ACIT CC 6(1), MUMBAI, BKC, MUMBAI vs. DINESH JAIPRAKASH BAHETI , NANDED

The brief facts are that assessee is an individual engaged in the business of trading and transportation of cement. A search and seizure action was conducted on some Rucha Group and during the course of search proceedings certain pages relating to alleged Whatsapp chat between Shri Shailendra Rathi and Shri Nilesh Toshniwal were found from the mobile phone of Shri Shailendra Rathi who was a consultant to Rucha Group. Simultaneously, search was also conducted in the case of the assessee on 23/09/2021. As per the ld. AO, from the mobile of Shri Shailendra Rathi one image was found which has been incorporated at page 3 of the assessment order wherein, it is mentioned about payments received by assessee during the F.Y. 2019-20. The assessee was confronted with the said image wherein, assessee stated that in the said image (which is some kind of account mentioning incoming and outgoing of funds), there is no mention of nature of transaction or purpose of alleged payment of such huge payment of cash and there is not even a name or any signature as to who has prepared the sheet. Further, he submitted that it is not clear whether the name mentioned is actually of the assessee. The assessee has also denied having received any cash from Shri Shailendra Rathi or any other person mentioned in that sheet and he also submitted that he does not know Shri Nilesh Toshniwal at all. However, assessee admitted that he knows only Shri Shailendra Rathi. However, the ld. AO observed that image recovered from I-phone Dinesh Jaiprakash Baheti of Shri Shailendra Rathi clearly mentions the date wise amounts paid to Shri Dinesh Baheti (assessee) and in his statement he has said that he knows the assessee and they are known to each other. Shri Shailendra Rathi has explained that “out” column of seized image money in cash has been sent to Shri Dinesh Baheti at various places like Mumbai, Pune, Jalna, Nanded, etc. He also explained that assessee is a businessman based in Nanded and he has also mentioned few names through whom the cash was sent to the assessee. The ld. AO further noted that the seized image showed an entry of Rs. 24,00,000/- paid to assessee by someone named Shri Kiran Rathod on 10/10/2019 and there is Whatsapp chat between Shri Shailendra Rathi and Shri Kiran Rathod found from I-phone of Shri Shailendra Rathi and Shri Kiran Rathod is also businessmen from Nanded. Thus, according to ld. AO, this was corroborative evidence in the form of Whatsapp chat between Shri Shailendra Rathi and Shri Kiran Rathod. It shows that there was a cash payment made to the assessee. The seized document in the form of Whatsapp chat showed that assessee has received an amount of Rs.12,66,12,150/- which has been added by the ld. AO u/s.69A in various years. The ld. AO has also reproduced certain extracts of statement of Shri Shailendra Rathi.

The ld. AO rejected the entire explanation and the submissions of the assessee and same is not acceptable for the following reasons after observing and holding as under:- (1) The image recovered from the i-phone of Shri Shailendra Rathi clearly mentions the date wise amounts paid to Shri Dinesh Dinesh Jaiprakash Baheti Behati. Further Shri Shailendra Rathi and Shri Dinesh Behati are known to each other and this fact has been admitted by the assessee in his statement recorded during the course of search Further Shri Shailendra Rathi also explained that in the out column of seized image, the money in cash had been sent to Shri Dinesh Baheti at various locations like Mumbai, Pune, Jalna, Nanded etc. He also explained that Shri Dinesh Baheti is a businessman based in Nanded. He further explained that Soniji, Rathod, Mama, Somani, Shannu, Manish kala, Desai, Rakesh are the persons through whom cash was sent to Shri Dinesh Baheti. Thus he had in detailed identified the transactions mentioned in the seized image and had identified the assessee as Shri Dinesh Baheti. (2) The argument of the assessee that during the course of search his statement was recorded and he in his statement stated that the he has not prepared the said seized document and he had not received any amount as per seized image, is not acceptable as the seized document clearly show that the assessee has received the amounts mentioned against his name on various dates. The assessee's denial of receipt of cash is only to avoid the tax liability. (3) The seized image show an entry of Rs. 24 lakhs paid to Shri Dinesh Baheti by Rathod on 10 10.2019. A corroborative evidence regarding payments made to Shri Dinesh Baheti by Rathod in the form of whatsapp chat between Kiran Rathod and Shri Rathi was found from the iphone of Shri Shailendra R Rathi during the course of search proceedings at the residence of Shri Shailendra Rathi. The chat show that a sum of Rs 24 lakh was to be paid on 10 10.2024 for which a serial no of Rs 1 of Rs 10 note was given Shri Shailendra Rameshchandra Rathirecorded on oath u/s 132(4) of the Income Tax Act, 1961. Shri Rathi explained the said image in the reply of Q. No 42 and stated that Shri Kiran Rathod is a businessman based in Nanded During the period of October 2019, money was sent to Nanded Shri Shailendra Rathi also explained that the payments with reference to Rathod on 10.10.2019 is Dinesh Jaiprakash Baheti related to payment to Shri Dinesh Baheti and was done through Shri Kiran Rathod. This corroborative evidence validates the authenticity of the transactions mentioned in the said seized image from the I-Phone of Shri Shailendra Rathi which shows cash payments made to Shri Dinesh Baheti. Therefore the argument of the assessee that no evidence has been brought on record by your goodself to show that the alleged transactions mentioned in this loose sheet were in fact carried out is not acceptable as the corroborative evidence show that a sum of Rs. 24 lakhs was received by the assessee from Rathod on 10.10.2019. The assessee's argument that the total amount received by Shri Dinesh Baheti as per the seized document is not Rs. 19.10 Crore is correct to the effect that as per the seized document a sum of Rs. 14,27,87,850/- does not pertain to Shri Dinesh Baheti. The assessee explanation to that extent is correct since as per the seized document, the total amount received by Shri Dinesh Baheti is of Rs. 12,66,12,150/-. Since the seized document show that the assessee has received amount of Rs. 12,66,12,150/- and the assessee has not recorded the sum received in his books of account and has not explained the source of the same, hence the same is added u/s 69A of the I.T. Act and penalty proceedings u/s 271AAC(1) are separately initiated.”

