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Facts
The assessee filed appeals against the order of the CIT(A) upholding additions made under Section 153C based on digital data from a third-party search. The additions were for alleged unexplained investment and interest income.
Held
The Tribunal held that the assumption of jurisdiction under Section 153C was not based on any incriminating material. The evidence relied upon, primarily WhatsApp chats and images, was uncorroborated, vague, and lacked evidentiary value. The Tribunal noted the dichotomy in treating the assessee and the investee company differently, further weakening the revenue's case.
Key Issues
Whether assumption of jurisdiction under Section 153C and subsequent additions were justified based on uncorroborated digital data from third-party search, and whether such data constitutes incriminating material.
Sections Cited
153C, 132, 69, 69A, 65B, 153D, 143(3), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN
(Assessment Year: 2022-23) Raghav Kumar, vs. ACIT, Central Circle 29, E – 1A, Maharani Bagh, Delhi. Sriniwaspuri, New Delhi – 110 065. (PAN : AKPPK7985B) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri R.S. Singhvi, Advocate Shri Satyajeet Goel, Advocate Shri Rajat Garg, CA Shri Mayank Maheshwari, Advocate REVENUE BY : Shri Dayainder Singh Sidhu, CIT DR Date of Hearing : 25.09.2025 Date of Order : 15.10.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
1. 1. These appeals are filed by the assessee against the order of the ld. Commissioner of Income-tax (Appeals)-30, New Delhi (for short ‘ld. CIT (A)) dated 28.03.2025 for the Assessment Years 2020-21 & 2021-22.
2. Since the issues are common and the appeals are connected, hence the & 3215/DEL/2025 same are heard together and being disposed off by this common order. We take up the assessee’s appeal being for AY 2020-21 as lead case to adjudicate the issues under consideration.
The brief facts of the case are, the assessment in the case of the assessee was initiated u/s 153C of the Income-tax Act, 1961 (for short ‘the Act’) based on third party search action u/s 132 of the Act carried out on 06.01.2021 in the case of HANS Group. During the course of search, digital data obtained from the mobile phone of Mr. Praveen Kumar Jain was analysed wherefrom a picture of envelops alleging names was found. Further, from examination of the contents of the WhatsApp chat found in the mobile phone of Mr. Praveen Kumar Jain and his son Mr. Vaibhav Jain, it was gathered that Mr. Praveen Kumar Jain was acting as an intermediary facilitating investment transactions for M/s. Mahagun (India) P. Ltd. which carried assured return. The image of envelops found in the mobile phone of Mr. Praveen Kumar Jain was alleged to be carrying the cheque/cash to be distributed to various parties as part of assured return from investment so made. The name of the assessee was alleged to be mentioned on one of the envelops and based on such information, the assessing officer was of the view the existence of transaction of unsecured loan and payment of assured income/interest to the assessee by M/s. Mahagun (India) P. Ltd. leading to initiation of & 3215/DEL/2025 action u/s 153C of the Act in the case of the assessee and M/s. Mahagun (India) P. Ltd. for AY 2020-21.
During assessment proceedings, the assessee denied the allegation of any loan or investment or receipt of any assured interest and disputed the allegation of name of the assessee appearing on one of the envelops. However, the assessing officer rejected the same and proceeded to complete the assessment order u/s 153C vide order dated 28/03/2024 after making addition of Rs.22,50,75,000/- u/s 69 and Rs.22,50,750/- u/s 69A on the alleged ground of unexplained cash investment and interest received thereon. The assessing officer has not made any reference to date or period of investment and the quantum of alleged investment was calculated on the basis of reverse calculations of alleged interest.
5. Aggrieved, the assessee preferred an appeal before ld CIT(A) and challenged the assumption of jurisdiction u/s 153C as well as additions made. However, ld CIT(A) sustained the additions and dismissed the grounds raised
by the assessee.
6. Aggrieved with the above order, the assessee is in appeal before us raising following grounds in this appeal: “1.1 That on the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in upholding the validity of notice u/s 153C of the Income tax Act, 1961 even though same was not based on any incriminating material. 1.2 That the satisfaction note recorded by the assessing officer is without application of mind and same being based on unsubstantiated allegation drawn & 3215/DEL/2025 from unauthenticated third party digital data dehors of evidentiary value, the notice u/s 153C is illegal and without merits. 1.3 That there being no case of any seizure of books of accounts or documents from the third party containing any information pertaining to the assessee, the assumption of jurisdiction u/s 153C is without valid ground and same is invalid and bad in law. 1.4 That this being a case of unabated assessment and in absence of any incriminating material or information, the initiation of action u/s 153C is arbitrary and without jurisdiction. 2.1 That on the facts and circumstances of the case, the Ld. CIT(A) was not justified upholding addition of Rs. 22,50,75,000/- u/s 69 of the Act on the alleged ground of unexplained investment even though same is untenable and unsubstantiated. 2.2 That the addition being based on hypothetical presumption based on reverse working and in absence of any credible material or justification, the impugned addition is arbitrary and not sustainable. 2.3 That this being a case of unabated assessment and the scope of proceedings u/s 153C being limited to incriminating material, the impugned addition which is wholly unsupported and based on presumption/extrapolation is beyond scope and bad in law. 2.4 That in any case, in absence of any direct or indirect material in support of allegation of unexplained investment, the impugned addition based on conjectures and surmises is invalid and devoid of merits.
3. That in the absence of any independent corroboration or opportunity of cross examination or certificate u/s 65B of the Indian Evidence Act, the unauthenticated third party digital data has no evidentiary value and the adverse inference based on the same is arbitrary and unjustified.
4. That on the facts and circumstances of the case, the Ld. CIT(A) was not justified in confirming addition of Rs.22,50,750/- u/s 69A on the alleged ground of interest receipts in cash even though same is untenable and unsubstantiated.
That on the facts and circumstances of the case, the Ld. CIT(A) was not justified in upholding the validity of the assessment order even though the same was passed without proper and valid approval u/s 153D of the Act.
That the orders of the lower authorities are not justified on facts and same are bad in law.”
& 3215/DEL/2025 7. The ld. Counsel of the assessee, Sh. R.S. Singhvi appearing for the assessee placed on record paper book of document and synopsis and made detailed submissions in support of grounds taken. It was submitted that the ld. CIT(A) has fallen into error in upholding the assessment order even though the assumption of jurisdiction u/s 153C and the impugned additions are sans any incriminating material. He argued that the photograph of envelops as appearing at Page 4 of the assessment order does not contain name of the assessee and as such the foundation of satisfaction note is ex-facie absent. The ld. AR also submitted that there is no direct or indirect evidence against the assessee and inference drawn from the contents of third party WhatsApp chat without any corroboration is baseless and same does not constitute valid basis for issuing notice u/s 153C or any addition. It was stressed that this is a case of unabated assessment as on the date of recording of satisfaction note and as such the proceedings u/s 153C could only be triggered based on incriminating material which is clearly absent in the present case. The ld. AR supplemented its submission by placing reliance on the assessment order u/s 153C dated 15.03.2024 passed in the case of M/s. Mahagun (India) P. Ltd. for the very same year i.e. AY 2020-21 wherein the proceedings u/s 153C was initiated based on same search and assessment was completed at returned income without making any addition based on the same & 3215/DEL/2025 finding from the search at HANS Group thus vitiating the fundamental allegation of cash investment by the assessee in M/s. Mahagun (India) P. Ltd. or any receipt of interest.
