2020-21 - Assessing Officer made certain addition as unexplained money and unexplained interest income on basis of image found in I-Phone of assessee found during search by taking view that on such amount, assessee earned interest - It was found tha....
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....h the AO to draw a conclusion that the assessee had distributed cash to voters amounting to rs.17 Crs. First of all, WhatsApp messages cannot be considered as a conclusive evidence to draw an adverse inference against the assessee, unless those WhatsApp messages are supported by corroborative evidences to indicate that those messages and contents represents undisclosed income of the assessee. Further, what is written in WhatsApp message is not readable in terms of any income or expenditure. We have gone through those WhatsApp messages, which is available in the assessment order and we find that nothing could be made out from those messages. In some messages, it was written inward on various dates and some tonnes. In some messages, it was written in outward in tonnes. From those messages, the AO given his own meaning and inferred with tonne means lakhs, inward means cash received for distribution and outward means cash distributed. The AO had also in his own meaning for some other contents recorded in WhatsApp messages and inferred cash distribution timings, shift change timings, etc., and concluded that the assessee has received so much cash and distributed so much of cash to vario....
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....filed a case against the assessee for doing any malpractices in election, nor the Election Commission of India, had taken any action as pointed out by the Counsel for the assessee. The Election Commission of India has not initiated any enquiry and further, accepted election expenditure statement filed by the assessee. As regards, WhatsApp messages, the assessee had offered an explanation before the AO and contended that those messages are exchanged between the assessee and the other counterpart about the business carried on by them. The AO rejected explanation offered by the assessee on the ground that the assessee could not substantiate its claim. In our considered view, the AO is grossly erred in denying the explanation offered by the assessee, because whether or not any explanation offered by the assessee on the assessee on the ground that the assessee could not substantiate its claim. In our considered view, the AO is grossly erred in denying the explanation offered by the assessee, because whether or not any explanation offered by the assessee on the messages, but the fact remains that the AO could bring some positive evidence to link the WhatsApp messages to allege that the c....
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.... Loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court. [Para 20] ii. DCIT v. Mahalaxmi Infracontract Ltd. [2025] 173 taxmann.com 399 (Ahmedabad - Trib.)[12-03-2025] Section 69C, read with section 69A, of the Income-tax Act, 1961 - Unexplained expenditure (Scope of provision) -Assessment years 2017-18, 2020-21 and 2021-22 Authorised person conducted search upon a group and seized various documents Assessing Officer made addition of certain amount as unexplained income of assessee under section 69A on account of cash loan received by assessee from aforesaid group - He also made addition of certain amount towards cash payment of interest as unexplained expenditure under section 69C - Commissioner (Appeals) deleted addition towards cash loan but upheld addition made on account of interest paid - Whether since apart from unsigned excel sheet recovered from third party there was no corroborative evidence to sub....
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....have been found at his premises. The absence of such evidence casts serious doubt on the correctness of the AO's conclusion. 31.9 Further, it is highly improbable that a prudent businessman would extend such a substantial amount in cash without any supporting documentation. The lack of legally enforceable documents such as loan agreements, notes, or confirmations further weakens the Revenue's case. The ld. CIT(A) correctly held that an addition of such magnitude cannot be made in the absence of concrete evidence. iv. Sachin v. DCIT (ITA No. 2613 & 2614/Del/22) (05/03/25) (ITAT, Delhi) 13. We have heard the rival submissions and perused the materials available on record. At the outset, we find that a search and seizure operation was conducted u/s 132 of the Act on 05.01.2017 in the case of Jindal Bullion Ltd (JBL). During this search, digital data stored in software called "Hazir Johri" was seized from the residence of Mr. Kushagra Jindal, promoter of JBL. The said software purportedly contained parallel books maintained by JBL where both transactions through the banking channel and cash transactions were found recorded. The Ld. AO observed that a ....
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.... out on the basis of facts and material and it is not open to assessing officer to make addition on the basis of guesswork or presumption. The principle laid down Supreme Court in the case of CIT V. Dhakeshwari Cotton Mills Ltd V. CIT: 26 ITR 775, 783 is fully applicable wherein it was held as under: As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). 4.8 In the light of the above, the addition of Rs. 22,50,75,000/- u/s 69 and Rs. 22,50,750/- u/s 69A on the alleged ground of unexplained investment being cash investment and interest received thereon are pur....
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....to 37. On perusal of the satisfaction note, we find that the AO has heavily relied upon photograph of envelops found in the WhatsApp chat from the mobile phone of Mr. Praveen Kumar Jain which are stated to have containing cash/cheque being assured return from a real estate company namely M/s. Mahagun (India) P. Ltd .. The AO has also made reference to image of a sheet allegedly containing interest calculation also found from the mobile phone of Mr. Praveen Kumar Jain. On close perusal of the image containing envelopes, it is noted that the envelops do not bear the name of the assessee. Further, the sheet allegedly containing interest calculation and name of the assessee as appearing at Paper book Pg 26 is unsigned, unauthenticated and non-specific and does not support the case of the revenue in absence of any corroboration. It is not clear as to whether the name Raghav (F) mentioned in the sheet is identifiable with assessee as the sheet contains no other identification details such a phone number, PAN or address. It is noted that other than discussion about the mobile phone data, the satisfaction note does not contain reference to any physical document or corroborative material to....
