ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(1), NAGPUR vs. VISHWAS SUDHAKAR CHAKNALWAR, NAGPUR

(7) The appellant craves leave to add, alter, modify and withdraw any grounds before or during the course of appellate proceedings.”

Vishwas Sudhakar Chaknalwar 4. Brief facts of the case are, assessee is an individual and proprietor of Auto Plus, Vishwas Logistics Nagpur,Venkatramana Realtors, and Vishwas Logistics (Chandrapur /Wardha/Ya vatmal & Bhandara) and partners with Vishwas Agencies, AV Realities, and Vishwas Tyres. A search and seizure action under section 132 of the Income Tax Act, 1961 (in short “Act”) took place on 25.06.2019 at Shri Vishwas Sudhakar Chaknalwar residential premise. Simultaneously the search and seizure action also took place at Atul Yamsanwar and others. At the time of search loose paper/ diaries were found. Parallelly, a survey under section 133A of the Act was conducted at the business premises of A-one Lifestyle, M/s Vishwas Tyres, and M/s.Vishwas Agencies. At the time of the survey, at the place of A-one Lifestyle, a certain loose documents were found. Assessee filed his original return of income under section 139(4) of the Act for the year under consideration on 28.03.2021 declaring total income at Rs.1,91,15,600/-. Subsequently, notice under section 143(2) of the Act was issued on 20.05.2021 and Notice under section 142(1) of the Act was issued on 29.01.2020 & 05.04.2021 along with a detailed questionnaire. In response, Assessee furnished his submissions and the details as called for. Not convinced with the submissions of the Assessee, Assessing Officer framed the assessment under section 143(3) of the Act dated 28.05.2021 by making an addition of Rs.10,00,000/- as undisclosed income under section 69A for A.Y. 2020-21 by relying on Document No. B-9 which was found and seized which is a hard disk wherein the back-up data of mobiles phones of the assessee is retrieved.

Vishwas Sudhakar Chaknalwar 5. Being aggrieved by the order of the Assessing Officer, Assessee preferred an appeal before the Ld.CIT(A) and filed his submissions. After considering the submissions of the Assessee, Ld.CIT(A) partly allowed the appeal of the Assessee and sustained the addition of undisclosed income of Rs.10,00,000/- under section 69A of the Act.

On perusal of grounds of appeal, it is noticed that the sole ground of dispute 7. for adjudication is whether the addition of Rs.10,00,000/- is sustainable based on WhatsApp Conversation. We find that similar matter was considered by the ITAT Mumbai Bench in the case of ACIT v. Prashant Prakash Nilawar in dated 12.02.2025 and the Tribunal has passed a detailed order, relevant findings of the order are reproduced below: - “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 and the observations and findings of ld. CIT(A) as well as our discussion in respect of compliance of Section 65B of Indian Evidence Act which also applies on the issue in hand, we find no infirmity in the findings arrived at by the ld. CIT(A) in deleting the addition Vishwas Sudhakar Chaknalwar made by ld. Assessing Officer. Accordingly, ground no.3 raised by the Revenue is dismissed.

9. Before parting, in addition to our discussion and conclusions arrived in the context of compliance requirements of section 65B of Indian Evidence Act, it is important to note that the impugned additions in the present appeals are based on electronic images/sheets found and seized from the mobile of the concerned persons/third parties in the course of their respective searches. In the present era of technology and digital communication, additions cannot be simply based on extracts of WhatsApp conversation between third parties without placing on record corroborative evidence to support the allegations. We make a useful reference to certain provisions contained in the Information Technology Act, 2000, wherein the term “electronic record” is defined in Section 2(t). According to this section, it means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche. In this Act, section 11 deals with attribution of electronic records for the purpose of attributing the same to the originator of such electronic records. Section 11 is reproduced as under: 11. Attribution of electronic records.— An electronic record shall be attributed to the originator— (a) if it was sent by the originator himself; (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or (c) by an information system programmed by or on behalf of the originator to operate automatically. 9.1. In the present case, before us, additions have been made on the basis of electronic images / sheets found and seized from the mobiles of concerned persons/third parties which are electronic records. Section 132(4A) r.w.s. 292C contains presumption as to evidence which is admissible against the person in whose possession or control such evidence is found and such a presumption is a rebuttable presumption. Section 11 of the Information Technology Act also attributes the electronic record to its originator when 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:

