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Facts
The assessee purchased an immovable property, and the Assessing Officer (AO) made an addition of Rs. 71,27,250/- under Section 69 of the Income Tax Act, treating it as unexplained investment on account of alleged 'on money' paid in cash. The assessee challenged this addition, arguing that the payment was made through banking channels and that the evidence relied upon by the AO (WhatsApp messages and a retracted statement) was inadmissible and lacked corroboration.
Held
The Tribunal held that the addition made by the AO was unsubstantiated and based on a standalone reliance on a retracted statement without corroborative evidence. The Tribunal noted that the assessee had provided substantial explanation supported by documentary evidence, and that principles of natural justice were violated by not providing an opportunity for cross-examination.
Key Issues
Whether the addition under Section 69 on account of alleged 'on money' paid in cash is sustainable without corroborative evidence, especially when principles of natural justice, including the opportunity for cross-examination, are violated. Whether WhatsApp messages and retracted statements can form the sole basis for such an addition.
Sections Cited
143(3), 144B, 69, 132, 132(4), 65B, 153C, 292C
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM
O R D E R
Per Arun Khodpia, AM:
The captioned appeal is filed by the assessee, challenging the order of Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short “ld. CIT(A)”] dated 16.07.2025 for the AY 2022-23, which in turn arises from the assessment order passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (for short “the Act”) dated 27.03.2024, passed by Assessment Unit Income Tax Department (for short “ld.
AO”).
The grounds of appeal raised by the assessee in the present appeal, reads as under:
“1. Undisclosed Investment u/s.69 of the Act - Rs.71,27,250 On the facts and circumstances of the case and in the law, the Lr CIT(A) erred in confirming addition on account of undisclosed investment u/s. 69 of Rs. 71,27,250 made by AO on account of 'On Money' allegedly paid to the Seller for purchase of a warehouse property on the basis of Assessment Order. The CIT(A) as well the AO failed to provide any evidence, statements recorded and sufficient opportunity to cross-examine the Seller. The Ld CIT(A)/AO failed to appreciate: a. That the whatsapp chat does not reflect any 'on money' paid in cash; b. the Whatapps messages are inadmissible as they do not comply with Sec 65B of Indian Evidence Act, 1872; c. That despite repeated requests by the Appellant, neither the seized documents pertaining to the appellant alleged payments nor the statements recorded of the seller u/s 132(4) were provided to the appellant. d. That despite repeated requests, cross-examination of the Seller was not provided. The statements are the only basis of which the addition was carried out. e. That as per the confirmations received from the sellers, he has shown the balance amount of Rs 71,27,250 as on 31.03.2022, 31.03.2023 & 31.03.2024 as receivable. That means the buyer has still not paid and the seller has still not received. Hence, the question of payment of cash does not arise; f. That the sellers' AO has accepted that his assessee has not received any 'on money' and the assessment order passed accordingly without making any variation. The same should apply to the assessee as well; g. That the case laws relied upon the by Lr CIT(A) are distinguishable on facts and not applicable to the facts of the assessee. Further, he has completely failed to distinguish the case laws relied upon by the assessee on various grounds; h. That the assessee has submitted detailed arguments on as many as 6 sub- grounds before the Lr CIT(A). However, the Lr CIT(A) has only considered ground related to Section 65B of IEA, 1872 and statement recorded u/s 132(4) without specifically dealing with the other grounds; i. That the Lr CIT(A) has failed to grant an opportunity of being heard through Video Conference facility despite specific request for the same being made by the Assessee. Thus, the principles of natural justice have been clearly violated, and consequentially, the assessment proceedings vitiated rendering the assessment order bad-in-law. Further, the assessment is completed without any corroborative evidence to the general statement made by the Seller. Therefore, the appellant prays that the addition made under section 69 as Unaccounted Investment be deleted and Assessment Order be quashed.
2. Addition or amendment to Grounds of appeal: The appellant craves, leave, to add to, amend and / or alter the above grounds of appeal.”
Concisely stated, pursuant to a search action u/s 132 of the Act carried out on 03.12.2021, by the Investigation wing of the department in the case of Sangini Group of builders, Surat. Certain information qua the assessee, to enter into a transaction of purchase of immovable property admeasuring 9,503 Sq.
