DCIT CC - 6(1), MUMBAI vs. SHRI JAYANT HIRALAL SHAH , PUNE

Ld. CIT (A) in his detailed judgment has deleted the said addition after observing and holding as under:- 6.6. The appellant has argued that the images of the WhatsApp chat have not been found from the possession of the appellant. Therefore, the presumption as to documents provided for in section 2920 and 132(4A) were not available against the appellant as to the correctness of the contents of the seized data found from the possession of a third party The appellant thus pleaded that documents found from the possession of a third party could not be relied upon to make additions in the case of the appellant. According to the appellant Sh Shailendra Rathi was a consultant to the Rucha Group and not connected to the assessee Similarly Sh. Nilesh Toshniwal was an independent professional person who was a practicing advocate. According to the appellant, while Sh. Toshniwal at times rendered professional advice to the appellant in legal matters in connection with the real estate business activities, he was not assisting in financial matters. According to the appellant, there was no material to suggest that the appellant has entered into the alleged transaction While Sh Nilesh Toshniwal denied the impugned transaction of Rs. 80 lakh with Sh. Ashok Luniya, Sh. Shailendra Rathi had nowhere stated that the amount of Rs. 80 lakh was received by him at the instance of the appellant or on behalf of the appellant. The appellant stated that even if any transaction of Rs. 80 lakh took place between Sh. Shailendra Rathi and Sh. Ashok Luniya, he had nothing to do with the same. The appellant also questioned the admissibility of the digital evidence in the form of images of WhatsApp chats on the ground that the requisite certificate u/s 65B of the Indian Evidence Act had not been drawn. The appellant also argued that the statement of Sh. Shailendra Rathi recorded during the course of the search could not be relied upon as the same had since been retracted. Also, according to the appellant, the addition made was bad in law as cross- examination of Sh.

Shri Jayant Hiralal Shah Shailendra Rathi was not allowed to him. The appellant also relied on certain case laws to argue that the addilions made on the basis of documents/material found from a third person could not be used against him in the absence of any Independent evidence to link him to such material. Moreover, according to the appellant the impugned WhatsApp conversation between Sh. Shailendra Rathi and Sh. Nilesh Toshniwal was dated 19.09.2019 and so the impugned transaction in any case was not related to AY 2021-22 in which the addition has been made by the AO. Also, according to the appellant, section 69C had in any case been wrongly Invoked by the AO as it had been nowhere alleged that the appellant had incurred any such expenditure. Thus, the appellant stated that the addition of Rs. 80,00,000/- made by the AO u/s 69C of the Act be deleted 6.7 In this regard it is seen that a search took place in the case of the assessee On 23.09.2021 along with the other entities of the Businessman/Middlemen Group of cases. Certain images from the WhatsApp chat between one Shri Shailendra Rathi and one Shri Nilesh Toshniwal were found during the search proceedings at the residence of Shri Shailendra Rathi. It was observed that Shri Shailendra Rathi had texted to Shri Nilesh Toshniwal as received 80. Sh Shailendra Rathi was a key associate of the Rucha Group also covered during search and Sh. Nilesh Toshniwal was allegedly a key associate of the assessee Shn Shailendra Rathi in his statement dated 24.09.2021 recorded on oath u/s 132(4) of the Act, stated that he had received Rs. 80 lakh in cash through Shri Ashok Luniya, the contact given by Shri Toshniwal. The statement was later retracted by Sh Shailendra Rathi It is also seen that the assessee, at the time of recording of his statement on oath u/s 132(4), was confronted with the statement of Shri Rathi, wherein the assessee stated that he was not aware of such a transaction and that he did not have any business relation with Shri Ashok Luniya. 6.8 It is also seen that during the course of the assessment proceedings also, the assessee was asked to explain the transaction. In response, the assessee reiterated that while Shri Ashok Luniya was a friend of the assessee but he had no business relationship with him. Also, he was not aware about any such transaction and these transactions were not related to him.

Thereafter, he has referred to various judgments of Hon’ble High Courts and Tribunal decisions and finally observed as under:- 6.18 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 assessee. In the present case it is seen that the addition of Rs. 80,00,000/- has been made by the AO relying on the statement of a third party le Sh. Shailendra Rathi, which had in any case been retracted. Also, the addition has been made on the basis of Shri Jayant Hiralal Shah material found being certain image in the WhatsApp conversation during the course of the search on a third party le Sh Shailendra Rathi. Both Sh. Nilesh Toshniwal and the assessee Sh. Jayant Hiralal Shah have consistently 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 Interestingly, even the WhatsApp conversation or the statement of Sh. Shailendra Rathi does not make any reference to the assessee but refers to one Sh. Ashok Luniya. It is also not the case that Sh. Ashok Luniya ever implicated the assessee Sh. Jayant Hiralal Shah in respect of the impugned transaction. While the assessee Sh Jayant Hiralal Shah was also covered under search, it is not the case either 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. 80,00,000/- made by the AO in the case of the assessee is accordingly deleted and the ground of appeal is allowed.

