Income Tax Notice based on WhatsApp Chat between Assessee Son and Accountant

Income Tax Notice based on WhatsApp Chat between Assessee Son and Accountant

Based on the analysis of the case DCIT vs. Niru Dhiren Shah, here are the Facts, Issue, and Decision:

1. Facts

• Search Operation: A search and seizure action under Section 132 was conducted on the assessee and separately on a third party, Mr. Rounak Kumar (son of the property purchaser).

• The Transaction: The assessee sold a shop for a registered consideration of Rs. 3.38 Crores.

• The Evidence: During the search of the third party, a WhatsApp chat was retrieved which contained an Excel sheet estimating the market value of the property at Rs. 6.55 Crores.

• The Addition: Relying on this third-party chat and rates from a government website (magicbricks.com), the Assessing Officer (AO) treated the difference of Rs. 3.16 Crores as unexplained money received by the assessee and added it to their income under Section 69A.

2. Issue

• Whether the addition of Rs. 3,16,65,485/- made by the AO under Section 69A, based solely on digital evidence (WhatsApp chats) retrieved from a third party without corroborating evidence from the assessee, is sustainable in law.

3. Decision

The ITAT dismissed the Revenue’s appeal and deleted the addition. The key reasoning was:

• Third-Party Evidence: The WhatsApp chats were between the buyer’s son and an accountant. The assessee was not a participant in these chats, and there was no direct evidence linking them to the alleged cash receipt.

• Lack of Corroboration: No independent incriminating material (such as cash or physical documents) was found in the possession of the assessee to substantiate the receipt of “on-money.”

• Inadmissibility (Section 65B): The digital evidence (screenshots/chats) lacked the mandatory certificate under Section 65B of the Indian Evidence Act, rendering it inadmissible as evidence.

• Valuation Compliance: The registered sale deed value (Rs. 3.38 Cr) was already higher than the value determined by the Stamp Duty Authority (Rs. 2.56 Cr), negating the presumption of suppression of value under standard provisions.