The ld. AR also highlighted that since no evidence was provided in support of contents of the satisfaction note, the assessee filed RTI application dated 13/05/2025 before the assessing officer seeking various information :- a. Copy of Information received from DCIT Central Circle 31, New Delhi as mentioned in para 2 of the assessment order. b. Copy of Statement of following persons as referred in the assessment order: i. Sh. Vaibhav Jain ii. Sh. Amit Jain (Director of M/s. Mahagun India P. ltd.) iii. Sudam Jain c. Copy of summon u/s 131 issued to M/s. Mahahun India P. ltd. alongwith reply filed by the said party as referred at Page 6 Para 3b of the assessment order. d. Copy of panchnama and search warrant in the case of Praveen Kumar Jain and Vaibhav Jain. e. Certified copy of seized material based on which satisfaction u/s 153C was recorded including: i. Clear copy of envelops extracted at Page 3 of the assessment order ii. Complete whatsapp chat as referred at page 8 to 10 and 14 to 16 of the assessment order. f. Whether any certificate u/s 65B of the Indian Evidence Act, 1872 was obtained with respect of digital data found from the mobile phones of Sh. Parveen Kumar Jain and Sh. Vaibhav Jain? If yes, please provide the copy of the same. g. Copy of assessment order for AY 2020-21 and 2021-22 passed in the case of Sh. Praveen K. Jain h. Copy of assessment order for AY 2020-21 and 2021-22 passed in the case of Sh. Vaibhav Jain i. Copy of assessment order for AY 2020-21 and 2021-22 passed in the case of M/s. Mahagun India P. Ltd. j. Copy of approval u/s 153D of the Income tax Act, 1961 before passing of assessment order u/s 153C for AY 2020-21 and 2021-22.
However, it was submitted that the assessing officer failed to provide the documents at serial no. ‘b(ii), c, e, g, h’ and ‘i’, which has direct relevance or bearing to the issue under consideration. The Ld. AR summarized his arguments in a note reproduced hereunder: “1. The appeal filed by the appellant assessee is against order dated 28/03/2025 passed by CIT(A) u/s 250 of the Income Tax Act, 1961.
The CIT(A) upheld the assumption of jurisdiction u/s 153C and addition of Rs.22,50,75,000/- u/s 69 and Rs. 22,50,750/- u/s 69A on the alleged ground of unexplained investment being cash investment and interest received thereon made vide assessment order u/s 153C dated 04/03/2024. 3.1 Vides Ground No. 1, the appellant is challenging the action of CIT(A) in upholding the validity of notice u/s 153C which is not based on any incriminating material. The finding of CIT(A) is at Para 6.3 to 6.4, Page 35 of the impugned order. 3.2 It is submitted that the assumption of jurisdiction u/s 153C is based on whatsapp data found from the mobile phone of Mr. Praveen Kumar Jain wherefrom the assessing officer has drawn presumption regarding existence of transaction of cash investment and payment of cash interest to the appellant by M/s. Mahagun (India) P. Ltd.. The description of the alleged transaction as referred in the performa for recording satisfaction note is as under:
[The satisfaction note is enclosed at [The satisfaction note is enclosed at PB Pg 21- 37] 3.3 In this connection, the following In this connection, the following facts are relevant: i. It is a case of It is a case of unbated assessment where no assessment proceedings where no assessment proceedings were pending as on the date of recording of satisfaction note u/s 153C were pending as on the date of recording of satisfaction note u/s 153C were pending as on the date of recording of satisfaction note u/s 153C i.e. 08/02/2023. i.e. 08/02/2023. ii. The satisfaction note is based on third party mobile phone data The satisfaction note is based on third party mobile phone data The satisfaction note is based on third party mobile phone data obtained obtained during search at HANS Group on 10/01/2021 during search at HANS Group on 10/01/2021 iii. Presumption regarding name of the appellant appearing in the image of Presumption regarding name of the appellant appearing in the image of Presumption regarding name of the appellant appearing in the image of alleged cash envelop is factually incorrect and is evident from the alleged cash envelop is factually incorrect and is evident from the alleged cash envelop is factually incorrect and is evident from the photograph extracted at Page 4 of the assessment order. photograph extracted at Page 4 of the assessment order. photograph extracted at Page 4 of the assessment order. iv. That ot That other than digital data extracted from the Whatsapp chat of Mr. her than digital data extracted from the Whatsapp chat of Mr. Praveen Kumar Jain’s mobile phone, no incriminating or document Praveen Kumar Jain’s mobile phone, no incriminating or document Praveen Kumar Jain’s mobile phone, no incriminating or document was found relating/pertaining to the appellant. was found relating/pertaining to the appellant. v. The digital data extracted from the Whatsapp chat of Mr. Praveen The digital data extracted from the Whatsapp chat of Mr. Praveen The digital data extracted from the Whatsapp chat of Mr. Praveen Kumar Jain ha Kumar Jain has throughout remained uncorroborated and content of s throughout remained uncorroborated and content of the same vis the same vis-à-vis the appellant has remained untested. vis the appellant has remained untested. vi. The assessment in the case of alleged investee company M/s. The assessment in the case of alleged investee company M/s. The assessment in the case of alleged investee company M/s. Mahagun (India) P. Ltd. for AY 2020 Mahagun (India) P. Ltd. for AY 2020-21 was completed u/s 153C 21 was completed u/s 153C based on the very sam based on the very same search vide order dated 15/03/2024 e search vide order dated 15/03/2024 wherein wherein wherein returned returned returned income income income was was was accepted accepted accepted without without without any any any addition/disallowance. addition/disallowance. The copy of the assessment order is placed at The copy of the assessment order is placed at PB Pg 103 PB Pg 103 – 104and the relevant portion is reproduced hereunder for and the relevant portion is reproduced hereunder for ready reference: ready reference:
3.4 In the above background, it may be appreciated that this being a case of unabated assessment, the requirement of existence of third-party incriminating material is sine qua non for valid assumption of jurisdiction u/s 153C of the Act. It is important to note that the term ‘incriminating material’ is specific and includes within its fold any material or evidence containing information regarding any undisclosed income or asset. However, the such material or evidence must be credible/specific/speaking and truthfulness of the same must be accepted/affirmed by the third party from whose possession such material/evidence was found. 3.5 In the present case, the inference drawn against the appellant from the whatsapp data obtained from the mobile phone data of Mr. Praveen Kumar Jain is outrightly fallacious and major infirmities in the satisfaction is highlighted as under: The satisfaction note recorded by the assessing officer of the appellant is ad-verbatim the satisfaction note forwarded by the assessing officer of the searched person thus showing non-application of mind and exercise based on borrowed satisfaction. The image of envelops extracted at Page 4 of the satisfaction note does not contain name of the appellant. The AO of the appellant has not verified the factual inaccuracy while recording the satisfaction note. The statement extracted at Page 5 of the satisfaction note is also not relevant as the same is in context of photograph of the envelops as reproduced at Page 4. The name Raghav (F) mentioned in the so called unsigned sheet reproduced at Page 6 of the satisfaction note does not pertain to the appellant. There is no basis for identifying such name with the appellant. Further, the statement of Mr. Praveen Kumar Jain is totally silent about this aspect. In fact, even the said sheet does not contain crucial information regarding the nature of transaction/date of transaction/mode of transaction/basis of calculation/rate of interest and as such the same is merely a dumb document having no evidentiary value. It is not known as to how and on what basis the AO has presumed amount mentioned in the sheet as interest in absence of any corroborative material. The screenshot of Whatsapp chat extracted at Page 8 of the satisfaction note regarding some proposed payment of Rs. 20 lakhs by Mr. Praveen Kumar Jain to appellant is vague and without context as the nature