GIPSKARTON INDIA PRIVATE LIMITED,NEW DELHI vs. ACIT, CENTRAL CIRCLE-7, NEW DELHI

The brief facts of the case are that the assessee is a corporate resident engaged in the business of wholesale of construction material.

Now the aggrieved assessee is in appeal before us.

Before us, the ld counsel of the assessee vehemently contended that the addition was solely made on the basis of statement of Shri Siddharth Gupta recorded at the time of search and no other adverse material was brought on record.

It was submitted that though there is a mention of the lady called Reepti Ma'am in the statement of Shri Siddharth Gupta, however, in the extract of the statement of Smt. Reepti provided to the assessee with the above show cause notice placed at PB Pg. 32-33 there is a mention of certain amounts being transferred, the name of the assessee appears nowhere.The statement of Shri Siddharth Gupta also refers to one Shri Naresh who is said to be a part of his HR team and his name is also appearing in the chat. However, no statement of Shri Naresh was ever recorded by the Ld. AO.

The ld AR further argued that the chat was between Shri Siddharth Gupta and Shri Mohit Leeladhar. The statement given by Shri Siddharth Gupta has been taken as gospel truth without recording any statement of Shri Leeladhar which could have been the most important evidence in the present case. The ld AR argued that the conclusion drawn by Assessing Officer that Leeladhar works for M/s Gipskarton has no basis as nowhere Siddharth Gupta has stated so. The ld. counsel for the assessee accordingly prayed for deletion of the addition.

Per contra, the ld. DR relied upon the orders of the authorities below. Countering the argument that Shri Sidharth Gupta statement has been taken as gospel truth, the ld DR stated that Shri Sidharth Gupta was the director of the assessee company and he made the above referred statement under oath under section 132(4) of the I.T.

We have heard the rival submissions and have carefully perused the records and materials before us. We find from the facts of the case that in the course of search and seizure operation, certain Whatsapp Chat was recovered from the mobile of Shri Sidharth Gupta, Director of the assessee company with Mohit Leeladhar EA. In one chat referred to Question no. 50, Mohit Leeladhar informs Shri Sidharth Gupta that “50 kg sweets handover” to which Sidharth Gupta responds “ok”. In another chat, referred to in Question no. 52, Mohit Leeladhar informs he has received “1 kg sweets from Ripti Ma’m” and “2 kg sweets from Nareshji” to which Sidharth Gupta again responds “ok”. When confronted with this conversation, Shri Sidharth Gupta, in his statement recorded under oath u/s 132(4), acknowledges the transactions and admitted that ‘1 kg sweets’ refers to the cash of 1 lakh. Shri Sidharth Gupta also admitted that ‘Ripti’ refers to Rebti Nayak, an employee of Sidharth Gupta who maintains the record of cash transactions and cash loans of Sidharth Gupta family. Sidharth Gupta also identifies ‘nareshji’ as his field boy.

Further, we find that Siddharth Gupta in his answer to Question no 52, confirms that the figures mentioned in the whatsapp chat “may have been shared with me for approving petty amount for other expenses of M/s Gipskarton India Pvt Ltd”. (emphasis supplied). In an earlier Question no. 44, Sidharth Gupta had identified Mohit Leeladhar as accountant of Mohit Gupta. Statement of Rebti Nayak was also recorded u/s 132(4) where she admitted to maintaining the cash transactions and cash on the directions of Sidharth Gupta. There is no denial by the assessee company that Mohit Leeladhar is not employee of Mohit Gupta, another Director of the assessee company.

From the facts as narrated above, we find that the crux of the matter hinges upon the statement of Sidharth Gupta. It would be pertinent to refer to the statement of Shri Siddharth Guptau/s 132(4) of the I T Act recorded on 02/03.02.2022 during the search which reads as under:

We find, from the above whatsapp conversation that Shri Siddharth Gupta, in his statement recorded under oath u/s 132(4) at the time of search, has deposed before the officer in Answer to question no. 50 that cash transaction took place through the person named Shri Mohit Leeladhar and the expenses were towards M/s Gipskarton India Pvt Ltd. In answer to question no. 51, Sidharth Gupta explained that the Rs 10 note “might have been used for delivery of cash for internal office expenses of Gipskarton India Pvt Ltd”. In answer to question no. 52 Sidharth Gupta himself even decodes the code of ‘1 kg sweets’ used in the chat as referring to one lakh rupees and the amount “may have been shared with me for approving the petty amount for office expenses of Gipskarton India Pvt Ltd”. Sidharth Gupta also admits and identifies ‘Reepti Ma'am’ and ‘Shri Naresh ji’as members of his HR team.

From the deposition of Sidharth Gupta, the Director of the assessee, we find that he acknowledges the identity of the persons involved in the whatsapp chat, the purport of the chat, the codes used in the chat and the entity for which the cash transaction was being used. It is also clear that as Director, Siddharth Gupta was in charge of the administrative functioning of the assessee company which necessarily means that Shri Sidharth Gupta knows what he is saying and what are the ramifications of his words to the assessee company. We also find that Shri Sidharth Gupta deposition was recorded before two witnesses and Sidharth Gupta has neither retracted the statement nor has claimed that the statement has been obtained by coercion or undue influence. Shri Siddharth Gupta statement under section 132(4), therefore, has evidentiary value and can be relied upon.

We also note from the assessment order that the AO has obtained the certificate under section 65B(4) of the Evidence Act with regard to the ‘whatsapp chat’ as electronic evidence satisfying the legal requirement as laid down by the Supreme Court in the case of Arjun Panditrao Khotkar v. Kailash Kushanrao [(2020) 3 SCC 216]. The assessee nor the ld counsel of the assessee before us has objected or controverted the use of whatsapp chat as ‘electronic evidence’.

