The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the deletion of a ₹81.40 lakh addition made under Section 69 of the Income-tax Act, 1961, holding that an allegation of “on-money” payment for purchasing immovable property cannot be sustained solely on the basis of an uncorroborated third-party statement and unauthenticated WhatsApp conversations between employees of the developer.
The Bench of Challa Nagendra Prasad (Judicial Member) and Rakesh Kumar Lodha (Accountant Member) has observed that the Assessing Officer had made the addition solely on the basis of a third-party statement and WhatsApp conversations between two employees of the searched developer.
The appellant/assessee filed her income-tax return declaring a total income of ₹25.59 lakh. Her return was selected for scrutiny under the Computer-Assisted Scrutiny Selection system based on information that she had allegedly paid ₹81.40 lakh in cash while purchasing a flat in the Transcon Triumph project at Andheri, Mumbai.
The information originated from a search conducted on Transcon Developers Private Limited on September 23, 2021.
During the search proceedings, the developer’s General Manager (Sales), Vishal Suresh Makhija, gave a statement under Section 132(4) of the Income-tax Act. According to the statement, the assessee and Laksh Rastogi had agreed to purchase Flat No. A-2502 in Tower-1 of the Transcon Triumph project.
The registered agreement value of the flat was stated to be ₹2.21 crore, whereas the alleged total deal value was ₹3.024 crore. The difference of ₹81.40 lakh was claimed to have been paid in cash to the developer.
The alleged admission was based on WhatsApp conversations dated June 28 and June 29, 2021, involving the developer’s employees. One of the numbers was stated to belong to Lalit Birla, an accountant at the developer’s head office.
The conversations reportedly referred to ₹81.40 lakh collected in cash in connection with the sale of the flat. Of this amount, ₹50 lakh was allegedly given to Rajani Developers Private Limited and ₹31.40 lakh to Rishi Todi, a director of Transcon Developers Private Limited.
Relying on the statement and the WhatsApp conversations, the Assessing Officer issued a show-cause notice proposing an addition of ₹81.40 lakh.
The assessee questioned the evidentiary value of the WhatsApp chats, contending that they were conversations between third parties and were unsupported by independent or corroborative material.
The Assessing Officer nevertheless made the addition under Section 69, observing that the assessee had failed to produce confirmation from the developer denying that the alleged cash payment had been received.
The assessee challenged the assessment before the CIT(A), arguing that the entire addition rested on WhatsApp chats exchanged between two employees of the searched developer.
She maintained that no corroborative evidence had been discovered to establish that she had actually paid the alleged cash amount. The assessee also relied upon decisions of coordinate benches of the ITAT concerning additions made on the basis of third-party material.
Accepting the contentions, the CIT(A) deleted the ₹81.40 lakh addition.
The Revenue consequently approached the Tribunal, contending that the CIT(A) had failed to properly consider the developer official’s statement, the WhatsApp conversations and the assessee’s inability to furnish confirmation denying the alleged payment.
Before the Tribunal, the assessee submitted that an addition for alleged cash “on-money” could not be made merely on the strength of material recovered from a third party.
It was also argued that the Revenue had failed to establish the authenticity and evidentiary value of the WhatsApp conversations. Further, neither the third-party statement was furnished to the assessee nor was an opportunity to cross-examine the person who made the statement provided.
The assessee relied on several decisions, including Amit Shanta Ram Bagade v. ITO, in which the Mumbai ITAT had held that an addition for alleged cash payment could not survive in the absence of corroborative evidence.
Reliance was also placed on rulings in Anil Jaggi v. ACIT, Heena Dashrath Jangi Aani v. ITO, Ramesh Kumar Puraji Jain v. DCIT, Naresh Bhavanji Cheeda v. ACIT, Shivaji Tukaram Pawale v. ITO and Mafatlal Mangilal Kothari v. ACIT.
The WhatsApp conversations were unauthenticated, and the Revenue had failed to produce any corroborative evidence substantiating its primary allegation that the assessee had paid ₹81.40 lakh in cash, the Bench observed.
The ITAT rejected the approach of placing the burden on the assessee to obtain confirmation from the developer denying the cash transaction. It held that the Assessing Officer was first required to discharge the burden of proving the alleged on-money payment through reliable and corroborative evidence.
The Tribunal further noted that the digital material relied upon by the Assessing Officer was not accompanied by a certificate under Section 65B of the Indian Evidence Act, 1872.
Referring to the Supreme Court’s decision in Anvar P.V. v. P.K. Basheer, the Bench observed that digital data unaccompanied by the requisite Section 65B certificate was not admissible in evidence.
Thus, apart from the absence of independent corroboration, the electronic material relied upon by the Revenue also suffered from an evidentiary defect.
The ITAT reiterated that an addition cannot be made purely on the basis of third-party statements without the Assessing Officer producing corroborative evidence establishing the alleged cash payment by the assessee.
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