2024 (9) TMI 1265 - AT - Income Tax

Addition u/s. 69C - cash payment made by assessee to Shri Shailendra Rathi - addition based on third party statements and documents - Addition made as there was a WhatsApp message in the mobile of Shri Nilesh Toshniwal prior to 07/10/2019 by Shri Shailendra Rathi stating as Received80@Dubai and reason given by ld. AO is the statement of Shri Shailendra Rathi - HELD THAT - First of all so called What sAPP message stating received 80@Dubai is not found from the mobile of the assessee. Albeit, from an independent third person who is a professional and no connection with assessee. Another important point is that, the message has not been sent by the assessee from his mobile but was found mobile phone of Shri Shailendra Rathi sent by someone else. None of these two persons are either connected with the assessee for any kind of business nor there is any common interest nor has any corroborative evidence been found from the assessee to correlate the alleged transaction. On perusal of the statement of Shri Shailendra Rathi, nowhere he has suggested that these payments relate to any transactions relating to the assessee on or behalf of the assessee or received on or behalf of the assessee. There is a complete mismatch of time period between What sApp message and the date mentioned in the statement. When assessee was confronted with the statement of Shri Shailendra Rathi, he has categorically stated that he is neither aware of such transaction nor does he have any business relation with Shri Ashok Lunia. No enquiry whatsoever has been conducted by the ld. AO as to what was the connection between assessee and Shri Ahok Lunia and what the transaction was for and what is the business relationship with Shri Shailendra Rathi and how this transaction pertains to assessee. During the search at Assessee s place no corroborative evidence or material has been found. Nowhere Shri Shailendra Rathi has implicated the assessee that he has paid or received cash of Rs. 80,00,000/- on behalf of the assessee. Addition has been made and secondary evidence of electronic record being What sApp conversation from a mobile and statement of a person and from the statement nowhere the name of the assessee figures. If the message and the information has not been retrieved or recovered from the assessee, there cannot be any presumption against the assessee. The onus was on the persons who have given the statement or from whose mobile What sApp chat had been found. Nowhere it has been brought on record whether Shri Nilesh Toshniwal has stated anything about the assessee or any enquiry was done from him. If the ld. AO is trying to use the What sApp chat relating to some third person against the assessee, then its mandatory requirement u/s 65 B of the Evidence Act to comply with the procedures given therein. As stated above, there is no material from the possession of the assessee which can remotely suggest that assessee had entered into alleged transaction. Even if it is accepted that What sApp message can be treated as evidence then, here the transaction took place between Shri Shailendra Rathi and Shri Ahok Lunia and the message appeared in the mobile phone of Shri Nilesh Toshniwal and Shailendra Rathi and there is no whisper about the assessee s name. Ld. AO has also denied the opportunity to cross examine Shri Shailendra Rathi whether this transaction at all pertains to the assessee, because nowhere he has even taken the name of the assessee that this transaction pertain to assessee. The entire edifice of addition made by the ld. AO is reliance on the statement of third party and material found during the course of search of the third party. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 80,00,000/- made under Section 69C of the Income-tax Act, 1961.
2. Admissibility and reliability of WhatsApp chat images as evidence.
3. Reliance on third-party statements and documents found during search operations.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 80,00,000/- made under Section 69C:

The Revenue challenged the deletion of an addition of Rs. 80,00,000/- made under Section 69C, which pertains to unexplained expenditure. The Assessing Officer (AO) based the addition on a WhatsApp message found on the mobile phone of a third party, Shri Shailendra Rathi, which stated "@ received 80." Shri Rathi, in his statement under oath, claimed that Rs. 80 lakh was received in cash through Shri Ashok Luniya. The assessee denied any such transaction or business relationship with Shri Ashok Luniya.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, observing that the WhatsApp chat images were not found in the possession of the assessee and hence, the presumption under Section 292C and 132(4A) of the Income-tax Act were not applicable. The CIT(A) emphasized that documents found from a third party's possession could not be relied upon to make additions against the assessee without independent evidence linking the material to the assessee. The CIT(A) also noted the absence of a Section 65B certificate for the digital evidence, rendering it inadmissible.

2. Admissibility and Reliability of WhatsApp Chat Images as Evidence:

The WhatsApp chat images were a critical piece of evidence used by the AO. However, the CIT(A) and the Tribunal highlighted the legal requirement for a certificate under Section 65B of the Indian Evidence Act to validate digital evidence. The Tribunal referenced the Supreme Court's judgment in Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal, which mandates certification for electronic evidence. The absence of such certification in this case rendered the WhatsApp chat images inadmissible.

3. Reliance on Third-Party Statements and Documents Found During Search Operations:

The AO relied on the statement of Shri Shailendra Rathi and the WhatsApp chat images found during the search at Shri Rathi's residence. The CIT(A) and the Tribunal underscored that the addition was based on third-party statements and documents without any corroborative evidence linking the assessee to the alleged transaction. The Tribunal noted that the AO did not conduct any inquiry to establish a connection between the assessee and the third parties involved. The Tribunal reiterated that suspicion, however strong, cannot replace evidence, as held by the Supreme Court in Umacharan Shaw and Bros v CIT.

The Tribunal also pointed out that the AO denied the assessee the opportunity to cross-examine Shri Shailendra Rathi, which is a critical procedural lapse. The Tribunal concluded that the addition of Rs. 80,00,000/- was unsustainable as it was based solely on third-party statements and documents without independent corroboration.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 80,00,000/-, emphasizing the inadmissibility of the WhatsApp chat images due to the lack of a Section 65B certificate and the absence of independent evidence linking the assessee to the alleged transaction. The Tribunal dismissed the Revenue's appeal, reiterating the legal principle that documents or statements from third parties cannot be used to make additions against an assessee without corroborative evidence. The appeal of the Revenue was dismissed, and the order was pronounced on 7th August 2024.