The ld. CIT (A) after considering the relevant finding given by the ld. AO, documentary evidences and explanation and the submissions given by the assessee has deleted the addition. However, in so far as plea of the assessee that assessee was not allowed cross examination of Shri Shailendra Rathi, same has been rejected by him. The reasons for deletion of addition by the ld. CIT (A) are that ld. AO was relying upon statement of Shri Shailendra Rathi which was later on has been retracted by him and the seized material in the form of Whatsapp chat does not specify nature or purpose of the alleged transaction and neither Dinesh Jaiprakash Baheti does it have the signature or any other identification details of the assessee, nor any corroborative material was found from the possession of the third party against the assessee. He held that, there has to be link or relevance which needs to be established with the searched materials in the case of assessee by placing on record corroborative evidence to that effect. Unless and until this criteria is satisfied the material itself and the statement given in connection with such material has no bearing on the case of the assessee.

Another important finding which has been given that the assessee himself was covered under search and there was no corroborating material or evidence which was found during the course of search. He further held that reliance placed by the ld.AO on the Whatsapp chat between Shri Shailendra Rathi and Shri Kiran Rathod is also misplaced as the Whatsapp chat does not make any reference to the assessee and there is no statement of Shri Kiran Rathod corroborating the Whatsapp message and in any case both are third parties, thus, addition cannot be made on the basis of Whatsapp chat conversation between the third parties without adducing corroborative evidence in support of such allegation. After referring and relying upon various judgments, he has deleted the addition after holding as under:- 6.11. Thus, it is seen that the Hon'ble Courts have clearly held that documents/material found from the premises of a third party or a statement of a 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 assessce. In the present case it is seen that the Dinesh Jaiprakash Baheti addition of Rs 12.66, 12-150/- has been made by the AO relying on the statement of a third party i e Sh. Shailendra Rathi, which has in any case been retracted. Also, the addition has been made on the basis of material found being certain image in the WhatsApp conversation during the course of the search on a third party le Sh Shailendra Rathi The assessee has denied having any knowledge of the contents of the impugned material. It is seen that while such material could have been a reason for starting an investigation, the AO has simply relied on such material found from the premises of a third party and relied on third party statement to make the addition without corroborating it with any kind of independent evidence linking such material with the assessee. As per the plethora of Court judgments discussed above, such an act is not permitted under the law. The Hon'ble Supreme Court in the case of Umacharan Shaw and Bros v CIT (1959) 37 ITR 271 held that suspicion, however strong, cannot take the place of evidence. Similarly, raising presumption itself does not amount to proof. Presumption, however strong, cannot take the place of evidence as held in the case of Pooja Bhatt 66 TTJ (Mum) 817 and in the case of D.M Kamani HUF 65 TTJ (Pat) 504. While the assessee Sh. Dinesh Baheti was also covered under search, it is not the case that any corroborating evidence was found in his case linking him to the material found from Sh. Shailendra Rathi. Thus, in the absence of any independent evidence linking the assessee with the material found from a third party or a third party statement, the addition made by the AO on the basis of such third party statement or material found from the third party cannot be sustained. The addition of Rs. 12,66,12,150/- made by the AO in the case of the assessee is accordingly deleted and the ground of appeal no. 3 is allowed.”

