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2025 (2) TMI 1167 - AT - Income TaxAdditions u/s 69A and 69C - Reliance on documents from electronic records - evidence on record to show compliance u/s. 65B of the Indian Evidence Act - HELD THAT - Admittedly from the perusal of the image found from the mobile of Shri Javed Shaikh as reproduced in the impugned assessment order we note that there is nothing mentioned about the name of assessee. It was found from person who was an employee of the assessee and had left the employment as stated by the assessee in his statement. There is no corroborative material brought on record by the authorities below to conclusively demonstrate that transactions are of the assessee for the purpose of making addition. Importantly we also note that requirements of Section 65B of the Indian Evidence Act have not been complied with since the entire addition is based on image found from the mobile of Shri Javed Shaikh which is an electronic record. In this respect we take note of the decisions of Hon ble Supreme Court in Arjun Pandirao Khotkar 2020 (7) TMI 740 - SUPREME COURT which makes it mandatory to comply with the requirements in respect of electronic record compliance of which has nowhere been mentioned in the entire proceedings. Thus we delete the addition made in the hands of the assessee as unexplained money u/s. 69A. Further we affirm the deletion in respect of addition made by AO u/s. 69C by holding it as unexplained expenditure. Accordingly ground taken by the Revenue is dismissed and that of the assessee is allowed. Addition made u/s. 69C based on documents found and seized from mobile of one Shri Shailendra Rathi - The image/sheet found from the mobile of Shri Shailendra Rathi being an electronic record used as evidence for the purpose of making addition in the hands of the assessee is without obtaining necessary certification in this regard and therefore addition by AO is not tenable. Accordingly considering the overall factual matrix and discussions made above we do not find any infirmity in the findings arrived at by ld. CIT(A). Ground no.2 raised by the Revenue is thus dismissed. Addition u/s. 69A based on statement of one Shri Kaustubh Latke that payment is made by assessee to one group called as GNP Group - AO did not make any independent enquiry so as to ascertain the fact stated by Shri Kaustubh Latke in respect of sale of land at Pune in this respect. He did not identify details of land in Pune i.e. its location area buyer seller consideration etc. in relation to which assessee is alleged to be the recipient of consultancy services from Shri Kaustubh Latke. AO has simply placed reliance on uncorroborated statement of Shri Kaustubh Latke and arrived at a conclusion that assessee had made payment of Rs. 3 crores without adducing any evidence to that effect or conducting any enquiry. The seized document in the form of image found from the mobile of Shri Kaustubh Latke does not specify nature or purpose of the alleged transaction nor does have any signature or any other identification of the assessee. Addition cannot be made only on the basis of WhatsApp conversation between third parties without adducing corroborative evidence in support of such allegation. CIT (A) after considering various judicial precedents to state that documents/material found from the premises of third party or a statement of third party cannot be relied upon to make additions in the hands of the assessee unless such material or statement is corroborated by independent evidence linking such material to the assessee As decided in Common Cause v. UOI 2017 (1) TMI 1164 - SUPREME COURT wherein searches were conducted on the Birla and Sahara Group of Companies and incriminating material in form of random sheets and loose papers computer prints hard disk pen drives etc. were found held that noting on loose sheet/diary does carry any evidentiary value under the provision of section 34 of the Evidence Act.
1. ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Deletion of Additions under Sections 69A and 69C - Relevant Legal Framework and Precedents: Sections 69A and 69C of the Income-tax Act deal with unexplained money and unexplained expenditure, respectively. The Indian Evidence Act, particularly section 65B, is relevant for the admissibility of electronic records. - Court's Interpretation and Reasoning: The Tribunal emphasized the mandatory requirement of section 65B of the Indian Evidence Act for the admissibility of electronic records. It noted the absence of certification under section 65B for the electronic evidence relied upon by the Assessing Officer. - Key Evidence and Findings: The Tribunal analyzed the evidence, including images and statements from mobile phones of third parties, and found them insufficient to substantiate the additions. It noted the lack of corroborative evidence linking the transactions to the assessee. - Application of Law to Facts: The Tribunal applied the principles from Supreme Court judgments, which require compliance with section 65B for electronic evidence and corroboration of third-party evidence. - Treatment of Competing Arguments: The Tribunal considered the Revenue's reliance on third-party statements and documents but found them inadequate due to the lack of corroboration and compliance with the Evidence Act. - Conclusions: The Tribunal concluded that the additions under sections 69A and 69C were not sustainable due to non-compliance with section 65B and the lack of corroborative evidence. Issue 2: Compliance with Section 65B of the Indian Evidence Act - Relevant Legal Framework and Precedents: Section 65B of the Indian Evidence Act requires a certificate for the admissibility of electronic records. The Tribunal referenced Supreme Court decisions emphasizing this requirement. - Court's Interpretation and Reasoning: The Tribunal reiterated the importance of section 65B compliance, noting that the electronic evidence used by the Assessing Officer lacked the necessary certification. - Key Evidence and Findings: The Tribunal found that the electronic records relied upon were not supported by a section 65B certificate, rendering them inadmissible. - Application of Law to Facts: The Tribunal applied the legal requirement for electronic evidence, determining that the lack of certification invalidated the evidence used for the additions. - Conclusions: The Tribunal held that the absence of section 65B certification invalidated the use of electronic records for making additions. Issue 3: Reliance on Third-Party Statements and Documents - Relevant Legal Framework and Precedents: The Tribunal considered the admissibility and reliability of third-party statements and documents, referencing judicial precedents on the need for corroboration. - Court's Interpretation and Reasoning: The Tribunal noted that statements from third parties, without corroborative evidence, could not be solely relied upon for making additions. - Key Evidence and Findings: The Tribunal found that the statements and documents from third parties lacked corroboration and did not directly implicate the assessee. - Application of Law to Facts: The Tribunal applied legal principles requiring corroboration of third-party evidence, finding the evidence insufficient to support the additions. - Conclusions: The Tribunal concluded that the third-party evidence was inadmissible without corroboration, leading to the deletion of the additions. Issue 4: Jurisdictional Validity of Assessment Order - Relevant Legal Framework and Precedents: The Tribunal considered the jurisdictional challenge based on the non-issuance of a notice under section 148. - Court's Interpretation and Reasoning: The Tribunal did not adjudicate this issue, as the case was decided on the merits of the evidence. 3. SIGNIFICANT HOLDINGS - The Tribunal emphasized the mandatory nature of section 65B of the Indian Evidence Act for the admissibility of electronic records, aligning with Supreme Court precedents. - It held that electronic evidence lacking section 65B certification is inadmissible, leading to the deletion of additions based on such evidence. - The Tribunal reiterated that third-party statements and documents require corroboration to be relied upon for making additions. - The Tribunal dismissed the Revenue's grounds for appeal due to the lack of admissible and corroborative evidence. - The Tribunal allowed the assessee's grounds related to the deletion of additions, emphasizing the need for compliance with legal requirements for evidence.
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