Ft., at plinth 6 in building plot no. G-1. Survey no. 271/1/1 village Bhoirgaon, Taluka Bhiwandi, Maharashtra, for a consideration of Rs. 1,66,30,250/- (Rs.
1750 x 9503 Sq. ft.) from Shri Dinesh Kumar Dhanraj Garg. Query raised in the assessment proceedings to the assessee to explain the difference in consideration for Rs. 95,03,000/-, alleging that it has been paid in cash as on- money for purchase of property to the sellers, as to why the same should not be added back to the income of assessee. Response made by the assessee along with documentary evidence, denying any payment in cash as on-money.
Submissions of assessee were considered by the ld. AO, but remain dissatisfied for the part, out of alleged amount to the tune of Rs. 71,27,250/-. Accordingly, the assessment u/s 143(3) r.w.s. 144B was completed on 27.03.2024, with an addition of Rs. 71,27,250/- u/s 69 of the Act, treating it as unexplained investment.
Being aggrieved with the aforesaid addition, assessee preferred an appeal before the Ld. CIT(A), but was unable to convince him, thus, the appeal got dismissed. Ld. CIT(A) while deciding the issue observed as under:
As far as the decisions relied upon by the assessee are concerned those are distinctly distinguishable on facts as well as on law. In the case of Prarthana construction (supra), the document in question has not established the involvement of the said assessee and in the absence of the nexus it was held that the impugned document did not belong to the assessee. Likewise, in the case of Unique Organizer & Developers ( supra) the question of "on money" transaction was not proved by the Revenue Department. There was a finding on facts that the said addition was based on suspicion and surmises. We have also perused the decision of Maulik Kumar K. Shah (supra) and noted that the decision of the AO was devoid of evidence in support of his allegation. We, therefore, conclude that the decision cited by the assessee were primarily on their own facts; hence not matched with the facts of the appeal in hand. We also conclude that in a situation when any books of account or documents, etc. have been delivered to the requisitioning officer having jurisdiction over "such other person" i.e., other than the person who has been searched; then those documents, etc., delivered or requisitioned shall be dealt with as if they have been found in the possession or control of "such other person" against whom the proceedings have been initiated u/s.153C of IT Act. Such books of account or documents shall be deemed to have been found in the possession or control of such other person as if recovered in the course of search u/s. 132 of IT Act. Moreover, in this case the assessee being one of the signatory of the contents recording the transactions hence the documents was belonging to the assessee. Therefore, the amount in question was rightly assessed in his hand. We find no force in this ground of the assessee; hence, dismissed.
In the result, the appeal is dismissed.
3.2.7 In light of the above facts, it is concluded that even if whatsapp messages are technically inadmissible u/s 65B, the confession u/s 132(4) of Sh.
DineshkumarDhanrajGarg, supported by Whatsapp chats and presumption u/s 292C, is enough to sustain the addition of unexplained investment/on-money.
Thus, the appellant's contention is not found to be acceptable on the following points:-
* Section 132(4) admission is valid and standalone evidence. * Whatsapp chats are corroborative, not sole basis. * Section 292C presumptions support AO's conclusion.
* Assessee failed to rebut evidence during the assessment proceedings as well as appellate proceedings despite given multiple opportunities of being heard were provided to him.
* Income Tax Act allows material not strictly admissible under Evidence Act if it leads to detection of income. 3.3 In view of the above factual discussion and legal matrix of the case, addition of Rs.71,27,250/- on account of unexplained investment u/s 69 made by the AO is upheld, hence confirmed. Thus, the ground of appeal no. 1 is dismissed.
5. To challenge the above decision of Ld. CIT(A), assessee preferred the present appeal.
6. At the outset before us, Ld. Authorized representative of the assessee (for short “Ld. AR”) submitted that the addition was made under preconceived mind set by the Ld. AO placing reliance on the findings and information received from Investigation wing. The assessee tried to explain that the allegation was made under wrong inferences and thus cannot survive. Ld. AR made a written submission in support of contentions and against the observations of Ld.
