2025 (4) TMI 594 - AT - Income Tax

Unexplained money u/s 69A - additions on the basis of an image found from the smart phone of person working as personal assistant /Shri Ahish Chhangani - AR submitted that the presumption u/s 292C/ 132(4A) of the Act may be invoked in the hands of Shri Ashish Chhangani only and not against the assessee HELD THAT - It is well settled proposition of law that abstract documents which could not be corroborated with any other credible evidences should be considered as dumb documents only. In that case the AO could not have made addition on the basis of dumb documents For invoking the provisions of sec.69A of the Act it is required to be shown that the above said assets were physically available and further the assessee was found to be the owner thereof. In the instant case no physical money was found either with the assessee or with any other person and hence the question of the assessee being owner of the same does not arise. Hence the provisions of sec.69A are not applicable to the facts of the present case. We have held that the AO was not justified in relying upon whatsapp image taken from the phone of Shri Ashish Chhangani for making the addition. Hence we confirm the relief granted by Ld CIT(A) on the above said reasoning. Even otherwise as rightly held by Ld CIT(A) the sources of alleged disbursements would stand explained from the same document and hence no addition is warranted. Accordingly this ground of revenue is rejected. Unexplained expenditure u/s 69C - We notice that the document containing the details of alleged cash expenses was found in the smart phone of Shri Ashish Chhangani. It is stated that the said document did not contain the name of the assessee. Further the assessee has disowned the document and also did not accept the statement given by Shri Ashish Chhangani. We noticed earlier that Shri Ashish chhangani has also retracted his statement. Hence the said image cannot be considered as a credible evidence that could be related to the assessee. In our view it should be considered as a dumb document only. It is a fact that the AO has not brought any corroborating material to support the image found in the smart phone of above said employee. Accordingly we are of the view that the AO could not have made addition Unaccounted bonus payment - During the course of search operation certain papers were found in the drawer of Ms. Manjusha Bhagwat Patil who was an HR employee who explained that those papers represent bonus payments made to the employees in cash by the Account section - According to the assessee the bonus disbursements are made from Accounts department and not by her hence her statement should not be relied upon - HELD THAT - AO did not conduct any enquiry with any of the employees in order to find out the veracity of explanation given by the assessee. Hence the AO could not have made the addition on the basis of retracted statements and also without conducting any enquiry with the employees whose names were found in the document. AO has failed to discharge its burden and to bring on record the cogent convincing and relevant documentary evidences to make addition u/s 69C. See M/S RUCHA PROMOTERS AND DEVELOPERS PVT LTD. 2025 (2) TMI 1166 - ITAT MUMBAI Addition u/s 69A - addition has been made by the AO on the basis of a dumb document - HELD THAT - AO should have conducted further enquiries in order to find out the truth which he has failed to do. It is also stated that the statement given by the above said person has been retracted. Hence we are of the view that the impugned addition has been made by the AO on the basis of a dumb document which remained uncorroborated. In the earlier paragraphs while adjudicating the issue no.1 urged by the assessee we have held that the provisions of sec.69A could be invoked only if money is physically found in the hands of the assessee which is not the case. Accordingly we are of the view that the impugned additions made u/s 69A of the Act and made u/s 69C of the Act are liable to be deleted. Addition has been made on the basis of a third party statement - HELD THAT - AO could not have made any addition on the basis of third party statement which is not corroborated and not confronted with the assessee. We notice that the Ld CIT(A) has relied upon various case laws in support of the decision reached by him. Before us no contrary decision was placed reliance by the revenue. We noticed earlier that the assessing officer has made the addition u/s 69A of the Act but the assessee was not found to be the owner of any cash. Accordingly we are of the view that the Ld CIT(A) was justified in deleting the addition. Addition on the basis of whatsapp chat and also on the basis of statement given by Shri Shailendra Rathi - provisions of sec.69A could be invoked only if money is physically found in the hands of the assessee which is not the case. The Ld A.R further submitted that the AO had also made the addition in the hands of Shri Prashant Prakash Nilawar on the basis of whatsapp chat found in the phone of Shri Shailendra Rathi. The said addition has been deleted by the Tribunal vide its order passed in the hands of Shri Prashant Prakash Nilawar 2025 (2) TMI 1167 - ITAT MUMBAI - CIT(A) was justified in deleting the addition. Appeal of the Revenue is dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The legal judgment involves several core issues, including:

• Whether the notice issued under section 143(2) of the Income Tax Act is valid without a notice under section 148.
• Whether the procedures under section 65B of the Indian Evidence Act were followed in relying on electronic documents.
• Whether the addition of Rs. 2.10 crores as unexplained money under section 69A is justified.
• Whether the deletion of Rs. 1.99 crores as unexplained expenditure under section 69C is justified.
• Whether the addition of Rs. 1,40,500 as unexplained expenditure under section 69C is justified.
• Whether the addition of Rs. 14,87,200 as unaccounted bonus payment is justified.
• Whether the addition of Rs. 59.00 lakhs as unexplained money under section 69A is justified.
• Whether the deletion of Rs. 24.00 lakhs as unexplained expenditure under section 69C is justified.
• Whether the addition of Rs. 17.00 crores based on a third-party statement is justified.
• Whether the addition of Rs. 80.00 lakhs based on a third-party statement is justified.

ISSUE-WISE DETAILED ANALYSIS

Notice under Sections 143(2) and 148

The Court determined that the notice under section 143(2) was valid as the search took place for AY 2022-23, and the time for regular assessment for AY 2021-22 was available. Thus, there was no requirement for section 148 notice.

Procedures under Section 65B of the Indian Evidence Act

The Court did not adjudicate this issue as the assessee requested time to review the documents. The issue was left open for future consideration.

Addition of Rs. 2.10 Crores under Section 69A

The Court found that the addition was based on an image found on an employee's phone, which was deemed a "dumb document" as it lacked corroborative evidence. The presumption under sections 292C/132(4A) could not be invoked as the document was not created by the employee. The Court directed the deletion of this addition.

Deletion of Rs. 1.99 Crores under Section 69C

The Court upheld the deletion of Rs. 1.99 crores as the source of payments was explained by the alleged receipt of Rs. 2.10 crores. The Court confirmed the relief granted by the CIT(A) based on the absence of credible evidence.

Addition of Rs. 1,40,500 under Section 69C

The Court found that the document on which the addition was based was not credible evidence. The statement by the employee was retracted, and no corroborative material was provided. The Court directed the deletion of this addition.

Addition of Rs. 14,87,200 as Unaccounted Bonus Payment

The Court noted that the addition was based on retracted statements and lacked corroborative evidence. The Tribunal had previously deleted a similar addition in a related case. The Court directed the deletion of this addition.

Addition of Rs. 59.00 Lakhs under Section 69A

The Court found that the addition was based on sticky notes, which were considered dumb documents due to lack of corroboration. The Court directed the deletion of this addition.

Deletion of Rs. 24.00 Lakhs under Section 69C

The Court confirmed the deletion as the source of expenses was explained. The sticky notes were deemed unreliable, and the relief by CIT(A) was upheld.

Addition of Rs. 17.00 Crores Based on Third-Party Statement

The Court found that the addition was based solely on a third-party statement, which was retracted and lacked corroborative evidence. The CIT(A) deleted the addition, and the Court upheld this decision.

Addition of Rs. 80.00 Lakhs Based on Third-Party Statement

The Court found that the addition was based on a whatsapp chat and a statement from a third party, which was not corroborated. The CIT(A) deleted the addition, and the Court upheld this decision.

SIGNIFICANT HOLDINGS

The Court established several core principles:

• Additions based on uncorroborated third-party statements or documents deemed "dumb" due to lack of evidence are not justified.
• The presumption under sections 292C/132(4A) cannot be invoked without credible evidence linking the document to the assessee.
• Loose papers or uncorroborated documents cannot be used as sole evidence for making additions.
• The burden of proof lies with the revenue to corroborate statements or documents with independent evidence.
• Section 69A requires physical possession of money or assets by the assessee to justify additions.

The final determinations on each issue were in favor of the assessee, with the Court directing the deletion of various additions and upholding the relief granted by the CIT(A) where applicable.