and mode of so called transaction is not coming out. On what basis the AO presumed this amount to be interest payment is not known. Moreover, it is merely a promise to pay and there is no reference to any follow-up message confirming actual payment of the amount. In fact, no query or question was asked from Mr. Praveen Kumar Jain regarding the nature of this proposed transaction and there can be no presumption regarding existence or happening of any undisclosed transaction between appellant and Mr. Praveen Kumar Jain. There is no corroborative & 3215/DEL/2025 material to prove the nature of transaction or show actual happening of the same. The Whatsapp messages at Page 9 to 10 of the satisfaction note regarding demand of money by the appellant is again without context. The demand of money could be regarding refund, however, the assessing officer with pre-conceived mindset presumed the same to be in the nature of interest. Again, no question was asked from Vaibhav Jain or Praveen Kumar Jain regarding this Chat and hence the such messages have remained untested and uncorroborated. Further, the AO has not even recorded statement of the appellant in order to verify the nature and context of the chat. Page 11 contains reference to an image found from the Mobile phone of Praveen Kumar Jain containing alleged reference to the name of appellant with figure ‘30.01’. It is submitted that there is no ground or basis for identifying the name mentioned in the sheet with appellant. Further, the sheet is unsigned, without context and is incoherent about the nature of the transaction. The same does not bear any date and basis of figures mentioned therein. Additionally, no question or query was asked from Praveen Kumar Jain regarding this sheet. It is clearly a dumb document. The reference to third party whatsapp chat between Praveen Kumar Jain and Amit Jain at Page 13 to 14 of the satisfaction note is extraneous and patently irrelevant to the case of the appellant. It is clarified that such chat does not contains any reference to the name of the appellant. At Page 15 of the satisfaction note, the AO has extracted reply received from M/s. Mahagun Real Estate P. Ltd. wherein it has been categorically stated that they have no transaction with the appellant thus dismantling the theory and arbitrary allegation of cash investment and assured return received by the appellant. This fact is further corroborated from the assessment order u/s 153C passed in the case of M/s. Mahagun (India) P. Ltd. for AY 2020-21 wherein returned income was accepted without any addition or disallowance. The AO or investigation wing has not brought on record any evidence attributing the transactions to the appellant or the year to which it relates. In fact, except alleged Chat without any context, no other evidence of any such transaction has brought on record.
From the above discussion, it is self evident that the satisfaction note is not based on any credible material or evidence but mere based on erroneous presumption drawn from the uncorroborated digital data which has remained untested. It is emphatically submitted that for the purpose of assuming jurisdiction u/s 153C, there has to be clinching evidence or material to show existence of undisclosed income or asset and same cannot be done based on hearsay or presuming non-existing transaction.
& 3215/DEL/2025 3.6 In fact, it is a clear case where the assessing officer has drawn satisfaction note based on concocted theory of whopping cash investment of Rs.22,50,75,000/- and receipt of assured income thereon without there being any iota of evidence on record. In fact, the allegation of purported cash investment of Rs.22,50,75,000/- and quantification of the same is based on reverse working from interest amount which is highly arbitrary and shows complete lack of material. It may be appreciated that search based proceedings do not leave any scope for presumption/estimation and same are strictly to be based on hard evidence/material found. It is worth mentioning that the investments running to tens of crores are not done on oral promises and in absence of evidence in the form agreement or receipt to this effect, it would be preposterous to presume such investment based on arbitrary reverse working. Thus, the allegation of cash investment of Rs.22,50,75,000/- is directly contrary to the scope of proceedings u/s 153C of the Act in absence of any material whatsoever. 3.7 It is worth reiterating that the alleged investee company M/s. Mahagun (India) P. Ltd.. having specifically denied having any sort of transaction with the appellant and this fact having duly been accepted by the assessing officer while completing u/s 153C based on very same search, there remains no ground or basis for presuming any cash investment as the same is grossly inconsistent and irrational. 3.8 It is thus clear that the allegation of unexplained investment and income thereon is merely a figment of imagination based on unfounded interpretation of vague and uncorroborated whatsapp chat and as such in absence of any incriminating material, the assumption of jurisdiction u/s 153C is dehors of valid basis and may kindly be quashed. 3.9 Reference is made to following judicial precedents: i. DCIT vs. Sunil Kumar Sharma [2024] 469 ITR 271 (SC) Section 153C, read with section 153A, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Recovery of loose sheets of paper) - Assessment years 2012-13 to 2018-19 - High Court by impugned order held that it is established in law that a sheet of paper containing typed entries and in loose form, not shown to form part of books of account regularly maintained by assessee or his business entities, do not constitute material evidence - It further held that, therefore, action taken by respondent/revenue against assessee based on material contained in diaries/loose sheets, were contrary to law and thus, impugned notices under section 153C were required to be set aside, as same were void and illegal - Whether special leave petition filed against said order of High Court was to be dismissed - Held, yes [Para 3] [In favour of assessee] ii. Pr.CIT v. Krutika Land P. Ltd. [2019] 261 Taxman 454 (SC)
Section 153C, read with section 69C, of the Income-tax Act, 1961 - Search & seizure - Assessment in case of (Assessment in case of any other person) - Assessment year 2009-10 - During search certain incriminating documents were found in possession of one DD, managing and handling land acquisition on behalf of assessee-company and his statement was recorded - He stated that there were amounts disbursed for purchase of lands and a certain amount of cash had also been received by him to purchase lands - However, later he had retracted said statement - Assessing Officer issued notice under section 153C and initiated proceedings against assessee and made additions under section 69C - High Court by impugned order held that since seized documents did not belong to assessee but were seized from residential premises of one DD who had later retracted his statement, no action under section 153C could be undertaken in case of assessee - It further held that since entire decision was based on seized documents and there was no material to conclusively show that huge amounts revealed from seized documents were actually transferred from one side to another, additions under section 69C were not sustainable - Whether Special leave petition filed against impugned order was to be dismissed - Held, yes [Para 21] [In favour of assessee] iii. Pr. CIT v. Vinita Chaurasia [2018] 259 Taxman 129 (SC) Section 153C of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Illustrations) - Assessment year 2010-11 - A search was carried out in case of real estate broker 'L' in course of which a document was seized showing that assessee had purchased a property in shopping mall - Assessing Officer, initiated assessment proceedings against assessee under section 153C - In course of assessment, Assessing Officer taking a view that assessee had failed to explain source of money from which property was purchased, added said amount to her taxable income - Subsequently, 'L' retracted his statement made in search proceedings and submitted that document in question might belong to any other broker - Tribunal having formed an opinion that said document did not belong to assessee, deleted impugned addition - High Court in impugned order noted that no attempt was made by Assessing Officer to enquire into matter to find out if at all there was any such other broker who had prepared document in question - Moreover, there were internal