PRASHANT KUMAR MOHANRAO SURKANTI,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “J” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 2418 and 2480/MUM/2026 Assessment Year: 2020-21 and 2022-23

Prashant Kumar Mohanrao Asst. Commissioner of Income Surkanti, A/503, Kandivali Tax, Circle 42 (1)(1), Kautilya Gyan Darshan CHS Ltd, Vs. Bhavan, Bandra Kurla Complex, Ganesh Nagar Mumbai – Mumbai – 400051, Maharashtra. 400067, Maharashtra. PAN NO. DPCPS 8146 P Appellant Respondent

Assessee by : Shri Purav Gindra Revenue by : Ms. Jayshree Thakur (SR. DR)

: 29/06/2026 Date of Hearing : 30/06/2026 Date of pronouncement ORDER PER OM PRAKASH KANT, AM

These two appeals have been preferred by the assessee against two separate orders, both dated 30.12.2025, passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the Ld. CIT(A)"], for the Assessment Years 2020-21 and 2022-23, respectively. Since a common issue arises for consideration in both the appeals and the

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material facts are substantially identical, they were heard together. Accordingly, for the sake of convenience, consistency and to avoid repetition of facts, both the appeals are disposed of by this consolidated order.

“Ground No. 1: Addition u/s 69A - Alleged Unexplained Money of Rs. 4,93,827/- 1. That the Learned Assessing Officer erred in law and on facts in making, and the Learned Commissioner of Income Tax (Appeals) erred in confirming, the addition of Rs. 4,93,827/- under section 69A of the Income Tax Act, 1961, on account of alleged cash sales to Shri Aman Batra, Proprietor of Mani Ram Balwantrai & Sons. 2. That the authorities below failed to appreciate that the mandatory conditions for invoking section 69A were not satisfied, inasmuch as no money, bullion, jewellery or other valuable article was found to be owned, possessed or controlled by the Appellant, nor was any unaccounted cash or asset discovered during the course of proceedings. 3. That the impugned addition has been made solely on the basis of unverified WhatsApp chats and alleged statements obtained in the case of a third party, without any independent enquiry, corroborative evidence, or material establishing a live nexus between the Appellant and receipt of any unaccounted money. 4. That the Learned AO and the Learned CIT(A) erred in disregarding the documentary evidences furnished by the Appellant, including books of account, sales invoices, ledger confirmations and bank statements, which conclusively demonstrate that all transactions with the said party were duly accounted for and routed through proper banking channels. 5. That the addition is based on mere assumptions, presumptions and conjectures, and is therefore bad in law, arbitrary and liable to be deleted. Ground No. 2: Reliance on Third-Party Material and Violation of Principles of Natural Justice 6. That the Learned AO erred in law and on facts in making the impugned addition without furnishing to the Appellant the complete seized material relied

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upon, including copies of WhatsApp chats and the statement recorded under section 132(4) of Shri Aman Batra. 7. That the addition has been sustained without granting the Appellant an opportunity to cross-examine the said third party, whose statement has been heavily relied upon, thereby rendering the assessment order violative of the principles of natural justice. 8. That the assessment having been completed in breach of the doctrine of audi alteram partem, the same is bad in law and liable to be quashed. Ground No. 3: Erroneous Application of Section 69A 9. That the Learned AO and the Learned CIT(A) erred in invoking section 69A in respect of alleged sales transactions, which, even otherwise, could only have been examined under the head "Profits and Gains of Business or Profession" and not as "unexplained money". 10. Without prejudice, and assuming without admitting that any discrepancy existed, the authorities below erred in taxing the entire gross amount, whereas at best only the profit element, if any, embedded in such transactions could have been brought to tax. Ground No. 4: Invalid Reassessment Proceedings u/s 147 11. That the reassessment proceedings initiated under section 147 are bad in law and void ab initio, as the reopening is based solely on borrowed satisfaction derived from information received from ACIT, Central Circle 3(3), Ludhiana, without independent application of mind by the Assessing Officer. 12. That no live nexus exists between the alleged third-party search material and the formation of belief of escapement of income in the hands of the Appellant, rendering the assumption of jurisdiction under section 147 invalid. Ground No. 5: Mechanical Invocation of Section 115BBE 13. That the Learned AO erred in law in taxing the impugned addition under section 115BBE of the Act, without first establishing that the income falls within the scope and mischief of section 69A. 14. That the application of section 115BBE is purely consequential and unsustainable, and must necessarily fail once the addition under section 69A is deleted or modified.” 3. Briefly stated, the facts giving rise to the present appeal are that the assessee, proprietor of M/s Krishna Shweta, filed his return of