CIT(A), the same is extracted as under: -
Assessee's submission before Hon'ble ITAT: The assessee would like to contest the Assessment Order making an addition of Rs. 71,27,250 on the following grounds: a. That, factually, the Whatsapp messages do not reflect any cash payment received by the seller or paid by the buyer - Refer Para 4 - APB Page Nos. 12 to 16; b. That on legal grounds, the Whatapps messages are inadmissible as they do not comply with Sec 65B of Indian Evidence Act, 1872- Refer Para 9 & 10 - APB Page Nos. 26 to 39; 6 c. That no reliance can be placed on the statement recorded u/s 132(4) of DDG since the same has not been furnished to the assessee for perusal and rebuttal thereof - Refer Para 5 & APB Page Nos. 17 to 20 & Para 11 & APB Page Nos. 39 to 56; d. That the sellers has shown the balance amount of Rs 71,27,250 as on 31.03.2022, 31.03.2023 & 31.03.2024 as receivable. That means the buyer has still not paid and the seller has still not received even as on 31.03.2024 i.e. after more than 2 ½ years of the agreement date - Refer Para 6 & APB Page Nos. 84 to 86; e. That there being serious violation of natural justice in not providing an opportunity to cross-examine DDG, the assessment proceedings are vitiated and bad-in-law - Refer Para 11 & APB Page Nos. 39 to 56; f. That, factually, the sellers' AO has accepted that DDG has not paid any cash and the assessment order passed accordingly without making any variation. The same should apply to the assessee as well Refer Para 8 & APB Page Nos. 20 to 24, 81 to 83 and 87 to 107;
6. Assessee's para wise submission to CIT(A) order: a. Para 3.2.1 of CIT Order: Statement of DDG u/s 132(4) has evidentiary value and is valid piece of evidence under ITA. Courts have held that confession recorded under a valid authority and process under ITA can be used as primary evidence without corroboration. Hence, independent of whatsapp, admission of on-money in DDG sworn statement is enough to make a sustainable addition.
Assessee' submission: i. CBDT instruction dated 18.12.2014 for gathering of credible evidence ii. Furnishing of statement and cross examination is essential for sustaining / making an addition:
* In Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29 (SC) the Assessing Officer obtained information from a bank with regard to remittance of funds by the assessee. It was not disclosed but was used for the purpose of assessment. The Court held that, even though the proceedings under the Income-tax law were not governed by any confirmation or outside information were bound to produce it before the assessee so that he could controvert the statements contained in it by asking for an opportunity to cross-examine the person who had given such confirmation or information.
* Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC), wherein the Hon'ble Apex Court observed as under- "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority, though the statements of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea was not even dealt with by the Adjudicating Authority. As far as the Tribunal was concerned, rejection of this plea was totally untenable. The Tribunal had simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellants themselves to explain as to why their ex-factory prices remained static. It was not for the Tribunal to have guesswork for what purposes the appellant wanted to cross- examine those dealers and what extraction the appellant wanted from them.
* Vetrivel Minerals vs. Assistant Commissioner of Income-tax, Central Circle-2, Madurai [2021] 129 taxmann.com 126 (Madras)/[2021] 282 Taxman 321 (Madras)/[2021] 437 ITR 178 (Madras)[03-08-2021] : 21. Therefore, non-furnishing of the panchanama to the assessee is a violation of the principles of natural justice as it disables the petitioners from having knowledge of the seized materials and the alleged incriminating materials relied upon by the respondent department.
On the next issue of refusal of cross-examination of the persons whose statements were recorded during the time of search under section 132(4) of the Income Tax Act, it is trite law that the person against whom a statement is used, should be given opportunity to counter and contest the same. I am unable to accept the contention of the learned Senior Counsel that since the statements recorded were of persons who were employees of the assessee and therefore the assessee cannot seek for cross-examination of them.
The basic principles of jurisprudence governing the law of evidence can in no way interfered and could not be by the Income Tax Act provisions and neither the authorities functioning under the Income Tax Act has any discretion in such matters. The Supreme Court in the judgment Kishan Chand Chellaram 125 ITR 713 at page 720 which is also followed in the judgments cited by the petitioner in the case of Roger Enterprises (P) Ltd. (supra) and in the case of Brij Bhushan Singhal (supra), held as follows:-
It is true that the proceedings under the Income Tax Act law are not governed by the strict rules of evidence and therefore, it may be said that even without calling the Manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for the opportunity to cross-examine the Manager of the bank with reference to the statement made by him. ...
* In CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103, the Hon'ble Calcutta High Court held that "Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness".
* Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498(SC) b. Para 3.2.2 of CIT Order: Even if WhatsApp chats are considered inadmissible evidence under 65B due to lack of certification, they can still serve as corroborative evidence when read with the confession and other material. Case relied upon: ACIT Vs Vetrivel Mineral [2025] 174 taxmann.com 110 (Madras) (30.04.205).
Para 3.2.4 : Since during the assessment proceedings as well as appellate proceedings, the appellant has failed to provide credible / cogent supporting evidence which establish that the said amount was paid by him through banking channel, it points to the fact that the appellant must have paid the disputed amount in cash on 26.10.2021 Assessee's submission :
* Mumbai ITAT in case of Prashant Prakash Nilawar ITA 5689 & 5073/MUM/2024 has referred to Hon'ble SC in case of Anvar P. V. V/s P. K. Basheer [2014] 10 SCC 473 - Refer to Page No. 7 of the order. It states that whenever a person is seeking to rely upon electronic record, for the same produced in the evidence, a certificate u/s 65B of the Indian Evidence Act is mandatory. Para 14 extracted. It is further held that there is no corroborative material brought on record to conclusively demonstrate that transactions are of the assessee. * Mumbai ITAT in case of Rucha Consultancy LLP vs. Deputy Commissioner of Income-tax [2025] 174 taxmann.com 221 (Mumbai - Trib.)[07-04-2025] has held that i. No addition could be made on the basis of whatsapp images without bringing any corroborative evidence on record; ii. No addition could be made when copy of the statement was not given and opportunity to cross-examine was not granted.
* Hon'ble SC in the case of Ambalal Sarabhai Enterprise Ltd Vs KS Infraspace LLP - CA 9346/9347 of 2019 dated 06.10.2020 has held that:
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.
* Hon'ble Chennai ITAT in the case of A Johnkumar 2019 dated 13.05.2022 has held that :
First of all, WhatsApp messages cannot be considered as a conclusive evidence to draw an adverse inference against the Further, what is written in WhatsApp message is not readable in terms of any income or expenditure. (Page 19)
Further, the AO had relied upon the WhatsApp messages sent from assessee's mobile phone to Mr. Somu and had given his own meaning to those messages. In the process, the AO neither tested the admissibility of WhatsApp messages as evidence u/s.69B of Evidence Act, nor examined Mr.Somu the recipient of messages sent by the assessee. The AO without carrying out necessary enquiries and also examining those persons, simply concluded that those messages are meant for distribution of cash and the assessee has spent such a huge amount for election expenses. c. Para 3.2.5 of CIT Order: Decision of Hon'ble Delhi HC in the case of Urmila Gambhir [2010] 325 ITR 171:
Assessee's submission: There was no denial that the paper was related to purchase of property. The only question was whether the addition was to be made in the hands of the company or the assessee as the deed was in the name of the company. Facts are distinguishable. d. Para 3.2.6 of CIT Order: decision of Hon'ble Ahmedabad ITAT in the case of Pravinbhai Patel 45 taxmann.com 533: Assessee's submission: The documents are signed by the both the parties to agreement in the presence of witnesses. Facts are distinguishable.
Based on aforesaid submissions, Ld. AR submitted that the information flowing from what’s app images are reflating the transactions for Rs. 95,03,000/- already executed between the parties paid on 26.10.2021 though banking channel, even before the date of search on 03.12.2021. Acceptance of cash received by the seller Shri Dineshkumar Dhanraj Garg (DDG) from assessee in statement u/s 132(4), but retracted later, cannot be the sole basis or be used against the assessee without furnishing the same to assessee for rebuttal thereof. Regarding total amount of Rs. 1,66,39,753/-, balance 71,72,250/- (Rs.
1,66,39,753/- (-) Rs. 95,03,000/-) is still due to be paid to the seller as reflating in his books, ledger copy of assessee’s account in the books of seller furnished.
