TaxTMI 
TaxTMI 
2026 (10) TMI 284
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....FAA AO who passed the assessment order & Date of order 4631/D/25 2016-17 CIT(A)-27, New Delhi DIN & Order No : ITBA/APL/M/250/2025-26/1076585142(1) Dated 30.05.2025 DCIT, CC-20, New Delhi Dated 03.03.2023 4632/D/25 2017-18 CIT(A)-27, New Delhi DIN & Order No : ITBA/APL/M/250/2025-26/1076585734(1) Dated 30.05.2025 DCIT, CC-20, New Delhi Dated 03.03.2023 4633/D/25 2018-19 CIT(A)-27, New Delhi DIN & Order No : ITBA/APL/M/250/2025-26/1076587138(1) Dated 30.05.2025 DCIT, CC-20, New Delhi Dated 03.03.2023 4634/D/25 2019-20 CIT(A)-27, New Delhi DIN & Order No : ITBA/APL/M/250/2025-26/1076586996(1) Dated 30.05.2025 DCIT, CC-20, New Delhi Dated 03.03.2023 4635/D/25 2020-21 CIT(A)-27, New Delhi DIN & Order No : ITBA/APL/M/250/2025-26/1076580487(1) Dated 30.05.2025 DCIT, CC-20, New Delhi Dated 03.03.2023 4636/D/25 2021-22 CIT(A)-27, New Delhi DIN & Order No : ITBA/APL/M/250/2025-26/1076583725(1) Dated 30.05.2025 DCIT, CC-20, New Delhi Dated 03.03.2023 4637/D/2522022-23 CIT(A)-27, New Delhi DIN & Order No : ITBA/APL/M/250/2025-26/1076583142(1) Dated 30.05.2025 DCIT, CC-20, New Delhi Dated 06.03.2023 5321/....
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.... Rs. 12,96,04,843/- and alleged unaccounted expenses at about Rs. 11.22 crores and estimated 15% net profit on the gross receipts making addition of Rs. 1,94,40,726/- and ld. CIT(A) restricted the addition so made to 8.5%. Accordingly, both department and assessee are in appeal. The grounds in appeal of assessee are as follows: "1. That having regard to the facts and circumstances of the case and in law the ld. CIT(A) erred in confirming addition to the returned income of Rs. 1,10, 16,412/- by applying adhoc profit rate @ 8.5% on alleged unaccounted sale, worked out on the basis of dumb document / rough notings which have not been confronted / is not related to appellant / is not related to unaccounted transaction is arbitrary and is against law and facts on record and is liable to be deleted. 2. That having regard to the facts and circumstances of the case, the order passed u/s 147/143(3) is barred by limitation and have been passed without taking proper prior approval u/s 153D and the addition confirmed by Ld. Commissioner of Income Tax (A) in respect of the alleged transaction / document is not sustainable on various legal and factual grounds and hence liable t....
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....ion 148 read with section 149 of the act are without satisfying the statutory preconditions of the Act and as such, the assessment so framed is null and void and deserves to be quashed." 6. The copy of notice u/s 148 of the Act has been provided in the paper book from page No. 26-42 and for AY: 2016-17 the copy of the notice available at page No. 26-30. This notice u/s 148 of the Act has one Annexure A2 which provided proforma for approval by the specified authority. The quantum of income which has escaped attention is shown to be Rs. 24,18,29,696/- and in reasons for the belief for the income that allegedly has escaped assessment, ld. AO observes as follows: "After careful examination of specific information received from Investigation Wing, it is found that the assessee has an unaccounted Receipts of Rs. 12,96,04,702/- and unaccounted expenses of Rs. 11,22,24,994/-. Thereafter corroboration with other seized material, taking holistic / 360° view of other circumstantial evidences, further deliberations by application of mind, I am satisfied that this case is a fit case for assessment/re-assessment u/s 147 of the Act as it fulfill the condition of Explanation 2(iii)....
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....t factual legal limb being invoked for assumption of jurisdiction. There is substance in the contention of ld. Sr. Counsel that alleged unaccounted business receipts is a flow/transaction and cannot be presumed to be an asset as the same should otherwise be distinctively identifiable for value on its own. The description of word 'asset' expressly includes immovable property shares/securities, loans/advance and bank deposits. The alleged unaccounted business receipts/payments/expenses cannot be thus classified as asset. 9. The substance in contention of ld. Counsel that the jurisdictional condition for the purpose of Section 148 r.w.s 149(1)(b)(i) or (ii) of the Act requires foundation showing a live link between the reasons recorded and the corresponding limb of clause (i) to clause (iii). Thus, the attention drawn to the Coordinate Bench decision in Vintage Distillers Vs. DCIT (ITAT Delhi) in ITA No. 6435 to 6440/Del/2025; M/s Ace Tyres (P) Ltd. Hyderabad Vs. ACIT (ITAT Hyderabad) in ITA Nos. 1084 to 1088/Del/2025; Vilas Polymer Private Ltd. Vs. DCIT (ITAT Hyderabad) in ITA Nos.1870 to 1875/Hyd/2025; DCIT, Alsorg Interiors Pvt. Ltd. (ITAT Delhi) in ITA Nos. 5240 to 5242/Del/202....
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.... the assessee is of vital consequences and admittedly the assessee is said to be engaged in the business of interior decoration, sale, purchase, manufacturing and designing of furniture and modular kitchens. As we examined the whatsapp chats relied by ld. AO we find that there are only communication with regard to amounts and figures. That too most of it is not in terms of currency denominations. But, there is no material whatsoever as to what was the nature of goods or services sold or rendered by the assessee which became basis of these alleged transactions referred in the chats. Admittedly, no books of accounts or any cash sales have been found in the search and no discrepancy whatsoever have been found in the physical stock, manufacturing records, purchases or assets of the company nor any payments on account of expenditure qua alleged sales outside the books have been found. 13. It is relevant to note that the basis of additions with regards to aforesaid assessment years are following digital documents, as discussed in all the said years by learned AO in the assessment orders: I. WhatsApp chats from the mobile phone of Shri Jitender Singh with clients including Nit....
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....onclusive inference can be drawn. However, otherwise independent corroboration is necessary. 16. Then Whatsapp chats are not proof of a completed taxable transaction. A chat may evidence discussion, negotiation, instruction, expectation or shorthand and unless it proves a completed transaction where money was actually received on account of an identifiable sale or purchase of goods or services, the ld. Tax authorities cannot rely chats to allege that amounts referred represents income of the assessee. 17. The assessment orders before us do reproduce WhatsApp on sample basis but same relate to 2021 and 2022. The same may be relied upon by the ld. AO to allege a modus operandi, but they in themselves or even by statements do not prove specific transactions. Every alleged receipt must have some corroboration and matched with the counter-party, project, invoice, delivery/installation record, corresponding cash movement and accounting treatment. Whereas, no corroboration or enquiry was ever made either by learned ld. AO or ld. CIT (A). 18. Reliance for aforesaid proposition is laid on decision in LSL Tools P. Ltd. vs ACIT (Delhi ITAT) in ITA No. 5643/Del/2024, where co-ordinate....
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....proof and probative value of the evidences, cannot be ignored even by quasi judicial authorities. Thus where the initial burden of proof is on the Revenue authorities to show that the receipts constitutes income, and only real income is liable to tax and more particularly in case of search assessments that addition is on the basis of incriminating material found during the search, the burden on the Revenue is of proving that the assessee has attempted to evade tax and this burden is to be discharged by establishing facts and circumstances from 'relevant material' driving conclusive inference that in fact assessee evade tax lawfully payable by it. Reliance can be placed on the decision of the Hon'ble Supreme Court in the case of CIT vs. Sati Oil Udyog Ltd., 373 ITR 746 (SC). Hon'ble Supreme Court in Commissioner of Income-Tax, West Bengal vsDurga Prasad More AIR 1971 SC 2439 has observed that "Now coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas in others, it may be nomin....