Vishwas Sudhakar Chaknalwar "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, ld. A.O neither provided any evidence in support of the WhatsApp chats relied upon by him nor did he provide the opportunity to cross examine the third parties even after a specific request was made by the assessee. 9.4. Also, Coordinate Bench of ITAT, Chennai in the case of Mr. A. Johnkumar vs. DCIT in dealt with issues relating to additions made based on WhatsApp messages and observed as under: “First of all, WhatsApp messages cannot be considered as a conclusive evidence to draw an adverse inference against the assessee, unless those WhatsApp messages are supported by corroborative evidences to indicate that those messages and contents represents undisclosed income of the assessee. ……The AO neither bring on record from which person, the assessee has received cash and to whom the assessee has distributed cash. The AO neither made out a case of source for cash and destiny of cash distributed by the assessee. In other words, the AO has abruptly concluded in his own understanding of the messages, the assessee has received so much of cash and distributed so much of cash and which is nothing but cash for votes and hence, concluded that the assessee has incurred a sum of Rs.17 Crs. for distribution of cash to voters and which is nothing but unexplained expenditure taxable u/s.69C of the Act……….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. In our considered view, the findings recorded by the AO is purely on suspicion and surmises manner without any evidences to justify his findings. 9.5. Keeping the context of material found and seized from third parties, we also refer to decision in the case of ACIT vs. Lata Mangeshkar [1974] 97 ITR 696 (Bom) wherein Hon'ble Court has extensively discussed the importance and meaning of primary evidence. In this case, Income-tax authorities came across a sort of a ledger 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 Vishwas Sudhakar Chaknalwar 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 she did not pass a receipt in the regular books of accounts. In the statement recorded of managing partner, it was pointed out by the Tribunal that he had no personal knowledge of the actual payments made to the assessee and therefore his evidence could not carry the case of the Department any further. In the statement of firm's Bombay manager, he accepted that he had made payments in "black" to the assessee. It was pointed out by the Tribunal that he used to receive amounts from Madras from which he used to make disbursements in Bombay but he maintained no account in respect of the same which made it difficult to rely on his evidence. Hence, Tribunal rejected the entries and disbelieved the statement of the two witnesses. 9.5.2. An appeal was filed before the High Court of Bombay. The High Court of Bombay after considering all the circumstances held that the Tribunal was justified in holding that the additions were wrongly made stating as below: "Moreover, entries in books of account-whether in day-book or in the ledger-are merely corroborative evidence and in the absence of proper corroborative evidence the primary direct evidence would alone be required to be scrutinized and that evidence in this case consisted of the testimony of C. S. Kumar and the evidence of that witness was found to be thoroughly unreliable by the Tribunal. After all, the entries in the day-book or the ledger would be a corroborative piece of evidence and once the direct evidence of the person who is said to have made payments in "black" to the assessee is disbelieved, we do not think that any value could be attached to the entries in the ledger or to the entries in the daybook even if one had been produced. In the circumstances, we feel that the questions which are sought to be referred arise out of a finding of fact recorded by the Tribunal on pure appreciation of evidence." 9.6. We also refer to the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla & Ors. 1998 (3 SCC 410) (SC), where Section 34 of the Evidence Act, 1872 has been explained and held that entries in a file containing loose sheets of papers were not "book" and hence entries therein Vishwas Sudhakar Chaknalwar were not admissible under Section 34 of the Evidence Act. Further, it was also held in this case that entries in books of account shall not alone be sufficient evidence to charge any person with liability. Entries, 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 kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book.... I think the term 'book' in Section 34 aforesaid may properly be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of Section 34, and I have no hesitation in holding that unbound sheets of paper, in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of Section 34." We must observe that the aforesaid approach is in accord with good reasoning and we are in full agreement with it. Applying the above tests it must be held that the two spiral note books (MR 68/91 and MR 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are "books" within the meaning of section 34, but not the loose sheets of papers contained in the two files (Mrs 72/91 and 73/91).' 9.7. Also, Hon'ble Supreme Court in case of Common Cause v. UOI [2017] 394 ITR 220 (SC), wherein searches were conducted on the Birla and Sahara Group of Companies and incriminating material in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. were found, held that noting on loose sheet/diary does carry any evidentiary value under the provision of section 34 of the Evidence Act. Relevant extract reads as under. “It is apparent from the aforesaid discussion that loose sheets of paper are wholly irrelevant as evidence being not admissible U/s 34 Vishwas Sudhakar Chaknalwar so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. ……………. In case of Sahara, in addition we have the adjudication by the Income- tax Settlement Commission. The order has been placed on record along with I.A. No.

