ITAT Deletes Additions Based on WhatsApp Chats

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has deleted multiple additions made against an assessee in a search assessment after holding that the Income Tax Department could not sustain additions merely on the basis of WhatsApp chats, retracted statements and unverified third-party allegations without providing supporting evidence or opportunity of cross-examination. The bench of Sandeep Gosain (Judicial Member) and Bijayananda Puruseth (Accountant Member) passed the order while deciding cross appeals filed by the assessee and the Revenue for Assessment Year 2016-17 and ultimately allowed the assessee’s appeal and dismissed the department’s appeal. The dispute arose from a search action during which the department allegedly found WhatsApp communications and certain seized documents. Based on these materials and statements recorded during search proceedings, the Assessing Officer made several additions treating them as undisclosed income of the assessee. One of the major issues before the Tribunal related to an addition of Rs. 15 lakh allegedly connected to transactions with one Vilas Pawar. The department relied upon WhatsApp communications recovered from the assessee’s iPhone and alleged that the assessee had parked unaccounted cash with the said person. The assessee argued that the WhatsApp messages had no evidentiary value and pointed out that no certificate under Section 65B of the Indian Evidence Act had been obtained for the digital evidence. It was further contended that the chats merely referred to transactions between third parties and did not establish that the cash belonged to the assessee. The assessee also argued that no independent inquiry or corroborative evidence had been brought on record by the department. Accepting the assessee’s contentions, the Tribunal held that the additions could not survive merely on the basis of WhatsApp chats and unsupported allegations. The Bench observed that the department failed to conduct further inquiry or produce evidence linking the assessee with the alleged cash transactions. Accordingly, the addition was deleted. Another significant dispute concerned additions relating to alleged unaccounted cash transactions with Parekh Ornaments LLP. The Assessing Officer had treated over Rs. 3.75 crore as undisclosed income based on seized papers and statements recorded under Sections 132(4) and 131 of the Income Tax Act. The assessee contended that the statement relied upon by the department had been retracted and that copies of the seized documents and third-party statements were never supplied despite repeated requests. The assessee also argued that no opportunity for cross-examination of Mukesh Parekh was granted even though the addition substantially relied upon his statement. The Tribunal noted that the assessee had consistently challenged the reliance on third-party statements recorded behind his back and had specifically sought cross-examination opportunities. It further observed that the Assessing Officer failed to bring any corroborative evidence to support the additions. The Tribunal also recorded that the assessee had furnished explanations and documentary evidence regarding the transactions, including details of jewellery purchases and bank loan documents relating to a proposed restaurant construction project. Relying on settled legal principles, including the Supreme Court ruling in Andaman Timber Industries, the Tribunal reiterated that additions based on third-party statements without granting cross-examination are unsustainable in law. It further observed that statements recorded under Section 133A do not carry conclusive evidentiary value. Consequently, the Tribunal directed deletion of the additions sustained by the CIT(A) in relation to the alleged Parekh Ornaments transactions. The Revenue had also challenged deletion of an addition relating to professional income earned by the assessee’s spouse, an advocate. The department had alleged that the income actually belonged to the assessee because the spouse had allegedly made admissions during search proceedings. However, the Tribunal observed that the spouse had already retracted the statement and that documentary evidence including professional bills, receipts, TDS certificates and income tax returns had been furnished to establish that the professional income genuinely belonged to her. The Tribunal further noted that the same income had already been taxed in her hands and therefore could not again be taxed in the hands of the assessee, as that would amount to impermissible double taxation. The Tribunal also upheld the partial relief granted by the CIT(A) concerning agricultural income declared by the assessee. It noted that the assessee had produced evidence relating to agricultural activities, including cultivation details, bank loans for farming operations and confirmations from agricultural societies. The Bench held that the department failed to rebut the documentary evidence and had merely relied upon retracted statements. Further, the Tribunal rejected the department’s attempt to treat agricultural income earned by the assessee’s family members as the assessee’s undisclosed income. It observed that the Revenue had failed to establish any basis for such additions and that the assessee’s family members had produced evidence regarding ownership of agricultural land, crop cultivation and agricultural receipts. The Tribunal held that additions based purely on presumptions and surmises, without cogent evidence, could not be sustained under the Income Tax Act. Accordingly, the Revenue’s appeal was dismissed while the assessee’s appeal was allowed. Case Details Case Title: Vikas Vilas Rasal Versus ACIT Citation: JURISHOUR-1262-HC-2026(Ker) Case No.: ITA No. 7636/Mum/2025 Date: 21.04.2026 Counsel For Petitioner: Rakesh Joshi Counsel For Respondent: Vivek Perampurna, (CIT DR) Click Here To Read Order Read More: AI Strategy for GST Litigation

ITAT Deletes Additions Based on WhatsApp Chats

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