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....action u/s 153C is strictly to be based on incriminating material and there is no scope or leeway to draw arbitrary presumption sans material. Thus, the existence of such allegation in the satisfaction note clearly shows non-application of mind or deprivation of incriminating material. Further, it is nobody's case that contents of mobile phone were authenticated or validated from any independent evidence or statement and as such action based on untested digital data cannot be sustained. 16. At this juncture, we find it appropriate to state that the criteria for assumption of jurisdiction u/s 153C is rather strict and there must be cogent and credible incriminating material for valid action. In other words, the third party material must be specific, speaking and must clearly bring out the details of undisclosed transaction. In fact, the benchmark for digital data/mobile phone data is even higher since it requires further corroboration so as to constitute credible evidence against the assessee. We draw strength from the decision of Coordinate bench decision in the case of Mr.A. Johnkumar v. DCIT (ITA No. 3028/Chny/2019) (Chennai Bench) wherein it was held as under: "9....
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....ing on record from which person, the assessee has received cash and to whom the assessee has distributed cash. The AO neither made out a case of source for cash and destiny of cash distributed by the assessee. In other words, the AO has abruptly concluded in his own understanding of the messages, the assessee has received so much of cash and distributed so much of cash and which is nothing but cash for votes and hence, concluded that the assessee has incurred a sum of Rs. 17 Crs. for distribution of cash to voters and which is nothing but unexplained expenditure taxable u/s. 69C of the Act. 9.5 We have given out thoughtful consideration to the reasons given by the AO and we ourselves do not subscribe to the reasons given by the AO for the simple reason that first of all, the assessee was not contested for election held at Nellithope Constituency. Therefore, the question of assessee spending such huge money to distribute to voters does not arise. Secondly, the AO has solely relied upon the photo identity cards issued by M/s. Johnkumar Trust and inferred that each photo identity cards, the assessee has paid a sum of Rs.4,000/-. We find that neither the AO has found any physi....
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.... made on the basis of said documents." 17. Similarly, reliance is also placed on another decision of Coordinate Bench in the case of ACIT v. Shanker Nebhumal Uttamchandani [2024] 161 taxmann.com 536 (Surat-Trib.) wherein it was held as under: "6. We have considered the rival submissions of both the parties and gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by the assessee. We find that the Assessing Officer made addition of Rs. 20,43,500/- as unexplained money and unexplained interest income of Rs. 4,27,237/- on the basis of image found in I-Phone of assessee by taking view that on such amount, the assessee earned interest. We find that before the Assessing Officer as well as ld. CIT(A), the assessee explained that there is no corroborative material to prove that the assessee made advance of such amount or earned interest. Neither it contained the name and signature of assessee 6 nor it is mentioned whether this amount was received or paid. We find that the ld. CIT(A) on considering the submission of assessee held that the Assessing officer is silent as to whom these advances were made and from whom such inte....
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....App chat or conversation having remained unsubstantiated, the same fails to inspire any confidence and carry no evidentiary value. Accordingly, in our considered view, the assumption of jurisdiction u/s 153C is not backed by any incriminating material and as such we find no reasons to uphold the same. Accordingly, the notice u/s 153C is without jurisdiction and is hereby quashed. The Ground Nos.1.1 to 1.4 raised by the assessee are allowed. 19. We would also like to delve into the merits of the additions, which to our mind is crucial aspect which was completely omitted to be enquired or looked into by the assessing officer while framing the assessment. The Ld. AR has placed on record the assessment order u/s 153C of the Act passed in the case of M/s. Mahagun (India) P. Ltd. for AY 2020-21 wherein it is seen that the notice u/s 153C was issued based on the very same search on Hans Group and the assessment was eventually completed at returned income without making addition. Now, when we compare the assessment order passed in the case of the assessee and in the case of M/s. Mahagun (India) P. Ltd., there is apparent dichotomy as on one hand, the assessing officer has made addition ....
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....ctions as one unit and its stand in identical matters cannot be different merely because the officers dealing with the two files are different. In any case, if there are substantive reasons in facts or in law to take a different view the same should be set out in the affidavit and the explanation that a different view was taken because the officers who took the two decisions were different, is no justification." 20. It is further noticed that as per the statement of income and assessment order, the assessee has declared income from Salary, rental income and income under head other sources and there is no allegation or evidence in support of any other source of income as may have been used for making unrecorded investment in terms of section 69 of the Act. Thus, the allegation of unexplained investment is erroneous and misconceived. We further note that while framing assessment particularly in a search case, there is no scope for drawing arbitrary presumption or inferences without any credible material as held by Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. Vs. CIT 26 ITR 775 (SC). 21. Considering the legal and factual infirmities in the assessment or....