Before us ld. DR submitted that once there was details of payment recovered from the mobile phone of Shri Shalendra Rathi wherein there is an image of payment of cash to the assessee and in the statement of Shri Shailendra Rathi who has Dinesh Jaiprakash Baheti admitted to pay in cash to various persons that itself constitutes an incriminating material against the assessee. Further, there is also Whatsapp chat between Shri Shailendra Rathi and Shri Rathod wherein there was a conversation that he has paid Rs.24,00,000/- to the assessee. Thus, it cannot be held that there was no incriminating material against the assessee.

We have heard both the parties at length and perused the relevant finding given in the impugned orders as well as various materials referred to before us at the time of hearing. As noted above there was a search and seizure action in some Rucha group and during the course of that search one Whatsapp chat was found from the I-phone of one Shri Shailendra Rathi who was a consultant to the Rucha group. The Whatsapp chat is between Shri Shailendra Rathi and one Shri Nilesh Toshniwal. The said Whatsapp chat contains one image wherein there was certain date wise payments have been written under the head “out” in the name of the assessee. A statement of Shri Shailendra Rathi was recorded wherein he stated that Rs.10,50,00,000/- were received through various resources which has been stated in column “in” and Rs.26.74 crores were transferred to Shri Dinesh Baheti on instruction of Shri Nilesh Toshniwal and Shri Jayant Shah in column “out”. The statement of Shri Sailendra Rathi was confronted to the assessee which assessee categorically denied and submitted that he has not received any cash from Shri Shailendra Rathi and he does not know who Shri Nilesh Toshniwal is. One of the main contention which has been raised before us is that, if any Whatsapp conversation has been Dinesh Jaiprakash Baheti found from the mobile phone of a third party which is a chat between another third party, then such conversation cannot lead to addition in the hands of the assessee and moreover if the ld. AO is relying upon the statement of Shri Shailendra Rathi, then assessee was required to be given cross examination or else the addition cannot be made on the basis of statement of third party without cross examination. It has been submitted that it was specifically requested before the ld. AO for cross examination of Shri Shailendra Rathi which was not given.

From the perusal of the statement of the assessee during the course of search recorded u/s. 132(4), assessee in reply to the question wherein he was confronted with the statement of Shri Shailendra Rathi, has categorically stated that he cannot comment on the statement of Shri Shailendra Rathi or about the chats with Shri Nilesh Toshniwal and he categorically stated that he has not received any cash from Shri Rathi and he do not know anyone named Shri Nilesh Toshniwal. He also submitted that he has never seen this image of the Whatsapp nor he has any such chat with him and therefore, he cannot offer any comment. In all the statements he has denied receiving any payment from Shri Shailendra Rathi directly or indirectly through anyone and he is not aware of any such loose sheet nor does he know about any person. Assessee also denied knowing any Shri Jayant Shah and the allegation by Shri Shailendra Rathi is not even specific as to why any such huge amount would be paid to the assessee and for what purpose as he has no business deal with him directly or indirectly. From the perusal of Dinesh Jaiprakash Baheti thee statements of the assessee, we find that all along assessee has been denying receiving any cash payment or he is aware of any other person except that he was known to Shri Shailendra Rathi. Nowhere is it coming on record or any inquiry has been done post search as to what was the purpose of making huge payment from Shri Shailendra Rathi to assessee and why such amount has been paid to the assessee. It is also not clear whether it was a cash amount and where the funds have utilised. Further, Shri Shailendra Rathi has not even explained as how the payments have been made even before the amounts are received. What was the source of funds received by him and who has made the payment and the payment was meant for whom and who are the beneficiaries. At least something should have been brought on record to corroborate the unauthentic image mentioning of incoming and outgoing of funds in the personal chat of Whatsapp and that to be recovered from third person. There is no explanation relating to the receipt of payment from various sources of Rs.10.50 Crores nor has it been explained how the payment of Rs.26.74 Crores has been made against such receipts of Rs.10.50 Crores.

