TaxTMI 
TaxTMI 
2025 (3) TMI 1921
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.... an individual and earns income as a share of profit in a partnership firm namely M/s Sun Bright Hosiery situated at 2753/4, Sunder Nagar, Ludhiana. He has filed his return of income on 05.11.2022 declaring taxable income at Rs. 48,75,940/-. The case of the assessee was selected for complete scrutiny and a notice under Section 143(2) was issued and served upon the assessee. The ld. AO thereafter issued questionnaire under Section 142(1) of the Income Tax Act. The AO has observed that a search & seizure operation was carried out upon one Shri Aditya Kumar Jha, Chartered Accountant on 10.10.2021. In the search & seizure proceedings, it was found that Shri Aditya Kumar Jha alongwith Shri Manoj Kumar Gupta were involved in converting cash into RTGS ( through Hawala) with the purpose of sending the same to foreign remittance to the entities based abroad. According to the AO Shri Manoj Kumar Gupta has given a list of 17 persons/entities. In reply to Question No. 27 wherein one of the name of "Jain Ludhiana", it is at Sr. No. 6 of his list. On the strength of this list, it was harboured by the AO that assessee has remitted a sum of Rs. 2,69,86,600/- in cash with the help of Shri Manoj Kum....
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.... in appeal before CIT(A). He has reiterated his stand there. The ld. CIT(A) has examined the issue in detail and the impugned judgement is running into 82 pages. Relevant finding recorded by the CIT(A) is worthy to note, which read as under : "I have carefully pursued the submissions of the appellant placed on record as well as the copies of returns filed by the appellant and its nature of business and found that the appellant has not made any import during the year under consideration. I have also verified that the appellant does not hold any I EC number for making imports and has not in any way made any transactions which purported to be treated as import. Besides, I have perused the retractment of statement along with the affidavit filed by the Shri Manoj Kumar Gupta. On analysis of the same, Mr. Gupta has clearly stated that he has not made any business transaction or any cash transaction with the appellant during the year under consideration. I have observed that the reasons for making basis in the instant case of the appellant originated from the statement made by Shri Manoj Kumar Gupta against the appellant and a screenshot of the WhatsApp chat fou....
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....vidence indicates a lack of application of mind and procedural fairness. The evidence provided by the appellant, including the retraction of the third-party statement and the financial documents, was directly relevant to rebutting the AO's claims. The AO's arbitrary dismissal of this evidence without proper consideration or justification constitutes a significant procedural defect. Besides, I have also verified the bank account statements and income tax returns of the appellant and found that the appellant has not made any expenditure or claimed any expenditure during the year under consideration which remained unaccounted or unexplained. The appellant argued that no such expenditure was incurred during the relevant assessment year. The appellant provided documentary evidence showing that no foreign remittances were made, and there were no transactions that could be classified as unexplained expenditure under Section 69C of the Income Tax Act, 1961. Section 69C of the Income Tax Act, 1961 applies when an assessee incurs an expenditure and fails to explain the source of such expenditure satisfactorily. In this case, the appellant has consi....
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....ails. It is nowhere mentioned that the cash has been received. In other words, no chat pertaining to receiving of cash is mentioned in the above chat which proves that the transaction has never been made. The bank transfer UTR/transaction number or any kind of evidence which shows the success of the transaction is not mentioned in the WhatsApp chat which shows that no transaction has ever been done by the assessee. The appellant submitted that the WhatsApp chat appears to be normal conversation between the two persons, the meaning of which is not clear and by any stretch of imagination, the same cannot be treated as foreign remittance made by the assessee. In absence of any transaction confirmation/success details/transaction number, the same cannot be said to be a successful transfer and cannot be treated to be done without the fulfilling the pre-conditions of the transfer. The appellant also highlighted the fact that there exists no evidentiary value of the WhatsApp chat submitted by Sh. Manoj Kumar Gupta exists as no legal validity of an electronic evidence under the provisions contained in the evidence act and linked the case of the appellant....
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.... ITO [2021] 125 taxmann.com 187 (Bombay), the Bombay High Court held that uncorroborated WhatsApp chats cannot be used as the sole basis for making an addition. The Court emphasized the necessity of supporting such digital evidence with independent, corroborative material. The WhatsApp chats cited by the AO are inherently unreliable due to their susceptibility to alteration and the lack of corroborative evidence. The chats, without more, cannot establish the veracity of the alleged transactions or justify the addition made under Section 69C. I have carefully perused the submissions of the appellant as well the copy of screenshot of WhatsApp chat provided by the AO in his order. On analysis of the same, I have found that the WhatsApp chat can only be treated as evidence if it contains a live link with any corroborative evidence without which, the same is baseless in reaching a conclusion. I have also observed that the principles of natural justice require that the assessee be given an opportunity to cross-examine any witness whose statements or evidence are being used against them. This ensures that the evidence is subject to scrutiny and that any inaccura....
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....lip Kumar P. Chheda vs. ITO emphasized that WhatsApp chats must be supported by other substantive evidence to establish a case for addition under the Income lax Act. In the absence of any corroborative evidence, such as bank statements, transaction records, or other documentary proof, the WhatsApp chats cannot be used to justify the addition under Section 69C. The AO's reliance on these chats, without more, is legally and factually unsound. Given the lack of verification, context, and corroboration, the reliance on WhatsApp chats as evidence in this case is fundamentally flawed. The assessee should be granted relief on this ground, as the addition under Section 69C based on such unreliable and unverified digital evidence is unjustifiable. The WhatsApp chats do not meet the legal standards for admissibility and should not be used as the basis for any addition to the assessee's income. In view of the factual matrix of the case at hand, the judicial precedents cited above and the discussion above, these grounds of appeal adduced by the appellant are upheld stands disposed off accordingly. Ground no. 13: Interest under section 234B and 234C G....
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....noj Kumar Gupta. His mobile whatsapp chat was taken by the Revenue and in that chat, at Sr.No. 6, there is a name "Jain Ludhiana". Thereafter, it was clarified as " Ashwani Jain" i.e. the assessee. The AO has not examined whether mobile number given in this chat is of the assessee or not. He did not cross verified any of the entries. Therefore, we find that the only evidence possessed by the Revenue against the assessee is the alleged disclosure by Shri Manoj Kumar Gupta in a statement recorded by the DDIT ( Investigation). The AO thereafter did not conduct any further investigation. It is a statement made by a third person. It cannot bind the assessee unless opportunity to cross-examination is being given. Hon'ble Supreme Court in the case of Andaman Timber Industries Vs CCE in Civil Appeal No.4228 of 2006 dated 02.09.2015 has made following observation: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of wh....