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income for the assessment year under consideration on 25.01.2021, Rs.10,60,960/-. declaring a total income of Subsequently, information was received by the Assessing Officer from the Assistant Commissioner of Income-tax, Central Circle- 3(3), Ludhiana, pursuant to a search conducted under section 132 of the Income-tax Act, 1961, on 24.11.2022 in the case of Mani Ram Balwantrai Group, Ludhiana. As per the information so received, during the course of the search proceedings various incriminating documents and substantial digital evidence, including data extracted from mobile phones, desktop computers, servers and other electronic devices seized from the business as well as residential premises of the searched persons, were analysed. Such analysis allegedly revealed several WhatsApp chats, digital files, photographs, server logs and other electronic records indicating unaccounted business transactions. It was specifically reported that Shri Aman Batra, Proprietor of M/s Mani Ram Balwantrai & Sons, had allegedly recorded cash purchases aggregating to Rs.4,93,827/- from the proprietary concern of the present assessee during the relevant previous year. On the basis of the said information, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment.

3.1 Consequently, proceedings under section 147 of the Act were initiated by issuance of notice under section 148 dated 31.03.2024. During the reassessment proceedings, the assessee

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categorically denied having entered into any unaccounted cash transactions with the said concern. It was submitted that all sales effected to M/s Mani Ram Balwantrai & Sons stood duly recorded in the regular books of account, corresponding tax invoices had been issued and the sale consideration had been received through normal banking channels. The assessee also furnished copies of ledger accounts, invoices and bank statements in support of the said contention. The Assessing Officer, however, was not persuaded by the explanation furnished. According to him, the WhatsApp chats recovered during the course of search unmistakably evidenced cash transactions between the assessee and Shri Aman Batra. The Assessing Officer further observed that the mobile number 9930650490 reflected in the WhatsApp conversations belonged to the assessee and that Shri Aman Batra, in his statement recorded under section 132(4) of the Act, had explained the modus operandi adopted in carrying out such cash transactions. The Assessing Officer concluded that the impugned cash sales were never reflected in the regular books of account maintained by the assessee. Proceeding on the aforesaid premise, the Assessing Officer treated the sum of Rs.4,93,827/- as unexplained money and brought the same to tax under section 69A of the Act.

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assessment order and the submissions of the assessee, affirmed the action of the Assessing Officer. The appellate authority held that the Assessing Officer had duly considered the explanation offered by the assessee and that the material gathered during the course of search, read with the statement recorded under section 132(4) of the Act and the WhatsApp chats recovered from the seized electronic devices, sufficiently established that the impugned cash transactions had taken place outside the regular books of account. The learned CIT(A), therefore, upheld the addition made by the Assessing Officer. The relevant finding f ld CIT(A) is reproduced as under:-

5.3 Aggrieved with the above said addition, the appellant is in appeal raising grounds as mentioned at para 3. In ground no 1, the appellant has contended that Ld. Assessing Officer (AO) has erred in in making Addition without appreciating the fact that Proper detailed explanation has been provided against random chat figure mentioned by the Dept in show cause notice and appellant has also submitted all the supporting documents against the explanation which includes Copy of Invoices, Ledger confirmation, Bank Statement. Appellant has properly explained in his submission against show cause notice that no such cash sale has been done by him to the party referred by the Dept. I have perused the assessment order and the submission of the appellant and find that the AO has discussed elaborately the explanation and submission made by the appellant on the issue. The AO has noted that the sales made in cash are not entered in books and during the course of search, the statement of Shri Aman Batra has been recorded u/s.132(4) of the Act and he has categorically explained the modus operandi and the same is available in his whatsapp chats . The assessee in his reply has denied all the cash transactions but the various evidences clearly show that all the transactions which are entered into and are evident in the whatsapp chat of mobile No.9930650490 belongs to Mumbai Krishna Prashant who is assessee. The AO has noted that Even though the assessee has stated that all the sales are made to Shri Aman Batra are properly accounted in the books of accounts and are settled through proper banking channels, but it is not acceptable. It is very obvious that all the cash sales made therein were never entered in the books of account which has been categorically explained by Shri Aman Batra in his statement recorded u/s.132(4) of the Act. Thus, under the