Vishwas Sudhakar Chaknalwar 8. In the light of the above judicial precedents and placing reliance on the above judgment of the ITAT, Mumbai Bench, we direct the Assessing Officer to delete the addition of Rs.10,00,000/- which is made by relying on WhatsApp Conversation. Accordingly, appeal of the Assessee is allowed.

In the result, appeal filed by the Assessee is allowed. 9.

ITA No. 264/NAG/2022 (A.Y. 2018-19)

Revenue has filed the appeal challenging common impugned order passed 10. by the learned Commissioner of Income Tax (Appeals) – 3, Nagpur [hereinafter in short “Ld.CIT(A)”] vide Order No. CIT(A)-3/10590/2016-17, CIT(A)- 3/10687/2017-18 & CIT(A)-3/10446/2018-19 and Date of order 23.06.2022 for the A.Y. 2018-19.

Revenue has raised following grounds of appeal in its appeal: - 11.

“1. On the facts and circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs.65,00,000/- on account of undisclosed income, without appreciating the fact that the same was made based on entries relating to receipt of amounts in cash from various persons, which were evident from the documents identified as B-35, impounded during the survey proceedings. In this regard the Ld.CIT(A) has completely ignored the fact that the entries found in B-35 were clearly identified to be relating to the assessee Vishwas Chanknalwar and his proprietary concern - 'Vishwas Logistics. 1(a). The Ld. CIT(A) has also erred in deleting the addition of Rs. 65,00,000/- made as undisclosed income without considering the fact that no explanation was furnished by the assessee with regard to the amounts received.

Vishwas Sudhakar Chaknalwar 12. At the outset, the learned Authorized Representative (in short “Ld.AR”) appearing for the assessee submitted that the tax effect on the amount disputed by the Revenue is below the revised monetary limit of Rs.60 lakhs applicable to appeal before the Tribunal, as per CBDT Circular No.09 of 2024, dated 17/09/2024. Thus, the learned AR submitted that the Revenue’s appeal being covered under the aforesaid Circular is not maintainable.

The learned Departmental Representative agreed that the tax effect on the 13. amount disputed by the Revenue is below the monetary limit of Rs.60 lakhs for the appeal under consideration.

Having heard the arguments of rival parties, perused the material available 14. on record and gone through the orders of the authorities below, we are of the view that the tax effect on the amount disputed by the Revenue in the present appeal is below the revised monetary limit of Rs.60 lakhs as per CBDT Circular cited supra. The tax demand involved in the appeal is Rs.50,21,250/- as per Form 36. It also stands clarified by the CBDT that the revised monetary limit of Rs.60 lakh, as per the aforesaid CBDT Circulars, would also apply to all pending appeals. In view of the aforesaid, Revenue’s appeal deserves to be dismissed. However, the Revenue is given liberty to seek recall of this order if, at a later point of time, it is found that the appeal falls under any of the exceptions provided in the CBDT Circular referred supra.

Vishwas Sudhakar Chaknalwar 16. To sum-up, appeal filed by the Assessee is allowed and appeal filed by the revenue is dismissed.

Order pronounced in the open Court on 09/06/2025