WhatsApp Chats Alone Can’t Prove Bogus Transactions: ITAT Deletes Rs. 89.50 Lakh Addition On Gifts From NRI Father-In-Law

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has deleted additions made against an assessee in relation to gifts received from his Dubai-based father-in-law, holding that mere WhatsApp chats, suspicion, and presumptions cannot justify invoking Section 69A of the Income Tax Act without corroborative evidence. The bench of Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member) observed that the department failed to establish that the gifts represented the assessee’s own unaccounted money routed back through banking channels. The dispute arose after a search and seizure operation conducted on 31 October 2022 at the premises of Kapoor Watch Company Pvt. Ltd. and related persons. The assessee, who managed a Kapoor Watch showroom in Gurugram and was closely associated with the group, was also subjected to search proceedings. Based on certain loose papers and WhatsApp chats allegedly recovered during the search, the Assessing Officer (AO) reopened the assessment under Section 147 and alleged that the assessee had sent cash to his father-in-law residing in Dubai, who later remitted the same amount back as “gifts” through banking channels. The AO treated gifts amounting to ₹89.50 lakh as unexplained money under Section 69A and further alleged that the assessee generated undisclosed income through property transactions, grey market luxury watch sales, and commission entries linked to Kapoor Watch Company. However, the Tribunal found that all the gifts were duly credited in the assessee’s disclosed bank accounts forming part of the regular books of account. It further noted that no addition relating to undisclosed property income had actually been made in the assessee’s hands. The ITAT also relied upon an earlier coordinate bench decision in Kapoor Watch Company Pvt. Ltd. where allegations relating to bogus cash sales and accommodation entries had already been rejected. The Tribunal noted that the foundation of the Revenue’s allegation itself had collapsed after the earlier ruling. Explaining the scope of Section 69A, the Tribunal held that the provision can be invoked only when the assessee is found to be the owner of unexplained money or valuables that are not recorded in the books of account and whose source remains unexplained. Since the gifts in the present case were received through banking channels and duly reflected in the books, the basic requirement of Section 69A was absent. Buy Now: Income Tax Judgments E-Compilation : April 2026 The Bench further held that the donor was a Non-Resident Indian (NRI), and therefore the source of funds in the donor’s hands could not be casually doubted by the Indian tax authorities. The Tribunal criticised the Revenue for relying heavily on WhatsApp chats and uncorroborated statements without bringing any independent evidence on record. It observed that suspicion, conjectures, and presumptions cannot substitute legal proof in income tax proceedings. The ITAT extensively referred to various Supreme Court and High Court judgments, reiterating that ownership of unexplained money must be conclusively established before invoking Section 69A. The Bench emphasised that mere possession or assumptions are insufficient to sustain additions. Importantly, the Tribunal noted that except for a few isolated instances, there was no evidence showing that the assessee had deposited cash with the father-in-law which later returned as gifts. Even in respect of those isolated chats, the Revenue failed to demonstrate any corresponding cash deposits in the donor’s bank account before remittances were made. The Bench also held that the assessee had furnished the donor’s bank statements, affidavit, and financial details establishing sufficient creditworthiness. The donor had disclosed substantial taxable income and capital gains in India over multiple years. Rejecting the Revenue’s approach, the Tribunal observed that additions cannot be sustained merely because the assessee later retracted statements recorded during search proceedings. It held that retracted statements unsupported by corroborative material do not constitute conclusive evidence. Consequently, the ITAT deleted the remaining addition of ₹25 lakh sustained by the Commissioner (Appeals) and upheld deletion of the balance ₹64.50 lakh, thereby granting complete relief to the assessee on the issue of alleged bogus gifts. The Tribunal also dismissed Revenue’s appeal challenging deletion of ₹16.18 lakh addition relating to alleged cash payments for construction of immovable property. The Revenue had relied upon unsigned Excel sheets allegedly recovered from a contractor’s premises to claim that the assessee made unaccounted cash payments. The ITAT observed that the Excel sheets merely contained estimated figures, lacked dates and particulars, and repeatedly used the word “discuss”, indicating tentative discussions rather than actual payments. The Bench held that no corroborative evidence was produced to prove actual cash transactions. The Tribunal further remarked that if the AO genuinely doubted the declared cost of construction, the matter should have been referred to the Departmental Valuation Officer instead of making additions based on assumptions and unsigned spreadsheets. In another issue relating to Assessment Year 2021-22, the ITAT held that “on-money” received during sale of property could not be taxed under Section 69A once the source of money was fully identified. The Tribunal ruled that such undisclosed cash receipts formed part of sale consideration and had to be taxed under the head “capital gains” instead of “unexplained money”. The appeals were thus partly allowed in favour of the assessee while Revenue’s appeals were dismissed. Case Details Case Title: Parvinder Singh Taneja Versus DCIT Citation: JURISHOUR-1148-ITA-2026(DEL) Case No.: ITA No.5651 to 5653/Del/2025 Date: 06.05.2026 Counsel For Appellant: Amit Goel, Adv Counsel For Respondent: Monika Singh, CIT DR Click Here To Read Order Read More: CESTAT Flags “Gross Violation Of Natural Justice” In Customs Refund Adjustment Done Without Hearing Importer

WhatsApp Chats Alone Can’t Prove Bogus Transactions: ITAT Deletes Rs. 89.50 Lakh Addition On Gifts From NRI Father-In-Law

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