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circumstances, the addition made by the AO is correct. Contention of the appellant is not tenable and this ground of appeal is dismissed. 5. Before us, the learned Authorised Representative for the assessee reiterated the submissions advanced before the lower authorities. He submitted that the entire addition has been founded solely upon certain WhatsApp chats allegedly recovered during the course of search in the case of a third party, namely, Shri Aman Batra, without there being any independent material establishing that the assessee had received any unaccounted cash. It was contended that every sale effected by the assessee to M/s Mani Ram Balwantrai & Sons stood duly recorded in the regular books of account, corresponding tax invoices had been issued and the sale consideration had been received through normal banking channels. 5.1 The learned Authorised Representative further invited our attention to the ledger account of M/s Mani Ram Balwantrai & Sons maintained in the books of the assessee, copies whereof have been placed in the paper book. It was submitted that, on a comparison of the entries appearing in the WhatsApp chats with the entries recorded in the books of account, it would be evident that several transactions correspond to duly accounted sales. According to him, the authorities below failed to undertake any meaningful reconciliation of the entries before drawing an adverse inference against the assessee. The learned Authorised Representative further submitted that the assessee was neither supplied the complete electronic record relied

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upon by the Assessing Officer nor afforded an effective opportunity to reconcile each of the transactions with the regular books of account. He, therefore, submitted that in the interest of justice the matter deserves to be restored to the file of the Assessing Officer for carrying out a proper reconciliation after granting adequate opportunity of hearing to the assessee.

5.2 Per contra, the learned Departmental Representative supported the orders of the authorities below. It was submitted that the addition has been made on the basis of credible information received from the Investigation Wing pursuant to a search under section 132 of the Act. According to the learned Departmental Representative, the WhatsApp chats, coupled with the statement recorded under section 132(4) of Shri Aman Batra, clearly established that cash transactions had been undertaken outside the regular books of account. It was, therefore, contended that the Assessing Officer as well as the learned CIT(A) had rightly sustained the addition. 6. We have thoughtfully considered the rival submissions and carefully perused the orders of the authorities below as well as the material placed before us. The short controversy requiring adjudication is whether the addition of Rs.4,93,827/- made under section 69A of the Act, on the basis of the WhatsApp chats recovered during the search in the case of a third party, can be sustained on the facts obtaining in the present case.

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6.1 It is not in dispute that the addition has primarily been founded upon the information received from the Central Circle, Ludhiana, based upon the digital evidence seized during the search proceedings in the case of M/s Mani Ram Balwantrai Group. It is equally undisputed that the assessee has consistently maintained that every transaction with the said concern stands duly reflected in its regular books of account and that the corresponding sale consideration has been received through banking channels. The Ld. Counsel for the assessee drawn our attention to the ledger account of the Mani Ram Balwant Rai and sons appearing in the books of accounts of the assessee, which is reproduced as under for the ready reference:-

Date Particulars Vch Type Vch No. Debit Credit Balance 1-Apr-19 To Opening 1,88,869.40 2,08,975.40 Balance Dr 4-Apr-19 To Sales - Sales 20,106.00 2,08,975.40 Inter State - Dr IGST 10-Apr-19 By ICICI Bank Receipt 25 1,00,000.00 1,08,975.40 Dr 26-Apr-19 To Sales - Sales 79,153.00 1,88,128.40 Inter State - Dr IGST 25-Jun-19 By ICICI Bank Receipt 132 1,50,000.00 38,128.40 Dr 1-Aug-19 To Sales - Sales 68,392.00 1,06,520.40 Inter State - Dr IGST 3-Aug-19 To Sales - Sales 52,222.00 1,58,742.40 Inter State - Dr IGST

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Date Particulars Vch Type Vch No. Debit Credit Balance 7-Aug-19 To Sales - Sales 61,543.00 2,20,285.40 Inter State - Dr IGST 8-Aug-19 To Sales - Sales 67,394.00 2,87,679.40 Inter State - Dr IGST 9-Aug-19 To Sales - Sales 69,015.00 3,56,694.40 Inter State - Dr IGST By ICICI Bank Receipt 185 38,122.00 3,18,572.40 Dr 14-Aug-19 By ICICI Bank Receipt 192 2,51,171.00 67,401.40 Dr 30-Aug-19 To Sales - Sales 2,68,493.80 3,35,895.20 Inter State - Dr IGST 14-Sep-19 To Sales - Sales 20,564.00 3,56,459.20 Inter State - Dr IGST 24-Sep-19 To Sales - Sales 23,113.00 3,79,572.20 Inter State - Dr IGST 27-Sep-19 To Sales - Sales 25,709.00 4,05,281.20 Inter State - Dr IGST 1-Oct-19 To Sales - Sales 18,128.00 4,23,409.20 Inter State - Dr IGST 1-Nov-19 To Sales - Sales 12,644.00 4,36,053.20 Inter State - Dr IGST 8-Nov-19 By ICICI Bank Receipt 351 4,05,274.00 30,779.20 Dr 13-Nov-19 To Sales - Sales 2,80,191.00 3,10,970.20 Inter State - Dr IGST 9-Dec-19 To Sales - Sales 40,409.00 3,51,379.20 Inter State - Dr

