PAVANI & SSS CONSTRUCTIONS,HYDERABAD vs. ACIT., CENTRAL CIRCLE - 2(3), HYDERABAD

आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad �ी �वजय पाल राव, उपा� य� एवं �ी मधुसूदन साव"डया, लेखा सद& य के सम� ।

Before Shri Vijay Pal Rao, Vice-President A N D Shri Madhusudan Sawdia, Accountant Member आ.अपी.सं /ITA No. 1572/Hyd/2025 (िनधा�रण वष�/Assessment Year: 2019-20)

M/s. Pavani & SSS Vs. Assistant Constructions Commissioner of Hyderabad Income Tax PAN: AARFP0148B Central Circle 2(3) Hyderabad (Appellant) (Respondent)

िनधा��रती �ारा/Assessee by: CAs Kranthi Palivela & Mrudulatha राज� व �ारा/Revenue by: Shri Bala Murali Krishna Korrapati

सुनवाई की तारीख/Date of hearing: 22/06/2026 घोषणा की तारीख/Pronouncement: 22/07/2026 आदेश/ORDER Per Madhusudan Sawdia, A.M.:

This appeal is filed by M/s. Pavani & SSS Constructions (“the assessee), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)- 12 Hyderabad (“Ld. CIT(A)”) dated 18.07.2025 for the A.Y.2019-20.

“1. The Order of the Commissioner of Income Tax (Appeals) - 12 dated 18- 07-2025 is contrary to law and facts. 2. The Appellate Commissioner has erred in upholding the addition made by the Assessing Officer by The Way of Treating the Cash mentioned in WhatsApp Chat Of 25 To Be Rs. 25,00,000 as on money ignoring the information furnished and hence the order against The Principles of Natural Justice and Equity. 3. The Appellant craves leave to act, to amend or alter any of the aforesaid grounds as the occasion may require.” 3. The brief facts of the case, as culled out from the records, are that a search and seizure operation under section 132 of the Income-tax Act, 1961 (“the Act”) was conducted in the case of M/s R.K. Infracorp Pvt. Ltd. and others on 06.02.2020. The business premises of M/s Upkar Infra Projects Pvt. Ltd. were also covered in the said search. During the course of the search proceedings, backup data of the mobile phone of Shri Ravindra Reddy, who is the Managing Director of M/s Upkar Infra Projects Pvt. Ltd., was extracted and examined. During examination of the mobile data, certain WhatsApp conversations exchanged between Shri Ravindra Reddy (“Buyer”) and Shri Abhijit Reddy (“Partner of the Assessee Firm”) were found. Based on the contents of the said WhatsApp chats, the Learned Assessing Officer (“Ld. AO”) formed a view that the assessee had received an amount of ₹25,00,000/- as on-money in connection with the sale of a flat by the assessee to the buyer. Accordingly, the Ld. AO issued notice under section 153C of the Act on 06.06.2023 requiring the assessee to furnish its return of income for Assessment Year 2019-20. In response thereto, the assessee filed its return of income on 06.07.2023 admitting a total income of ₹53,11,320/-. During the assessment proceedings, the assessee denied having received any on-money in connection

3 with the sale of the flat. However, the Ld. AO was not convinced with the explanation furnished by the assessee. Relying upon the WhatsApp conversations and the surrounding circumstances, the Ld. AO concluded that the amount referred to as “25 cash” in the WhatsApp conversations represented ₹25,00,000/- received by the assessee as on-money in connection with the sale of the flat. Accordingly, the Ld. AO completed the assessment under section 153C of the Act vide order dated 09.03.2024 by making an addition of ₹25,00,000/- and assessing the total income of the assessee at ₹78,33,820/-.

WhatsApp conversation had no relation whatsoever with the sale transaction between the assessee and the buyer. According to him, the amount of “₹25 cash” referred to in the chat represented only Rs.25,000/- i.e. a contribution made by the buyer to Shri Abhijit Reddy, who is a partner of the assessee-firm, towards expenses relating to the formation of an association of flat owners. The Ld. AR submitted that due to legal difficulties in registration of the association under the relevant State laws, the proposed association could not ultimately be registered. Therefore, the assessee could not produce documentary evidence relating to registration of such association. He further submitted that the WhatsApp conversation was between two individuals and the assessee- firm was not a party thereto. Therefore, no adverse inference could be drawn against the assessee merely on the basis of such conversation. Inviting our attention to the confirmations placed at page nos. 16 to 19 of the paper book, the Ld. AR submitted that both Shri Abhijit Reddy and the buyer had confirmed that the amount referred to in the WhatsApp conversation was only ₹25,000/- paid towards expenses for formation of the maintenance association. The Ld. AR further relied upon the decision of the Hyderabad Bench of the Tribunal in the case of Nagalakshmi Devineni & Others Vs. DCIT in ITA Nos.1559, 1563 and 1573/Hyd/2025 dated 11.02.2026 and the decision of the Mumbai Bench of the Tribunal in the case of DCIT Vs. Niru Dhiren Shah, ITA No. 4294/Mum/ 2025, dated 27.10.2025 and submitted that WhatsApp chats by themselves cannot constitute the sole basis for making an addition in the absence of corroborative evidence and in the absence of a certificate under section 65B of the Indian Evidence Act, 1872. Accordingly, it was submitted that

the addition made by the Ld. AO was based merely on suspicion and conjectures and was therefore liable to be deleted.

stating that “today architect office is closed Anna. Will mail you on Monday”. According to him, this also establishes the connection between the parties in relation to the flat transaction. The Ld. DR further referred to the WhatsApp conversation dated 03.01.2019 wherein the buyer informed that the amount had been transferred and the reply recorded was “yes received it” followed by the query “can we receive cash”. The Ld. DR inviting our attention to the payment details made through cheques placed at page no. 17 of the paper book and demonstrated that on 03.01.2019 the buyer has made a payment of Rs.25 lakhs. According to him, the said conversation clearly indicates discussion regarding cash payment in connection with the property transaction. He further referred to the message dated 09.01.2019 wherein the buyer stated that “I will send 25 cash by tomorrow evening”. According to the Ld. DR, when the said message is read along with the surrounding circumstances and the entire chain of conversations, it clearly points towards payment of ₹25 lakhs as on-money. The Ld. DR also submitted that the assessee’s explanation regarding formation of a flat owners’ association is unsupported by any documentary evidence. No evidence regarding formation of such association has been produced before the Ld. AO, before the Ld. CIT(A), or even before the Tribunal. It was further submitted that the alleged payment was stated to have been made on 09.01.2019 whereas the flat itself was registered in favour of the buyer only on 02.03.2019. Therefore, according to normal human conduct, no purchaser would contribute towards formation of an association before the property itself stands registered in his name. The Ld. DR therefore submitted that the explanation of the assessee is improbable and deserves to be rejected. He further submitted

that the judicial precedents relied upon by the assessee are distinguishable on facts as, in the present case, the WhatsApp conversations are corroborated by surrounding circumstances and the admitted transaction of sale of the flat. Accordingly, he prayed for upholding the orders of the lower authorities.

architect-related discussions, transfer of amounts and subsequent discussions relating to cash payments. These conversations coincide with the period during which the buyer was in the process of purchasing the flat from the assessee. Therefore, we find merit in the contention of the Revenue that the WhatsApp conversations cannot be viewed independently of the property transaction. We also find that the admitted facts on record show that all the payments in round figures such as ₹75 lakhs, ₹50 lakhs, ₹50 lakhs and ₹25 lakhs were made by the buyer towards purchase of the flat. The period of such payments are very close with the period covered by the WhatsApp conversations. Particularly, the message dated 03.01.2019 stating “Amount Transferred today” followed by the response “yes received it” and thereafter the query regarding receipt of cash assumes significance. On the same date, i.e. 03.01.2019, the assessee has received the payment of Rs.25 lakhs from the buyer. Similarly, the message dated 09.01.2019 wherein the buyer stated that “I will send 25 cash by tomorrow evening” cannot be read in isolation. In our considered view, the entire chain of WhatsApp conversations, read in conjunction with the admitted transaction of sale of the flat, the chronology of payments and the surrounding circumstances, reasonably supports the inference drawn by the Ld. AO that the reference to “25 cash” pertains to ₹25 lakhs and not ₹25,000/-.