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....ction 138C(4) to be sufficient and, therefore, we can firmly conclude that if, in the case of the Income tax Act, 1961, there are no specific provisions with regard to admissibility of electronic evidences, then, the Manual issued by the Board would substantially hold the ground and the tax authorities are suppose to ensure that there is at least substantial compliance of the Manual to make the electronic evidence relevant and admissible under the law and thus pass judicial scrutiny in appellate jurisdictions. .................... 30. Now, what is material is that the Manual very categorically lays down the importance of chain of custody and the Manual lays down procedure to be followed by authorities for reporting and analysis of digital evidences and as to how the AO has to deal with the digital evidences and its analyse in the assessment order and what is the importance of chain of custody of digital evidences. The relevant para 9.1 and 9.6 of the Manual which:- "9.1 Reporting of Analysis of Digital Evidence in the Assessment Order should be done in a simple lucid manner, so that any person can understand. The report should give description of the item....
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....e. "9.6 Handling the digital evidence at a later stage In the Income Tax Department, the digital evidence stored is used in the assessment proceedings and at later stages in case of legal tangles. In order to maintain the sanctity of data stored/seized, there is a need to maintain a chain of custody while handling the digital evidence during the course of assessment proceedings and at later stages. Due to the lengthy legal proceedings involved, it may be needed to retain evidence indefinitely. Hence, a chain of custody of digital evidence should be created in order to know the details of who is accessing data, if anyone who accessed the data had tampered with the data etc." 31. In regard to the chain of custody form as a part of chapter 11, in para 11.6, the Manual mentions the steps to be undertaken at the forensic lab, and it is mentioned at page No.75 of the Manual as follows: "4. The data extracted in kept with the DDIT concerned and then transferred to the assessment units when the case is centralized. In case of this transfer, chain of custody form should be filled up and kept in safe custody for further reference." 19. The Revenue Autho....
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....hesis advanced by the revenue that the context of chant and figures found in chats represent incomes earned by the assessee. Thus in the absence of the above essential ingredients, the seized documents remain merely pieces of information and dumb documents incapable of giving rise to taxable income. Reliance is placed on the following case laws on the proposition that no addition can be made on mere hypothetical considerations and, on the basis of dumb document without any corroboration: * 39 ITD 183 (Del) Ashwani Kumar vs. ITO * 19 TTJ 546 (Gauhati) Kularanjan Pathak vs. ITO * 79 TTJ 1 (Jodh) JRC Bhandari Vs. ACIT * (1998) 3 SCC 410 CBI vs. V C. Shukla * 70 TTJ (Ahd) 122 Prarthana Construction (P) Ltd. Vs. DCIT * 84 ITR 222(Punj) Chiranji Lal Steel & Rolling Mills vs. CIT * 88 TTJ (Chd) 394 Punjab Traders vs. ITO * 69 ITD 336 Jaya Shetty vs. ACIT * 97 ITR 696 (Bom) ACIT vs. Miss Lata Mangeshkar * 41 ITD449 (Cal) ACIT vs. Shri RadheyShyam Poddar * 82 ITD 85 (Mum) T(tm) S. P. Goyal Vs. DCIT 22. Ld. Sr. Counsel has also drawn our attention to that fact that in similar facts and based....
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....is applied, the Revenue must reconcile duplicates, internal cash movements, bank entries, wrong-year entries, unrealised transactions and entries not pertaining to the assessee. Substantial portion of the all the aforesaid assessment order's deals with same WhatsApp illustrations which relates to 2020-21, 2021-22 and early 2022-23. Even if those chats establish a later-year practice, they cannot automatically be projected backwards. Each assessment year is separate and the Revenue must possess year-specific material for the addition made which has not been done in the instant cases. 24. It is further relevant that the search in the present case was extensive and continued from 09.02.2022 to 12.02.2022. If undisclosed sales of the magnitude alleged had actually taken place, the Department would ordinarily have discovered one or more of the following, excess stock, shortage of recorded stock, unaccounted raw material, unaccounted finished goods, parallel invoices, transport receipts, e-way bills, delivery challans, confirmations from customers, statements of purchasers, statements of transporters, unexplained cash, unexplained bank deposits, unaccounted purchases and most impo....