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Date Particulars Vch Type Vch No. Debit Credit Balance IGST 11-Dec-19 To Sales - Sales 21,836.00 3,73,215.20 Inter State - Dr IGST 16-Dec-19 To Sales - Sales 34,186.80 4,07,402.00 Inter State - Dr IGST 24-Dec-19 By ICICI Bank Receipt 424 2,80,191.00 1,27,211.00 Dr 2-Jan-20 To Sales - Sales 9,991.00 1,37,202.00 Inter State - Dr IGST 13-Jan-20 To Sales - Sales 13,132.50 1,50,334.50 Inter State - Dr IGST 24-Jan-20 To Sales - Sales 18,834.58 1,69,169.08 Inter State - Dr IGST 9-Mar-20 To Sales - Sales 3,914.00 1,73,083.08 Inter State - Dr IGST By Closing 13,97,841.08 12,24,758.00 1,73,083.08 Balance 13,97,841.08 13,97,841.08

6.2 On Prima Facie verification of the material placed before us, particularly the ledger account produced by the assessee, we find that prima facie several entries reflected in the WhatsApp chats appear to correspond with the transactions already recorded in the books of account. This aspect assumes significance because neither the assessment order nor the appellate order records any detailed

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exercise of reconciliation between the alleged WhatsApp entries and the regular books maintained by the assessee.

6.3 In our considered opinion, where an assessee specifically asserts that the transactions relied upon by the Revenue already stand duly accounted for in the regular books of account and produces contemporaneous documentary evidence in support thereof, it becomes incumbent upon the Assessing Officer to objectively examine such evidence and undertake a proper reconciliation before arriving at a conclusion that the transactions represent unaccounted cash dealings. An addition of this nature cannot rest merely upon isolated entries contained in electronic records without examining whether such entries are capable of being correlated with the recorded business transactions.

6.4 The principles governing assessment proceedings require that all relevant evidence produced by the assessee must receive due and objective consideration. Equally, where the Revenue relies upon material gathered from a third party, the assessee must be afforded an effective opportunity to explain the same by producing appropriate documentary evidence. The assessment process must necessarily conform to the requirements of fairness and reasonableness, which constitute the very foundation of quasi- judicial proceedings under the Act.

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6.5 We also notice that the learned Authorised Representative fairly submitted that the assessee is in a position to furnish a complete reconciliation of every transaction appearing in the WhatsApp chats with the corresponding entries recorded in the regular books of account. In the interest of substantial justice, such reconciliation deserves to be examined by the Assessing Officer.

6.6 Having regard to the entirety of the facts and circumstances of the case, we are of the considered opinion that the issue requires a fresh examination at the level of the Assessing Officer. We, therefore, deem it appropriate to set aside the impugned order of the learned CIT(A) and restore the matter to the file of the Assessing Officer with a direction to examine the reconciliation statement and all supporting documentary evidence that may be furnished by the assessee.

6.7 The assessee shall be at liberty to produce the complete books of account, ledger extracts, invoices, bank statements, reconciliation statement and any other documentary evidence in support of its contention that the transactions reflected in the WhatsApp chats are duly recorded in the regular books of account. The Assessing Officer shall verify the same objectively and independently and thereafter adjudicate the issue afresh in accordance with law by passing a reasoned and speaking order. It is clarified that we have not expressed any opinion on the merits of the addition, and all questions of fact and law are kept open to be

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examined by the Assessing Officer uninfluenced by any observations contained in the assessment order or the appellate order. The assessee shall extend full cooperation during the remand proceedings and shall not seek unnecessary adjournments. In view of the aforesaid directions, the grounds raised by the assessee are treated as allowed for statistical purposes.

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Order pronounced in the open Court on 30/06/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 30/06/2026 M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai