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TMI Blog2025 (2) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of made u/s 69C of Rs. 14,00,000/- without appreciating the fact that the expenses incurred were not recorded in the books of accounts? The Ld. CIT (A) further did not appreciate that the assessee failed to co-relate with evidences that the expenses added u/s 69C pertain to the unaccounted income disclosed and had not submitted any details about the nature of expenses and had not submitted any evidences regarding the source of funds for the expenses?" ii. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of made u/s 69C of Rs. 6, 18,73,000/-without appreciating the fact that corroborative evidence has been found from the cam scanner app of the mobile of Shri Shailendra Rathi and Shri Shailendra Rathi was confronted of his statement wherein he has clearly mentioned that the relevant page wherein transaction pertaining of the assessee were found on page no. 8 wherein the amount of Rs. 6,18,73,000/- has been shown as the amount expended towards various parties?" iii. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances of the case and in law, the appellant prays that If payment made as per the seized document is allowed and considered by CIT (A) as expenses and source of such expenses is considered as out of unaccounted "business receipts", then net income is based on the reasonable profit rate is required to be estimated in present case. 5) Appellant prays that 1) Addition made u/s 69A / 69C based on various seized documents of third party and statement recorded u/s 132(4) on which relied upon by AO / CIT (A) is duly retracted, therefore, addition made u/s 69A/69C is to be deleted. ii) The assessee craves your honour's leave to add, alter or amend any ground of appeal at the time of hearing or before. 3. Brief facts of the case are that, assessee filed his return of income u/s. 139(4) on 30.03.2022, reporting total income at Rs. 5,75,61,820/-. A search and seizure action u/s. 132 of the Act was conducted on 23.09.2021 which continued up to 30.09.2021 in the case of "Rucha Group". Case of assessee was also covered under search and seizure action u/s. 132. For the purpose of assessment, case of assessee was centralised to the office of Assistant Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 7 08.02.2021 Cash with Mama at Mumbai Javed bhai for work 20,00,000 8 19.02.2021 Cash at Bombay - 10,00,000 9 20.02.2021 Cash at Bombay - 4,00,000 Total 70,00,000 14,00,000 4.2. Ld. Assessing Officer took note of statement of Shri Javed Shaikh recorded u/s. 132(4), where in the answer to question no. 43, it was stated that said journal was sent to him from Pune office and explained that these transactions are cash payments and receipts. Facts submitted by Shri Javed Shaikh were confronted to the assessee, in response to which assessee submitted that 'Eijaj' is an Ex employee of Rucha Group. Subsequently, Shri Javed Shaikh retracted from the statement. Ld. Assessing Officer rejected the contention of retraction vide his office communication dated 18.10.2022. Ld. CIT (A) confirmed the addition of Rs. 70 lakhs based on this image found from the mobile of Shri Javed Shaikh and at the same time deleted the addition of Rs. 14 lakhs relating to expenditure since both were also recorded on the same image. 4.3. Before us, thrust of ld. Counsel of assessee is on the requirements to be complied in respect of section 65B(4) of the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined in electronic record or of the kind from which the information is derived was regularly fed into the computer in the ordinary course of the said activity; (iii) During the material part of the said period, the computer was operating properly and that even if it was not operating properly for some time, the break or breaks had not affected either the record or the accuracy of its contents; and (iv) The information contained in the record should be a reproduction or derivation from the information fed into the computer in the ordinary course of the said activity." 4.5. Reliance is also placed on the decision of Hon'ble Supreme Court in the case of Arjun Pandirao Khotkar [2020] 7 SCC 1, which also has clearly held that section 65B(4) of the Indian Evidence Act is mandatory. According to the Hon'ble Court, when documents from electronic records are produced by authorities and are sought to be used in evidence, in order to ensure the source and authenticity of the said documents, it is not only mandatory to obtain a certificate u/s. 65B(4) of the Indian Evidence Act, but despite efforts if the person seeking such a certificate is unable to do so, he can apply to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elete the addition of Rs. 70 lakhs made in the hands of the assessee as unexplained money u/s. 69A of the Act. Further, we affirm the deletion of Rs. 14 lakhs made by ld. CIT (A) in respect of addition made by ld. Assessing Officer u/s. 69C by holding it as unexplained expenditure. Accordingly, ground taken by the Revenue is dismissed and that of the assessee is allowed. 6. Now, we take up ground no.2 in the appeal by Revenue in respect of deletion of addition made u/s. 69C amounting to Rs. 6,18,73,000/- which is also based on documents, found and seized from mobile of one Shri Shailendra Rathi. Facts in this respect are that, during the course of search proceedings at the residence of Shri Shailendra Rathi, evidences containing hand written notes of cash amount received and disbursed from various activities were found as electronic images in the mobile of Shri Shailendra Rathi. From these electronic images, page no.8 is stated to be pertaining to assessee wherein Rs. 6,18,73,000/- is stated to be amount expended towards various parties. From this evidence and statement recorded u/s. 132(4) of Shri Shailendra Rathi, ld. Assessing Officer noted that as on 15.11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the owner of the said document i.e., Shri Shailendra Rathi, himself could not clearly explain the contents therein as is evident from his statements recorded. 