We have heard both the parties at length and also perused the relevant finding given in the impugned orders as well as materials referred to before us. The main reason for making the addition by the ld. AO is, firstly, there was a WhatsApp message Shri Jayant Hiralal Shah in the mobile of Shri Nilesh Toshniwal prior to 07/10/2019 by Shri Shailendra Rathi stating as “Received80@Dubai”. Second reason given by ld. AO is the statement of Shri Shailendra Rathi, which for the sake of ready reference is also reproduced hereunder:- Q.32 I am showing you Exhibit 9 (12 pages) which is images taken of your whatsapp chat between you (9604561111) and Nilesh Toshniwalji (9890839995) from your iphone 12 pro. Please state about the identity of Shri Nilesh Toshniwalji. Further go through the exhibit and state the context of the conversation. Ans. Sir, I have gone through the conversation on whatsapp chat and confirm that I had these conversations with Shri Nilesh Toshniwalji. Shri Nilesh Toshniwalji is a Chartered Accountant based in Pune. He works with Shri Jayant Shah of Jairaj group based in Pune. Jayant Shah is in line of business of real estate and trading of food grain. We are also in the business with Jairaj group where we were looking after the litigation related issue in M/s Nian Tech Pvt Ltd and Trendy Online Solution Pvt Ltd for their land in Hinjewadi, Pune. Further, during the pandemic lock down period, on many occasions, we helped Shri Jayant Shah to get e- pass for movement. Shri Jayant Shah is a friend of Shri Prashant Nilawar. Pagewise comment is as under. Page Comment No. 1 These are details of cheque given by me to Shri Nilesh Toshniwal ji to provide him the account details of Shri Prashant Nilawar (HDFC A/c no. 00071930012806) and Shri Pawan Chandak (IDBI A/c 0676104000045483) on 31.07.2019. 2 I asked Shri Nilesh to make transfer into the account of Shri Prashant Nilawar to the tune of Rs 4 crore and Rs 3 crore into the account of Shri Pawan Chandank. These are unsecured loans, the same may be verified from their bank accounts on 2. 3 On 14.09.2019, Shri Nilesh had given me details of Shri Jayant Hiralal Shah Shri Ashok Luniya based in Dubai for coordination purpose and 1 had given him the detail of Kumar based in Dubai. His phone number +971506254258 is saved in my mobile as Ashok Luniya Dubai Ref Jayant Shah Sir. The number of Kumar was received from an Angadiya based in Mumbai for the transfer of money abroad. 4 I had received one document from Shri Prashant Nilawar on 17.09.2019 which pertains to some conflict in Ajanta Cooperative Housing Society Ltd with Allwell Prop Pvt Ltd, This conflict was associated with Shri Jayant Shah’s interest. Shri Nilawar asked me to see if anything could be done through our end. Therefore, I asked Nilesh Toshniwal ji to provide me details related to same. 5 On 19.07.2020, We had received Rs 80 lakh in cash through Shri Ashok Luniya, the contact given by Shri Nilesh Toshniwal ji in Dubai on 14.09.2019. 6 On 08.10.2020, I had received Rs. 1,00,00,000 in cash through Shri Nilesh Toshniwal ji. 7 One payment was to be made by Shri Nilesh Toshniwal ji. In this regard, I had shared him the detail of the angadiya Shri Vinod (9370511116) to coordinate with him for the payment of Rs 1,00,00,000 in cash on 02.03.2020. Shri Nilesh told me to instruct Shri Vinod to call him on what’s App only. 8 On 12.03.2021, I had sent Shri Nilesh Toshniwal the bank account detail of M/s Kalyan Toll Infrastructure Ltd wrongly. 9 On 17.03.2021, I had again sent him the bank account detail of M/s Guna Infrastructure Limited for reversal of loan from M/s Guna Infrastructure Limited. The amount of Rs 10 crore was made into Guna Infrastructure Limited on 17.03.2021. Further, I asked Shri Nilesh about the floor plan of worli flats of Subhada Society. Shri Nilesh assented to provide me details.