Another crucial point is that, Shri Shailendra Rathi has admitted in his statement that neither he is source or author of the alleged documents nor he has specified as to who was the source of giving the money. Another very important fact is that even when assessee was searched, there is no seized document or any evidence which has been found directly or indirectly linking the assessee with any such kind of payment. Again, ld. Dinesh Jaiprakash Baheti AO has made reference to Whatsapp chat between Shri Shailendra Rathi and Shri Kiran Rathod, who also not known to the assessee nor there is any evidence that Shri Kiran Rathod knows the assessee and what was the purpose of making the cash payment to the assessee. Thus, under these circumstances, neither the Whatsapp chat found from the mobile phone of third party having conversation with another third party which has no link to the assessee can be made basis for making such huge additions in the hands of the assessee. If ld. AO is relying upon the statement of Shri Shailendra Rathi then it was incumbent upon the ld. AO to allow cross examination of Shri. Shailendra Rathi to the assessee and perhaps in that situation it could have been brought on record what was the purpose for making such payment or mentioning the name of the assessee. As noted above, nowhere Shri Shailendra Rathi has explained the source of funds and purpose for the funds were given. Although catena of judgments have been cited before us that under these facts and circumstances, no addition can be made, however, without even referring to those judgments from the facts itself it is very clear that there is no tangible material having live link nexus to establish that assessee has received any kind of cash.

A conversation received from Whatsapp chat has to be corroborated with other materials and even it has not been brought on record as to what is the authenticity of Whatsapp chat and whether the procedure prescribed u/s. 65 A & 65B of the Indian Evidence Act. Mobile Phone is an electronic record and condition provided for admissibility of any such digital data Dinesh Jaiprakash Baheti or record has been provided in section 65B of the Indian Evidence Act. The Hon’ble Supreme Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, 2020 SCC OnLine SC 571 has clarified the position as follows:

In addition to the aforesaid, the Supreme Court issued general directions to cellular companies and internet service providers to maintain call detail records and other relevant records, for the concerned period, in a segregated and secure Dinesh Jaiprakash Baheti manner, if such record is seized during the investigation in the relevant period. Concerned parties can then summon such records at the stage of defense evidence or in the event such data is required to cross-examine a witness. The Supreme Court clarified that these directions must be followed by the courts that deal with electronic evidence, to ensure the preservation of such evidence and the production of a certificate at the appropriate stage. The Court found this necessary given that telephone and internet service providers are generally required to preserve and maintain electronic call and internet log records for a limited duration of one year. If the police or other individuals fail to secure those records, or secure the records but fail to secure the certificate, within that period, the production of a certificate issued after commencement of trial would in all probability render the data unverifiable. An accused seeking to challenge the genuineness of a certificate under Section 65B (4) would be prejudiced as the electronic record may be missing.

Ergo, if the Income Tax Department is using the data from a mobile phone to draw adverse inference and making addition, then the authenticity of the data has to be proved and procedure prescribed under section 65 B of the Indian Evidence Act has to be followed as laid down by the Hon’ble Supreme Court. Otherwise it has no evidentiary value per se. Revenue has to authenticate the data retrieved or else such data needs to be corroborated with other material. Here in this case nothing has been brought on record that the procedure has been followed by the revenue and hence Whatsapp chat found from the third party Dinesh Jaiprakash Baheti cannot be evidence to rope in the assessee for making any addition unless it is corroborated with other evidence or material.

Another very important fact is that if nothing has been found from the premises of the assessee during the course of search and if ld. AO was relying upon documents seized from the person who was subject to search which pertains /pertain to or information contained therein belongs to the other person, i.e., the assessee, then under the provisions of the Act, the only course open for the ld. AO was to initiate proceedings u/s.153C. Once these documents seized is handed over to the ld. AO of the assessee by the Assessing Officer of such person and only if ld. AO is satisfied that such seized documents have a bearing on the determination of the total income of the assessee for six assessment years or for the relevant assessment year, then AO has to acquire jurisdiction u/s 153C and not u/s 147. Here in this case ld. AO is relying upon seized documents in the form of Whatsapp chat and the statement of third person which was found during the course of search in the case of third person then, ld. AO should have resorted to proceed against the assessee u/s.153C. In any case we have already held above that the conversation found in the Whatsapp chat of a mobile phone of a third party which is with another third party, no addition can be made unless some corroborative evidence or material is found from the possession of the assessee or during the course of some enquiry any other material or information is found which can corroborate or link with the Whatsapp chat. Accordingly, we Dinesh Jaiprakash Baheti do not find any infirmity in the finding of the ld. CIT (A) in deleting the addition.

Similarly, in the appeals for the A.Y.2021-22 and 2022-23 exactly similar finding has been given by the ld.AO and the ld.CIT(A) therefore, our finding given above will apply mutatis mutandis for these years also. 17. In the result, all the appeals filed by the Revenue are dismissed.