8.1 We also find no merit in the explanation furnished by the assessee that the amount represented a contribution towards formation of a flat owners’ association. Admittedly, no documentary evidence has been produced by the assessee to substantiate such contention. Neither before the lower authorities nor before us has the assessee been able to produce

any material demonstrating the existence, formation or proposed formation of such association. Apart from the confirmations furnished by Shri Abhijit Reddy and the buyer, no independent evidence has been brought on record. Furthermore, the alleged contribution was stated to have been made on 09.01.2019 whereas the flat itself came to be registered in favour of the buyer only on 02.03.2019. In our considered opinion, contribution by a purchaser towards formation of an association before registration of the property in his favour is not a convincing explanation and is contrary to the normal course of human conduct.

8.2 As regards the contention relating to absence of a certificate under section 65B of the Indian Evidence Act,1872, we find that the same does not assist the assessee in the facts of the present case. The assessee has not denied the existence of the WhatsApp conversations in their entirety. Rather, the parties to the conversations have accepted the contents thereof and the dispute raised is only regarding the interpretation of the chats. Therefore, in the peculiar facts of the present case, the WhatsApp conversations cannot be discarded merely on the ground that a certificate under section 65B of the Indian Evidence Act, 1872 has not been furnished.

8.3 We also do not find any merit in the contention of the assessee that the WhatsApp chats relied upon by the Ld. AO were exchanged only between two individuals and that the assessee-firm had no involvement in the said communication. Admittedly, one of the persons participating in the WhatsApp conversation is a partner of the assessee-firm, while the other person is the purchaser of the flat sold by the assessee-firm. A partnership firm, being a juristic arrangement, can act and communicate only through its partners. Therefore, it cannot be

accepted that the firm would independently communicate with its customers or purchasers without the involvement of its partners. In the ordinary course of business, all negotiations and communications relating to sale transactions are undertaken by the partners on behalf of the firm. Merely because the WhatsApp chats were exchanged between the partner of the assessee-firm and the purchaser, it cannot be inferred that the conversation was unrelated to the business affairs of the assessee-firm. Accordingly, the contention of the assessee that the chats have no evidentiary value against the assessee-firm for the sole reason that the firm was not directly a party to the conversation is misconceived and is, therefore, rejected.

8.4 We also find that the reliance placed by the assessee on the decisions cited before us is misplaced. The facts of the present case are materially distinguishable. In the present matter, the WhatsApp conversations are supported by surrounding circumstances, the admitted property transaction, the chronology of payments and other material brought on record. Further, the assessee has not denied the content of the WhatsApp chats in its entirety. Therefore, the ratio of the decisions relied upon by the assessee does not advance its case.

8.5 Considering the totality of facts and circumstances of the case, we are of the view that the assessee has failed to satisfactorily explain the contents of the WhatsApp conversations and has also failed to substantiate its alternative explanation with any credible evidence. On the other hand, the material available on record supports the conclusion reached by the Ld. AO that the assessee received ₹25,00,000/- as on- money in connection with the sale of the flat. Accordingly, we

find no infirmity in the order of the Ld. CIT(A) sustaining the addition of ₹25,00,000/-. The same is hereby upheld.

Order pronounced in the Open Court on 22nd July, 2026.

Sd/- Sd/-

(VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, dated 22nd July, 2026. Vinodan/sps Copy to: S.No Addresses 1 Pavani & SSS Constructions, Plot No.701, Pavani Prestige,6-3- 789, Ameerpet, Hyderabad 500016 2 Assistant Commissioner of Income Tax Central Circle 2(3) Aayakar Bhavan, Opp: LB Stadium, Basheerbagh, Hyderabad 500004 3 Pr. CIT – Central, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File

By Order TUMMALACHARLA Digitally signed by TUMMALACHARLA LAKSHMI NARAYANA DN: cn=TUMMALACHARLA LAKSHMI LAKSHMI NARAYANA, c=IN, o=INCOME TAX APPELLATE TRIBUNAL, ou=INCOME TAX NARAYANA APPELLATE TRIBUNAL, CHENNAI BENCH Date: 2026.07.22 15:37:22 +05'30'