contradictions and inconsistencies in document in as much as document specified that rent for property in question was payable by assessee from year 2006 onwards whereas according to revenue, said property had already been purchased by assessee - High Court held that in view of aforesaid facts, addition made on basis of single document whose genuineness itself was in doubt, was rightly deleted by Tribunal - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [Para 27] [In favour of assessee] iv. Pr. CIT v. Ankush Saluja [2019] 419 ITR 431 (Delhi) Section 153C, read with section 68, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person - Assessment year 2007-08 - & 3215/DEL/2025 Whether where original assessment under section 143(3), was completed before initiation of search and seizure action under section 132 and no incriminating document was found/seized during search, Assessing Officer has no jurisdiction to make an addition under section 68, while passing order under section 153A/153C - Held, yes [Para 7] [In favour of assessee] v. Pr. CIT v. Allied Perfumers (P.) Ltd. [2021] 431 ITR 237 (Delhi) Section 153C, read with section 68, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Incriminating material) - Assessment years 2001-02 and 2002-03 - Assessee filed its return of income which was processed under section 143(1) - Subsequently, a search and seizure operation under section 132 was conducted upon 'SV' group to which assessee company belonged - Main allegation against this group was that it had taken a large number of accommodation entries in its various group companies by paying cash to several entry operators - Thus, after recording a satisfaction note, a notice under section 153C was issued against assessee - Subsequently, an assessment order was passed under section 153/143(3) making additions to income of assessee under section 68 - Assessee contended that no addition could be made to its income in absence of any incriminating material found against it during course of search - It was noted that Tribunal had given a clear finding of fact that there was no reference to any incriminating material related to assessee found during search which could justify action of revenue - Merely because a satisfaction note was recorded, same could not lead to reach conclusion that notice under section 153C was justified - Whether, on facts, impugned notice under section 153C issued against assessee and further additions under section 68 were unjustified and same were to be set aside - Held, yes [Para 13] [In favour of assessee] vi. Pr. CIT v. S.R. Trust [2021] 438 ITR 506 (Madras) Section 153C of the Income-tax Act, 1961 - Search and seizure - Assessment of any other person (Illustrations) - Assessee, a medical charitable trust, registered under section 12AA was running a multi speciality hospital - A search action was conducted in case of one TJR, who was a supplier of medical, surgical equipment and other accessories to hospital - On basis of certain documents seized during search, Assessing Officer concluded that assessee had siphoned off funds through said TJR allegedly resorting to huge inflation of expenses - Accordingly, a notice under section 153C was issued against assessee - It was noted that Tribunal found that materials seized did not indicate any inflation of purchase expenses by assessee trust - Tribunal further noted that TJR approached Settlement Commission and submitted an application wherein Commissioner stated that there was no supporting evidence of returning cash withdrawn by TJR to hospital - Whether, thus, in absence of any incriminating documents or evidence discovered against assessee, during search upon TJR, jurisdiction under provisions of section 153C could not be assumed against assessee - Held, yes [Paras 9 and 10] [In favour of assessee] & 3215/DEL/2025 In view of the above, the assessing officer having failed to record valid satisfaction note in terms of section 153C and there being no case of any incriminating material pertaining to the appellant found from the third party search, the assumption of jurisdiction u/s 153C is unwarranted and bad in law. 4.1 The Ground No. 2 to 4 are in respect of merits of addition of Rs.22,50,75,000/- u/s 69 and Rs. 22,50,750/- u/s 69A on the alleged ground of unexplained investment being cash investment and interest received thereon. On perusal of the assessment order and also discussed above, the additions are based on whatsapp chat found from the mobile phone of Mr. Parveen Kumar Jain and the reasoning is same as contained in the satisfaction note. The assessing officer has alleged that the appellant had made cash investment with M/s. Mahagun (India) P. Ltd. and is receiving interest @12% as assured income. It may be noted that Page No. 2 to 16 of the assessment order is ad-verbatim contents of the satisfaction note. The CIT(A) has misdirected himself by upholding the additions without any even recording any detailed finding. The CIT(A) has merely relied on Whatsapp Chat without taking into consideration statement of the parties, nature of enquiry by investigation wing or assessing officer and existence of any evidence in support of alleged transactions. The order of CIT(A) is rather cryptic and mechanical. 4.2 In this regard, at the outset, it is submitted that the appellant has not made any cash investment or received any interest income and as such the additions are arbitrary and not sustainable. This fact is further corroborated from the assessment order u/s 153C passed in the case of alleged investee company M/s. Mahagun (India) P. Ltd. for the very same assessment year i.e. 2020-21 and based on the very same search wherein the assessment was completed after accepting returned income without any addition or disallowance. Accordingly, once no adverse inference in respect of alleged cash investment and interest income was drawn in the case of the investee company, it is not open to the assessing officer to take altogether opposite stand in the case of the appellant which is wholly consistent and bereft of merits. 4.3 Further, in addition to the factual inaccuracies and infirmities in the approach of the assessing officer as pointed out above, it is vehemently stressed that the additions are not sustainable as even at the stage of assessment, the assessing officer has failed to bring on record any evidence to prove existence of alleged cash investment or interest income. It is emphatically submitted that the additions made by erroneous inference drawn from the third party digital data obtained from the mobile phone of Mr. Parveen Kumar Jain is not supported from any corroborative evidence and as such the same has no relevance or bearing to the case of appellant. The following points deserves Your Honor’s attention:
& 3215/DEL/2025 The images of unsigned sheets/slips as appearing at Page 6 and 11 of the assessment order in absence of any corroboration have no evidentiary value. In fact, these being third party documents, no presumption u/s 292C could be raised against the appellant. There is no direct or indirect evidence showing payment of alleged cash in the form of investment or interest payments. Even after search, the AO has not found any signed slip or payment receipt or diary showing records of any cash transaction. The whatsapp chat between Mr. Parveen Kumar Jain or his son Mr. Vaibhav Jain with the son of appellant is vague, non-specific and does not provide the context of conversation. In fact, the chat does not even show existence of any cash investment or interest payment. Mere demand of money by one from another could be for several reasons or purpose and same cannot lead to any presumption of interest income. It may kindly be noted that no specific question vis-à-vis appellant was put forth to Mr. Parveen Kumar Jain regarding the images of the so called slips or whatsapp chat found from his mobile phone. It is not the case that Mr. Parveen Kumar Jain or his son Mr. Vaibhav Jain has acknowledged any transaction with the appellant. In any case, no opportunity of cross examination was given as the other party did not attend the assessment proceedings The so called investee i.e. Mahagun group and its Director Mr. Amit Jain has specifically negatived and denied having any transaction with the appellant thereby demolishing the case of the assessing officer altogether. [Refer Page 6 and 17 of the assessment order]. Further, as stated above, the assessment of M/s. Mahagun (India) P. Ltd. for the very same year and based on same search was completed u/s 153C without any addition or disallowance to this effect.