It also argued that the opportunity to cross examine the seller, whose statements are relied upon, not provided to the assessee was a violation of principle of natural justice. Further the impugned transaction was under scrutiny by the AO of the seller also, but no adverse inference was drawn and no addition was made in the hands of seller in the assessment for AY 2022-23 (copies of queries raised and assessment order of seller are furnished at Pb page 87 to 107). It is also contended that WhatsApp messages are inadmissible as they do not comply with sec 65B of Indian Evidence Act, 1872. It was therefore the prayer that the addition made u/s 69 of the Act on account of unexplained investment is liable to be struck down.
Per contra Ld. Sr. DR representing the revenue, referred to para 3.1 in assessment order and submitted that, the information regarding payment of on- money in cash was clearly unearthed during the search, the seller ‘DDG’ also admitted being receipt of cash from the assessee. Rebuttal from statement u/s 132(4) was an afterthought. Thus, in absence of any satisfactory explanation by the assessee, the addition was rightly made by the AO, the same deserves to be sustained, which the Ld. CIT(A) had done, therefore order of Ld. CIT(A) merits upholding.
Having heard the rival parties, perused the material on record and case laws pressed in to service by the parties. Factual matrix of the present case states the undisputed fact that during search on Sangini Group and further recording of statement u/s 132(4) of Shri Dineshkumar Dhanraj Garg (DDG) corroborated with evidence in the form of WhatsApp message (reproduced in the assessment order), the assessee has purchased an immovable property (Saidhara warehouse) at Surat for Rs. 1,66,39,753/- out of which an amount of Rs. 95,03,000/- was paid by cheque on 26/10/2021. Inference was drawn that the amount was received in cash by the seller, but this perception of the AO was changed after assessee’s submission that payments were made by cheque on 25.10.2021 (before the date of search on 03.12.2021) for purchase of property and construction thereon, vide cheque no 547802 for Rs. 71,27,250/- (Land + Plinth No. 6) and vide cheque 547803 for Rs. 23,75,750/- (towards construction cost), bank statement furnished before AO and accepted. As per MOU dated 12.01.2021, the remaining amount of Rs. 71,27,250/- (750x9503) was for intrinsic value of the property giving recurring yearly rental income; to be paid by the assessee in two years from the date of execution of MOU, such amount was outstanding in the books of seller as reflected in ledger accounts furnished, thus the message on WhatsApp has been duly clarified by the assessee.
However, the addition was made in presumption that explanation regarding the amount to be paid in future was just an after thought to evade the taxes, though such presumption does not have any supporting incriminating documents to justify.
In backdrop of the aforesaid facts and circumstances, the revenue authorities though have made the addition but remain unable to point out the basis of their opinion as to how the explanation furnished by the assessee were dissatisfactory. Ld. CIT(A) relied solely on admission of seller u/s 132(4), though the same gone retracted later, treating it as standalone evidence, which is not tenable under the settled principle of law. Observation that assessee failed to rebut evidence during the assessment as well as appellate proceedings is a bald statement without any specific document / evidence sought for, despite various documents furnished by the assessee. Not providing copies of statement and cross examination of the persons whose statement were used against the assessee is a gross violation of principle of natural justice.
11. We, thus, on the basis of substantial explanation by the assessee supported with documentary evidence, further corroborated with acceptability of the transaction in the case of seller by his AO passing an assessment with no addition, are unable to fathom and concur the decision granted by Ld. CIT(A) vaguely accepting the additions made by AO, without any logical reasoning to do so, are inclined to reverse the same. Consequently, the unsubstantiated addition made is directed to be vacated, made on standalone reliance to the statements of a third party, having no legs to stand in the eyes of law being withdrawn, without any corroborative evidence substantiating the impugned unexplained transaction of cash in totality. Much less, without furnishing such statement to assessee and no opportunity to cross examine, on the other hand the transaction is established by the assessee as genuine with support of documentary evidence. We, thus, set aside the order of Ld. CIT(A) and direct to delete the addition made u/s 69 vide impugned assessment dated 27/03/2024.
12. In result, we allow the appeal of assessee, as per our observations herein above.
Order pronounced in the open court on 29-12-2025.