First of all so called What’sAPP message stating “received 80@Dubai” is not found from the mobile of the assessee. Albeit, from an independent third person who is a professional and no connection with assessee. Another important point is that, the message has not been sent by the assessee from his mobile but was found mobile phone of Shri Shailendra Rathi sent by someone else. None of these two persons are either connected with the assessee for any kind of business nor there is any common interest nor has any corroborative evidence been found from the assessee to correlate the alleged transaction. On perusal of the statement of Shri Shailendra Rathi, nowhere he has suggested that these payments relate to any transactions relating to the assessee on or behalf of the assessee or received on or behalf of the assessee. Only relevant content of the transaction of Rs.80,00,000/- in his statement is as under:- “On 19-07-2020 we had received Rs. 80 lakh in cash through Shri Ashok Luniya, the contact given by Shri Nilesh Toshniwal ji in Dubai on 14-09-2019"

This statement merely states that on 19/07/2020 he had received Rs.80,00,000/- in cash through Shri Ashok Luniya. The contact was given by Shri Nilesh Toshniwal in Dubai on 14/09/2019. The date of message in WhatsApp chat is before 07/10/2019 and the transaction which is being referred is of 19/07/2020. There is a complete mismatch of time period between What’sApp message and the date mentioned in the Shri Jayant Hiralal Shah statement. When assessee was confronted with the statement of Shri Shailendra Rathi, he has categorically stated that he is neither aware of such transaction nor does he have any business relation with Shri Ashok Lunia. No enquiry whatsoever has been conducted by the ld. AO as to what was the connection between assessee and Shri Ahok Lunia and what the transaction was for and what is the business relationship with Shri Shailendra Rathi and how this transaction pertains to assessee. During the search at Assessee’s place no corroborative evidence or material has been found. Nowhere Shri Shailendra Rathi has implicated the assessee that he has paid or received cash of Rs.80,00,000/- on behalf of the assessee.

Here, the addition has been made and secondary evidence of electronic record being What’sApp conversation from a mobile and statement of a person and from the statement nowhere the name of the assessee figures. If the message and the information has not been retrieved or recovered from the assessee, there cannot be any presumption against the assessee. The onus was on the persons who have given the statement or from whose mobile What’sApp chat had been found. Nowhere it has been brought on record whether Shri Nilesh Toshniwal has stated anything about the assessee or any enquiry was done from him. If the ld. AO is trying to use the What’sApp chat relating to some third person against the assessee, then its mandatory requirement u/s 65 B of the Evidence Act to comply with the procedures given therein. This has been categorically held by the Hon’ble Supreme Court in the case of Arjun Panditrao Khotkar Shri Jayant Hiralal Shah vs. Kailah Kushanrao Gorantyal vide judgment and order dated 14/07/2020, wherein three Judges Bench of the Supreme Court have held that electronic evidence has to be certified u/s.65B(4). There is no such certificate brought on record to ensure the authenticity of such message. Though there is no specific provision of digital data validity under the Income Tax Act, however, it is imperative that the Income Tax department / investigation wing has to adhere with the condition stipulated u/s.65A and 65B of the Evidence Act before relying on such digital evidence. Here none of these aspects have been discussed by the ld. AO.

As stated above, there is no material from the possession of the assessee which can remotely suggest that assessee had entered into alleged transaction. As noted by the ld. CIT(A), Shri Nilesh Toshniwal has nowhere admitted the impugned transaction of Rs.80,00,000/- with Shri Ahok Lunia and nowhere Shri Shailendra Rathi has stated that amount of Rs.80,00,000/- received by him was at the instance of assessee or on behalf of the assessee. Even if it is accepted that What’sApp message can be treated as evidence then, here the transaction took place between Shri Shailendra Rathi and Shri Ahok Lunia and the message appeared in the mobile phone of Shri Nilesh Toshniwal and Shailendra Rathi and there is no whisper about the assessee’s name. Ld. AO has also denied the opportunity to cross examine Shri Shailendra Rathi whether this transaction at all pertains to the assessee, because nowhere he has even taken the name of the assessee that this transaction Shri Jayant Hiralal Shah pertain to assessee. The entire edifice of addition made by the ld. AO is reliance on the statement of third party and material found during the course of search of the third party. Nowhere there is material or evidence having any live link nexus with the assessee. In such a situation no adverse presumption can be drawn against assessee nor can any addition be made. The aforesaid observation and the finding of the ld. CIT (A) as noted above is not only based on correct appreciation of facts but also in accordance with the law and therefore, the aforesaid finding of the ld. CIT (A) is upheld and the grounds raised