4.4 We may further submit that the assertion of the assessing officer regarding admission of Sh. Parveen Kumar Jain at Page 18 of the assessment order is factually incorrect as Sh. Parveen Kumar Jain has neither named appellant nor acknowledged or attributed any transaction with the appellant. Moreover, as stated above, no specific question or query was put to Sh. Parveen Kumar Jain vis-à-vis the appellant which clearly proves that nothing adverse relating to the appellant was found during search. Similarly, the assertion of the assessing officer in Para 15 of the assessment order regarding the so called cash envelop is also factually erroneous as the name of the appellant does not find mention in the any of the envelops. The relevant image is reproduced hereunder for ready reference:
The assessing officer is attributing the last envelop bearing name of some The assessing officer is attributing the last envelop bearing name of some The assessing officer is attributing the last envelop bearing name of some ‘Kaya ji’ to the appellant which is ex to the appellant which is ex-facie untenable. It is thus clear that the facie untenable. It is thus clear that the assessing officer has not applied his mind to the facts of the case and assessing officer has not applied his mind to the facts of the case and assessing officer has not applied his mind to the facts of the case and proceeded to make addition with pre proceeded to make addition with pre-conceived mindset. 4.5 In addition to above, it is submitted that contents In addition to above, it is submitted that contents of Whatsapp chat are of Whatsapp chat are not reliable in absence of independent corroboration and it is not reliable in absence of independent corroboration and it is not reliable in absence of independent corroboration and it is incumbent upon the assessing officer to bring on record positive incumbent upon the assessing officer to bring on record positive incumbent upon the assessing officer to bring on record positive material to prove the transaction mentioned in the whatsapp chart. It is material to prove the transaction mentioned in the whatsapp chart. It is material to prove the transaction mentioned in the whatsapp chart. It is emphatically submitted that in th emphatically submitted that in the present case, leaving aside any e present case, leaving aside any corroborative material, there is no whatsapp chat between the appellant corroborative material, there is no whatsapp chat between the appellant corroborative material, there is no whatsapp chat between the appellant and Mr. Parveen Kumar Jain regarding any cash investment or interest and Mr. Parveen Kumar Jain regarding any cash investment or interest and Mr. Parveen Kumar Jain regarding any cash investment or interest income and as such the hypothetical presumption drawn by the income and as such the hypothetical presumption drawn by the income and as such the hypothetical presumption drawn by the assessing officer fr assessing officer from some unauthenticated dumb sheets found from om some unauthenticated dumb sheets found from the third party mobile phone is patently erroneous and devoid of the third party mobile phone is patently erroneous and devoid of the third party mobile phone is patently erroneous and devoid of merits. In this regard, reference is made to following decisions wherein merits. In this regard, reference is made to following decisions wherein merits. In this regard, reference is made to following decisions wherein it has been held that whatsapp chat/digital data from mobile phone it has been held that whatsapp chat/digital data from mobile phone it has been held that whatsapp chat/digital data from mobile phone without corroboration has no evidentiary value. out corroboration has no evidentiary value. i. ACIT ACIT v. v. Shanker Shanker Nebhumal Nebhumal Uttamchandani Uttamchandani [2024] 161 taxmann.com 536 (Surat taxmann.com 536 (Surat-Trib.) I. Section 69A of the Income I. Section 69A of the Income-tax Act, 1961 - Unexplained moneys Unexplained moneys (Illustrations) (Illustrations) - Assessment year 2020-21 - Assessing Officer Assessing Officer made certain addition as unexplained money and unexplained interest certain addition as unexplained money and unexplained interest certain addition as unexplained money and unexplained interest income on basis of image found in I income on basis of image found in I-Phone of assessee found during Phone of assessee found during search by taking view that on such amount, assessee earned interest search by taking view that on such amount, assessee earned interest search by taking view that on such amount, assessee earned interest - It was found that Assessing Officer had not recorde was found that Assessing Officer had not recorded in assessment order d in assessment order & 3215/DEL/2025 whether such image/photo was received by assessee in WhatsApp image or it was sent - Assessing Officer nowhere mentioned whether such image was confronted to assessee during search action or his statement was recorded for such image - Whether in absence of any corroborative evidence, there was no justification in making such addition - Held, yes [Para 7] [In favour of assessee] II. Section 69A of the Income-tax Act, 1961 - Unexplained moneys (Illustrations) Assessment year 2020-21 - Assessing Officer made certain addition as unexplained money and unexplained interest on basis of an image retrieved from digital device found in premises of third party during search - It was found that figure of principal amount and interest amount in no way could be correlated with each other - There was no material on record to suggest that such figure was confronted with third party nor addition was based on his statement - Whether there was no justification for making such addition in crores without any independent or corroborative material on record - Held, yes [Para 11] [In favour of assessee] ii. Mr.A. Johnkumar v. DCIT (ITA No. 3028/Chny/2019) (ITAT Chennai) 9.4 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The sole basis for the AO to make addition u/s.69C of the Act, was election held for Nellithope Constituency of Pondicherry Union Territory. The search was conducted on 17.11.2016. the AO had linked photo identity cards issued by M/s.Johnkumar Trust, to general public of Nellithope Constituency, which was found in the premise of the assessee during the course of search, and election held for the constituency and concluded that the assessee had distributed cash of various denominations to voters and thus, made addition of Rs.17 Crs. u/s.69C of the Act, as unexplained expenditure. The AO had also taken support from a WhatsApp message sent from the assessee’s mobile phone to Mr.Somu and analyzed those SMS messages on his own understanding and inferred that the assessee had used some code words to distribute cash to voters. Except photo identity cards issued by M/s.Johnkumar Trust, found in the premises of the assessee and WhatsApp message sent from assessee’s mobile phone, no other evidence was with the AO to draw a conclusion that the assessee had distributed cash to voters amounting to rs.17 Crs. 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. Further, what is written in WhatsApp message is not readable in terms of any income or expenditure. We have gone through those WhatsApp messages, which is available in the assessment order and we find that nothing could be made out from & 3215/DEL/2025 those messages. In some messages, it was written inward on various dates and some tonnes. In some messages, it was written in outward in tonnes. From those messages, the AO given his own meaning and inferred with tonne means lakhs, inward means cash received for distribution and outward means cash distributed. The AO had also in his own meaning for some other contents recorded in WhatsApp messages and inferred cash distribution timings, shift change timings, etc., and concluded that the assessee has received so much cash and distributed so much of cash to various persons in the process. 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. 9.5 We have given out thoughtful consideration to the reasons given by the AO and we ourselves do not subscribe to the reasons given by the AO for the simple reason that first of all, the assessee was not contested for election held at Nellithope Constituency. Therefore, the question of assessee spending such huge money to distribute to voters does not arise. Secondly, the AO has solely relied upon the photo identity cards issued by M/s.Johnkumar Trust and inferred that each photo identity cards, the assessee has paid a sum of Rs.4,000/-. We find that neither the AO has found any physical cash distribution to voters nor examined any of the photo identity card holding to ascertain the fact that cash was distributed to them. 