7.1. We have already dealt with the provisions of section 65B of the Indian Evidence Act in the above paragraphs, which squarely applies to the present piece of evidence relied upon by the ld. Assessing Officer. On our observations and findings in this respect as stated above, 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 ld. Assessing Officer 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. 8. For Ground no. 3 raised by Revenue in respect of deletion of addition amounting to Rs. 3 crores u/s. 69A based on statement of one Shri Kaustubh Latke that payment is made by assessee to one group called as "GNP Group", the stand of Revenue is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence 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. 8.4. It is trite law that addition cannot be made only on the basis of WhatsApp conversation between third parties without adducing corroborative evidence in support of such allegation. We also take note of detailed observations made by ld. 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. To our mind, such material can be a good reason for starting an investigation, however, ld. Assessing Officer has simply relied on such material found from the premises of a third party and relied on third party statement to make addition without corroborating it with any kind of independent evidence and enquiry. 8.5. Considering the fact pattern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it was sent by the originator himself or any person authorised on his behalf or by a system programmed by or on behalf of the originator. Keeping the provisions of the Act and of Information Technology Act discussed herein, there cannot be any presumption or attribution on the assessee in respect of the electronic records (electronic images / sheets found and seized from the mobiles) based on which additions have been made in the hands of the assessee. 9.2. In the given context, Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprise vs. KS Infraspace LLP Ltd, Civil Appeal No. 9346 of 2019 dealt on the aspect of WhatsApp chats and observed as under: "The WhatsApp messages, which are virtual verbal communications, are matters of evidence with regard to their meaning and its contents to be proved during trial by evidence_ in_chief and cross-examination. The emails and WhatsApp messages will have to be read and understood cumulatively to decipher whether there was a concluded contract or not". 9.3. Hon'ble Apex Court highlighted the importance of proving the contents of WhatsApp chat during trial by evidence and also cross examination. In the present case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained by a firm known as Vasu Films of Madras which was seized by them. Department relied on the entries in the ledger which allegedly reflected payments to Ms. Lata Mangeshkar in white and black and took the view that no receipts were shown by the assessee (i.e. Ms. Lata Mangeshkar) in the regular books of accounts. Statements of the managing partner of Vasu Films and firm's Bombay manager were recorded in which they explained the entries stating that the letter "W" put against payment is "White" while the letter "B" were put against payment is "Black". Income-tax officer made additions on the basis of entries as in the seized material alleging that these payments were outside the books of accounts and also relied upon the statements made by these two persons. The Appellate Assistant Commissioner confirmed the additions made by the Income-tax Officer. 9.5.1. Before the Tribunal, it was contended on behalf of the assessee that the entire evidence merely created suspicion and it did not take the place of proof. Tribunal after appreciating all the evidence came to a conclusion that evidence was not sufficient to prove that assessee had received money in "black" for which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries, even if relevant, were only corroborative evidence. Independent evidence as to trustworthiness of those entries was necessary to fasten the liability. In view of these facts, it was held by the Hon'ble Court that entries made in the Jain Hawala diaries are under Section 34, but truthfulness thereof was not proved by any independent evidence. Hon'ble Supreme Court further went on to state that even correct and authentic entries in books of account cannot, without independent evidence of their trustworthiness, fix a liability upon a person. The relevant extracts are as under. 18. "Book" ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as "book" for they can be easily detached and replaced in dealing with the word "book" appearing in Section 34 in Mukundram v. Dayaram a decision on which both sides have placed reliance, the Court observed:- "In its ordinary sense it signifies collection of sheets of paper bound together in a manner, which cannot be disturbed or altered except by tearing apart. The binding is of a kin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc, do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate, the nature and source of receipts as well as nature and reason of payments and have failed to prove evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. It is apparent that the Commission has recorded a finding that transactions noted in the documents were not genuine and thus has not attached any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts. Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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