On the other hand, we find that sum total of the arguments raised by the ld counsel of the assessee before us is as follows:

We note that the entire edifice of the assessee arguments is based on the issue of non-recording of statement of persons in the chat other than Shri Sidharth Gupta. It is worthwhile to note that the assessee company has nowhere denied the existence of the whatsapp chat or its explanation as offered by the Director of the assessee company though the Assessing Officer has given sufficient opportunity to the assessee to rebut the Revenue’s assertion. We also note that part of the statement of the Director recognizing the parties in the conversation has been accepted by the assessee company but the part of the statement regarding cash transaction is being denied.

We are of the considered view that in the instant case, both the whatsapp chat and its interpretation relied upon, belongs to the Director of the assessee company who manages the affairs of the assessee company. Shri Sidharth Gupta not only acknowledges the whatsapp chap in his phone but also explains the nature and purport of the whatsapp conversation. Though, Siddharth Gupta is associated with several other companies but he identifies, on his own volition, the said cash transactions with the assessee company only. Sidharth Gupta also identifies the persons involved in the transaction as his employees.

We also find that the Revenue has discharged its onus of unearthing an evidence in the form of whatsapp chat and has confronted the assessee company with the incriminating material gathered. The onus now lay with the assessee company to prove the statement of the Director of the assessee company as wrong or incorrect. There is however no attempt to discredit the deposition of Shri Sidharth Gupta much less furnishing any cogent or corroborative evidence to falsify it or prove it as incorrect. The assessee company has failed to demonstrate that the statement of its Director, initially recorded, were under pressure/coercion and factually incorrect. This burden has not even been attempted to be discharged.

The assessee has taken a legal ground that adverse inference has been drawn against the assessee by collecting material/statement recorded at the back of the assessee without giving him an opportunity to rebut/cross examine the same which is in violation of natural justice and has relied on the following decisions:

We find that this legal ground brings no succor to the assessee company. As we have narrated above, the Revenue has not collected any material behind the back of the assessee company. The statement of the Director of the company was not recorded behind the back of the assessee company. It was recorded concurrently in the course of search on the assessee group. The Revenue has followed the principle of natural justice by according the assessee company opportunity to rebut the incriminating material and evidence collected and statement recorded. There was no action taken behind the back of the assessee company.

The case laws relied upon by the assessee are therefore, distinguishable in facts and circumstances. In Andaman Timber Industries case the statement was recorded of witnesses who were various dealers of the assessee. In the case of Kalra Glass Factories, statement of partner of another firm was recorded at the back of the assessee. In Kishan Chand Chellaram case statement of employees who had already left the assessee was recorded. In the case of Best Infrastructure, Shri Tarun Goyal , whose statement was recorded was an entry operator. In Sri Ramdas Motor Transport Ltd case, the issue decided was where no incriminating material is found, the powers u/s 132(4) cannot be invoked. The Fire Arcor Infrastructure case decided by the Bombay High Court involved statement recorded of a Director of a different company who had received cash from the assessee. In Sunita Dhadda case, the statement recorded was of Director of a different builder company who had taken cash from the assessee.

In the instant case, the statement recorded is of the Director of the assessee company who acts on behalf of the company. The assessee company endeavour to seek for itself legal identity separate from its Director is merely an attempt to create a corporate veil which needs to be lifted. The assessee is a private limited company and the Director of the company is de-facto company itself. The Director of the company carries out all the functions of the assessee company and acts on behalf of the company. The Director signs the cheque of the company and takes decision on running the affairs of the company.

The statement of the Director Shri Siddarth Gupta was recorded during the search proceedings on the assessee company. The assessing officer supplied the copy of statement recorded u/s 132(4) to the assessee before drawing his conclusion. The Assessing officer discharged his obligation to collect evidence and confront the assessee with the evidence collected. The legal objection that principal of natural justice was not followed is not substantiated by the facts of the case as narrated herein above.

It is a trite law that once a statement is recorded under section 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income and the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time. As held by the Supreme Court in Pullan- gode Rubber Produce Co. Ltd. v. State of Kerala, (1973) 91 ITR 18 an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment.

We are fortified in our view by the decisions of the Hon’ble Supreme Court Of India in Kuwer Fibres (P.) Ltd v Commissioner of Income-tax reported in [2023] 146 taxmann.com 467 (SC), which held that the addition made on the basis of statement of one of co-directors of assessee recorded during course of search proceedings where corroborated by documents seized, there was no justification to reject such statement. Similarly, in Bannalal Jat Constructions (P.) Ltd Assistant Commissioner of Income-tax [2019] 106 taxmann.com 128 (SC), the hon’ble Supreme Court while dismissing the SLP, held that where in course of search proceedings, the statement of the director of assessee-company was recorded under section 132(4) admitting certain undisclosed income and subsequently, director of assessee- company retracted said statement, the burden lay on assessee to show that admission made by director in his statement was wrong and such retraction had to be supported by a strong evidence showing that earlier statement was recorded under duress and coercion.

Considering the facts in totality, and in view of the above discussion and our findings, we are not inclined to interfere with the findings of the CIT(A). We hold that the additions made u/s 69A of the Income Tax Act are on the basis of evidence found in the form of whatsapp chat and corroborated by the statement of the Director of the assessee company. The action of the lower authorities is valid and therefore the said addition stands sustained. The grounds no 1 to 4 is accordingly dismissed.

In the result, the appeal of the assessee in is dismissed.