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. Further, election to Nellithope constituency was held under strict monitoring agencies, including the Election Commission of India. The Election Commission of India deploys various agencies for monitoring election process. In this case, neither any of the agencies deployed for monitoring election process, was filed a case against the assessee for doing any malpractices in election, nor the Election Commission of India, had taken any action as pointed out by the Counsel for the assessee. The Election Commission of India has not initiated any enquiry and further, accepted election expenditure & 3215/DEL/2025 statement filed by the assessee. As regards, WhatsApp messages, the assessee had offered an explanation before the AO and contended that those messages are exchanged between the assessee and the other counterpart about the business carried on by them. The AO rejected explanation offered by the assessee on the ground that the assessee could not substantiate its claim. In our considered view, the AO is grossly erred in denying the explanation offered by the assessee, because whether or not any explanation offered by the assessee on the messages, but the fact remains that the AO could bring some positive evidence to link the WhatsApp messages to allege that the contents of WhatsApp messages depicts the undisclosed income or expenses of the assessee. In this case, on perusal of those WhatsApp messages what we could understand is that those messages are a dumb document without any corroborative evidence on record and therefore, no addition can be made on the basis of said documents. iii. DCIT v. Saarrthi Reality and Infra LLP [2025] 176 taxmann.com 859 (Mumbai - Trib.) The addition in question is solely based on an unverified WhatsApp message extracted from a mobile phone number that is not directly associated with the operational team of the assessee. The individual concerned, TV has categorically denied any knowledge of the document and clarified that the references to cash therein pertained merely to token booking amounts. The assessee has duly furnished comprehensive documentary evidence substantiating its claim, including sale agreements, cancellation deeds, and corresponding banking transactions. It is also pertinent to note that all transactions were executed at values exceeding the stamp duty valuation and were fully compliant with the provisions of section 43CA. Upon a careful appraisal of the facts and the evidentiary material on record, it is observed that the WhatsApp message relied upon by the Assessing Officer was retrieved from the mobile device of TV, who was subjected to a search. However, the revenue has failed to bring on record any corroborative material to substantiate the contents of the said message. The impugned document has neither been affirmed by any independent inquiry nor confirmed by any of the parties named therein. In the absence of any supporting material or confirmation, such a WhatsApp message cannot be regarded as a reliable or admissible piece of evidence to warrant an addition under section 69A. It is a settled position that an uncorroborated WhatsApp message, in the absence of any independent supporting evidence, cannot constitute a valid basis for initiating proceedings under section 153C. Accordingly, the addition made under section 69A pursuant to the assessment framed under section 153C is hereby quashed. [Para 7] & 3215/DEL/2025 4.6 In the context of inference drawn from uncorroborated third party documents and loose sheets, reference is made to following case laws: i. Common Cause (A Registered Society v. UOI [2017] 394 ITR 220 (SC) [Sahara Dairy case] Loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court. [Para 20] ii. DCIT v. Mahalaxmi Infracontract Ltd. [2025] 173 taxmann.com 399 (Ahmedabad - Trib.)[12-03-2025] Section 69C, read with section 69A, of the Income-tax Act, 1961 - Unexplained expenditure (Scope of provision) -Assessment years 2017-18, 2020-21 and 2021-22 Authorised person conducted search upon a group and seized various documents Assessing Officer made addition of certain amount as unexplained income of assessee under section 69A on account of cash loan received by assessee from aforesaid group - He also made addition of certain amount towards cash payment of interest as unexplained expenditure under section 69C - Commissioner (Appeals) deleted addition towards cash loan but upheld addition made on account of interest paid - Whether since apart from unsigned excel sheet recovered from third party there was no corroborative evidence to substantiate that assessee had paid interest in cash to third party, addition made on account of interest paid could not be sustained - Held, yes [Paras 26 and 27] [In favour of assessee] The position of the assessee is that the assessee has neither taken any cash loan and nor paid any interest in cash to any party during the impugned year under consideration. The only basis for making addition is an unsigned Excel sheet recovered from the premises of a third party, which cannot be the basis for making additions in the hands of the assessee. It is well settled principle that any addition cannot alone be made on the basis of unsigned excel sheet, without any further corroborative evidence to substantiate that the assessee had paid interest in cash to a third party. [Para 26] iii. DCIT v. Shri Gopal Krishnanatsa Katigar (ITA No. 1143/Bang/24) (02/06/25) (ITAT Bangalore) 31.3 The AO placed significant reliance on the initials “GK” found in the seized material to conclude that the assessee was involved in cash transactions with the Mishra Group. However, no substantive evidence was presented to establish that these entries unequivocally referred to the assessee (Gopal Krishnanatsa Katigar). The seized documents did & 3215/DEL/2025 not contain the assessee’s signature, handwriting, or any other direct evidence linking him to the alleged cash loans. A mere assumption based on entries, without corroborative proof, does not satisfy the standard of evidence required for making an addition under Section 69 of the Act. Further, the AO did not conduct any handwriting analysis or forensic examination to confirm that the noting in the seized documents was authored by or belonged to the assessee. The ld. CIT(A) correctly held that in the absence of such verification, attributing the transactions to the assessee was speculative. This is particularly relevant in income tax proceedings, where findings must be based on substantive and conclusive evidence rather than mere assumptions. 31.8 Another crucial fact noted by the ld. CIT(A) is that a search was conducted at the assessee’s premises on 17.01.2019, yet no evidence was found indicating that he had made cash investments in the Mishra Group. If the assessee had indeed invested ₹ 9,59,00,000/- in cash, some form of physical or documentary evidence—such as notes, agreements, or cash receipts—should have been found at his premises. The absence of such evidence casts serious doubt on the correctness of the AO’s conclusion. 31.9 Further, it is highly improbable that a prudent businessman would extend such a substantial amount in cash without any supporting documentation. The lack of legally enforceable documents such as loan agreements, notes, or confirmations further weakens the Revenue’s case. The ld. CIT(A) correctly held that an addition of such magnitude cannot be made in the absence of concrete evidence. iv. Sachin v. DCIT (ITA No. 2613 & 2614/Del/22) (05/03/25) (ITAT, Delhi) 13. We have heard the rival submissions and perused the materials available on record. At the outset, we find that a search and seizure operation was conducted u/s 132 of the Act on 05.01.2017 in the case of Jindal Bullion Ltd (JBL). During this search, digital data stored in software called „Hazir Johri‟ was seized from the residence of Mr. Kushagra Jindal, promoter of JBL. The said software purportedly contained parallel books maintained by JBL where both transactions through the banking channel and cash transactions were found recorded. The Ld. AO observed that a statement of Ms. Parul Ahluwalia, Director and former employee of JBL, was recorded under Section 132(4) of the Act, wherein, she stated that both „pakka‟ (entries recorded in regular books of account) and „kaccha‟ (unaccounted) transactions undertaken by JBL were documented in the „Hazir Johri‟ software. On perusal of seized data, among others, a ledger named „Pankaj kb‟ allegedly pertaining to Assessee was found. In the said ledger, the transactions made in cash as well as through banking channel were found recorded. But it is pertinent to note that & 3215/DEL/2025 the Hazir Johri Software was found and seized from the premises of JBL at the time of its search under section 132 of the Act. Hence the presumption under section 292C of the Act would apply to JBL and not to the assessee. Even though the proceedings stood initiated under section 153C of the Act on the assessee, the basic presumption under section 292C of the Act would only be on JBL. The assessee on its part had categorically denied the transactions reflected in the said Hazir Johri Software by clearly stating that the entries found thereon contains transactions of various other unrelated parties with the assessee and that the employee of JBL had recorded all the transactions against assessee’s name. Admittedly, the entries reflected in the said software pertains to other unrelated parties with the assessee. Admittedly, the said ledger is a combined ledger account of various transactions pertaining to other unrelated parties with the assessee and contains few transactions pertaining to the assessee. However, there is no concrete material brought on record by the lower authorities to implead assessee with all those transactions. Even for the transactions where assessee’s name was mentioned, the revenue was not able to bring any corroborative evidence to prove the nature of such transaction. Hence it could be safely concluded that the assessee had given a plausible explanation about the contents of the said software. Furthermore, as rightly pointed out by the Ld.AR, there is no corroboration of those entries with the bills / vouchers , sales, stock registers etc, showing the cash sales to prove that the alleged cash sales belong to the assessee. Hence those entries cannot be relied upon for making an addition in the hands of the assessee. 4.7 It is trite law that income tax proceedings are to be carried out on the basis of facts and material and it is not open to assessing officer to make addition on the basis of guesswork or presumption. The principle laid down Supreme Court in the case of CIT V. Dhakeshwari Cotton Mills Ltd V. CIT: 26 ITR 775, 783 is fully applicable wherein it was held as under: As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). 4.8 In the light of the above, the addition of Rs.22,50,75,000/- u/s 69 and Rs. 22,50,750/- u/s 69A on the alleged ground of unexplained & 3215/DEL/2025 investment being cash investment and interest received thereon are purely based on suspicion and hypothetical presumption drawn from uncorroborated and untested third party data and same being not supported from any tangible material or evidence, the CIT(A) was not justified in confirming the same and accordingly it is prayed that the additions may kindly be deleted.”
On the other hand, ld. CIT DR of the Revenue supported the orders passed by lower authorities and stated that the additions are based on images found from the mobile phone of Mr. Praveen Kumar Jain and requested for upholding of the same. However, the Ld. CIT DR did not dispute the factual position that there was no adverse finding or addition in the case of M/s. Mahagun (India) P. Ltd. for the very same assessment year passed u/s 153C of the Act.
Considered the rival submissions and material placed on record. The issue in appeal lies in a very narrow compass of material facts which affects the legality of action u/s 153C and additions made based on digital data found from the third person’s mobile phone who was subjected to search u/s 132 of the Act. The assessee is aggrieved with the action of the assessing officer in assuming jurisdiction u/s 153C and making additions based on third party digital data which is contended to be uncorroborated and not of incriminating nature.
Before moving forward, it is important to note that this is a case of unabated assessment where no assessment proceedings were pending as on the date of handing over of the material or recording of satisfaction by & 3215/DEL/2025 the assessing officer having jurisdiction over the case of the assessee, the fact which has not been disputed by the Ld. DR. In these circumstances, as held by Hon’ble Supreme Court in the case of CIT Vs Singhad Technical Education Society [2017] 397 ITR 344 (SC), the key requirement for assuming jurisdiction u/s 153C is discovery of incriminating material during third party search. Keeping in mind the above, we note that in the present case, the bone of contention between both the parties is whether digital data found from the mobile phone of Mr. Praveen Kumar Jain/Vaibhav Jain constitute incriminating material so as to trigger provisions of section 153C in the case of the assessee.
For the said purpose, we proceed to examine the satisfaction note recorded by the AO before issuing notice u/s 153C of the Act which is placed at Paper book Page 21 to 37. On perusal of the satisfaction note, we find that the AO has heavily relied upon photograph of envelops found in the WhatsApp chat from the mobile phone of Mr. Praveen Kumar Jain which are stated to have containing cash/cheque being assured return from a real estate company namely M/s. Mahagun (India) P. Ltd.. The AO has also made reference to image of a sheet allegedly containing interest calculation also found from the mobile phone of Mr. Praveen Kumar Jain. On close perusal of the image containing envelopes, it is noted that the envelops do not bear the name of the assessee. Further, & 3215/DEL/2025 the sheet allegedly containing interest calculation and name of the assessee as appearing at Paper book Pg 26 is unsigned, unauthenticated and non-specific and does not support the case of the revenue in absence of any corroboration. It is not clear as to whether the name Raghav (F) mentioned in the sheet is identifiable with assessee as the sheet contains no other identification details such a phone number, PAN or address. It is noted that other than discussion about the mobile phone data, the satisfaction note does not contain reference to any physical document or corroborative material to substantiate the content of the mobile phone data. Further, on perusal of the statement of the Mr. Praveen Kumar Jain and Mr. Vaibhav Jain placed at Paper book Pg 76 to 102 and 44 to 63, we find that none of the party has specifically identified or attributed any transaction with the assessee.
We find that there is no independent document such as loan agreement, acknowledgment receipt or any other signed document in support of alleged transaction. It is difficult to perceive existence of huge transactions without any paper trail or physical document being found or seized during search. In these circumstances, the images found from the mobile of Mr. Praveen Kumar Jain in absence of independent corroboration have no evidentiary value. Further, the WhatsApp chat between assessee and Mr. Praveen Kumar Jain and Mr. Vaibhav Jain & 3215/DEL/2025 containing reference to some monetary transaction is also without context as no contextual details was brought out in the satisfaction note particularly when there is apparent mismatch and disharmony between the quantum of the amount alleged. Further, no attempt was made by the search party or assessing officer to cross verify and establish the correlation between the allegation of assured payment by M/s. Mahagun (India) P. Ltd. with contents of the chat of the assessee with Mr. Praveen Kumar Jain. The statement of Mr. Praveen Kumar Jain and Mr. Vaibhav Jain are silent about this aspect and were not confronted about these chats at all. In addition to above, it is worth noting that in response to enquiry by the investigation wing, M/s. Mahagun (India) P. Ltd. has categorically denied any transaction with the assessee. It is thus apparent that the assessing officer drawn erroneous presumption solely based on satisfaction note sent by the AO of the searched person without making any independent examination of facts and enquiry. The amalgamation of the above facts clearly establishes the fallacy in the allegation raised in the satisfaction note and strikes at the very foundation of notice u/s 153C of the Act.
One more thing which stands out to us is the allegation of unexplained loan/investment of Rs.22,50,75,000/- which is undisputedly not based on any material but derived from reverse working from the so-called assured & 3215/DEL/2025 income amount. We must not lose sight of the fact that in case of third party search based proceedings, the action u/s 153C is strictly to be based on incriminating material and there is no scope or leeway to draw arbitrary presumption sans material. Thus, the existence of such allegation in the satisfaction note clearly shows non-application of mind or deprivation of incriminating material. Further, it is nobody’s case that contents of mobile phone were authenticated or validated from any independent evidence or statement and as such action based on untested digital data cannot be sustained.
At this juncture, we find it appropriate to state that the criteria for assumption of jurisdiction u/s 153C is rather strict and there must be cogent and credible incriminating material for valid action. In other words, the third party material must be specific, speaking and must clearly bring out the details of undisclosed transaction. In fact, the benchmark for digital data/mobile phone data is even higher since it requires further corroboration so as to constitute credible evidence against the assessee. We draw strength from the decision of Coordinate bench decision in the case of Mr.A. Johnkumar v. DCIT (ITA No. 3028/Chny/2019) (Chennai Bench) wherein it was held as under: “9.4 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The sole basis for the AO to make addition u/s.69C of the Act, was election held for Nellithope Constituency of Pondicherry Union Territory. The search was conducted on 17.11.2016. the AO had linked photo identity cards issued by M/s.Johnkumar & 3215/DEL/2025 Trust, to general public of Nellithope Constituency, which was found in the premise of the assessee during the course of search, and election held for the constituency and concluded that the assessee had distributed cash of various denominations to voters and thus, made addition of Rs.17 Crs. u/s.69C of the Act, as unexplained expenditure. The AO had also taken support from a WhatsApp message sent from the assessee’s mobile phone to Mr.Somu and analyzed those SMS messages on his own understanding and inferred that the assessee had used some code words to distribute cash to voters. Except photo identity cards issued by M/s.Johnkumar Trust, found in the premises of the assessee and WhatsApp message sent from assessee’s mobile phone, no other evidence & 3092/Chny/2019 was with the AO to draw a conclusion that the assessee had distributed cash to voters amounting to rs.17 Crs. 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. Further, what is written in WhatsApp message is not readable in terms of any income or expenditure. We have gone through those WhatsApp messages, which is available in the assessment order and we find that nothing could be made out from those messages. In some messages, it was written inward on various dates and some tonnes. In some messages, it was written in outward in tonnes. From those messages, the AO given his own meaning and inferred with tonne means lakhs, inward means cash received for distribution and outward means cash distributed. The AO had also in his own meaning for some other contents recorded in WhatsApp messages and inferred cash distribution timings, shift change timings, etc., and concluded that the assessee has received so much cash and distributed so much of cash to various persons in the process. 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 ITA Nos.3028 & 3092/Chny/2019 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. 9.5 We have given out thoughtful consideration to the reasons given by the AO and we ourselves do not subscribe to the reasons given by the AO for the simple reason that first of all, the assessee was not contested for election held at Nellithope Constituency. Therefore, the question of assessee spending such huge money to distribute to voters does not arise. Secondly, the AO has solely relied upon the photo identity cards issued by M/s.Johnkumar Trust and inferred that each photo identity cards, the assessee has paid a sum of Rs.4,000/-. We find that neither the AO has found any physical cash distribution to voters nor examined any of the photo identity card holding to ascertain the fact that cash was distributed to them. 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 & 3215/DEL/2025 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. Further, election to Nellithope constituency was held under strict monitoring agencies, including the Election Commission of India. The Election Commission of India deploys various agencies for monitoring election process. In this case, neither any of the agencies deployed for monitoring election process, was filed a case against the assessee for doing any malpractices in election, nor the Election Commission of India, had taken any action as pointed out by the Counsel for the assessee. The Election Commission of India has not initiated any enquiry and further, accepted election expenditure statement filed by the assessee. As regards, WhatsApp messages, the assessee had offered an explanation before the AO and contended that those messages are exchanged between the assessee and the other counterpart about the business carried on by them. The AO rejected explanation offered by the assessee on the ground that the assessee could not substantiate its claim. In our considered view, the AO is grossly erred in denying the explanation offered by the assessee, because whether or not any explanation offered by the assessee on the messages, but the fact remains that the AO could bring some positive evidence to link the WhatsApp messages to allege that the contents of WhatsApp messages depicts the undisclosed income or expenses of the assessee. In this case, on perusal of those WhatsApp messages what we could understand is that those messages are a dumb document without any corroborative evidence on record and therefore, no addition can be made on the basis of said documents.”
Similarly, reliance is also placed on another decision of Coordinate Bench in the case of ACIT v. Shanker Nebhumal Uttamchandani [2024] 161 taxmann.com 536 (Surat-Trib.) wherein it was held as under: “6. We have considered the rival submissions of both the parties and gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by the assessee. We find that the Assessing Officer made addition of Rs.20,43,500/- as unexplained money and unexplained interest income of Rs.4,27,237/- on the basis of image found in I-Phone of assessee by taking view that on such amount, the assessee earned interest. We find that before the Assessing Officer as well as ld. CIT(A), the assessee explained that there is no corroborative material to prove that the assessee made advance of such amount or earned interest. Neither it contained the name and signature of assessee 6 nor it is mentioned whether this amount was received or paid. We find that the ld. CIT(A) on considering the submission of assessee held that the Assessing officer is silent as to whom these advances & 3215/DEL/2025 were made and from whom such interest was received. The Assessing Officer while making addition, simply relied on the image of lose paper (image in the mobile phone of assessee). The Assessing officer has not brought any direct evidence on record that assessee has lent this amount to any person. There is no incriminating paper found from the WhatsApp image to specify whether it is loan taken or given as no name of person is mentioned on the said paper. The paper/image is not signed by assessee nor in his handwriting, thus, in absence of incriminating evidence, it cannot be held that the assessee has given the said loan out of his unexplained source. The ld. CIT(A) noted that there is no likelihood that some estimate of interest has been worked out taking a particular amount and particular rate of interest, such working does not prove that transaction of advance has been materialized unless there is further evidence to prove that such amount of loan has been taken or given on a particular date. No such evidence was found in the search. The assessee is not engaged in the business of money lending, therefore, working found on paper cannot be treated as sacrosanct evidence. On the basis of such findings, the ld. CIT(A) deleted both the additions.
We have independently examined the facts of the case. We find that the Assessing Officer has not recorded in the assessment order whether such 7 image/photo was received by assessee in WhatsApp image or it was sent. The source of image was not investigated by Assessing Officer. Assessing Officer nowhere mentioned whether such image was confronted to the assessee during the search action or his statement was recorded for such image. Thus, in absence of any corroborative evidence, we do not find any justification for making such addition. Hon’ble Supreme Court in Common Cause Vs Union of India (2017) 394 ITR 220 SC also held that loose sheets of papers are wholly irrelevant as evidence being not admissible under section 34, so as to constitute evidence with respect to transaction mentioned therein being of no evidentiary value. Thus, we affirm the order of ld. CIT(A) on our aforesaid additional observation.”
In the present case, we find that the satisfaction note does not contain reference to any tangible or incriminating material establishing any adverse case against the assessee. Further, as discussed above, the contents of WhatsApp chat or conversation having remained unsubstantiated, the same fails to inspire any confidence and carry no evidentiary value. Accordingly, in our considered view, the assumption of jurisdiction u/s 153C is not backed by any incriminating material and as such we find no reasons to uphold the same. Accordingly, the notice u/s & 3215/DEL/2025 153C is without jurisdiction and is hereby quashed. The Ground Nos.1.1 to 1.4 raised by the assessee are allowed.
We would also like to delve into the merits of the additions, which to our mind is crucial aspect which was completely omitted to be enquired or looked into by the assessing officer while framing the assessment. The Ld. AR has placed on record the assessment order u/s 153C of the Act passed in the case of M/s. Mahagun (India) P. Ltd. for AY 2020-21 wherein it is seen that the notice u/s 153C was issued based on the very same search on Hans Group and the assessment was eventually completed at returned income without making addition. Now, when we compare the assessment order passed in the case of the assessee and in the case of M/s. Mahagun (India) P. Ltd., there is apparent dichotomy as on one hand, the assessing officer has made addition on the ground of unexplained investment u/s 69 and unexplained money u/s 69A based on allegation of amount given and income received from M/s. Mahagun (India) P. Ltd. whereas on the other hand i.e. in the case of M/s. Mahagun (India) P. Ltd., no addition has been made at all even though the proceedings u/s 153C were initiated on this very count. We fail to understand as to how revenue authorities can take altogether opposite stand while dealing with identical set of facts which takes us to conclusion that the allegation made in the present case are not based on & 3215/DEL/2025 any compelling or concrete evidence but merely an inference drawn from unsubstantiated mobile phone data which was rightly rejected by the assessing officer in the case of M/s. Mahagun (India) P. Ltd.. In fact, it was the duty of the assessing officer of the assessee to have conducted enquiry with the assessing officer of the M/s. Mahagun (India) P. Ltd., however no such exercise was done. It would be relevant to make reference to observation of Hon’ble Bombay High Court in the case of CIT vs. Smt. Datta Mahendra Shah [2015] 378 ITR 304 (Bombay) wherein it was observed as under: “10 Before closing we would make a reference of affidavit dated September 8, 2015, of Shri R. P. Murkunde, Assistant Commissioner of Income-tax. It points out that a decision was taken not to file an appeal from the order dated August 31, 2012, of the Tribunal in the case of the respondent - assessee's son but a decision was taken to file an appeal in the case of the impugned order as the facts are not identical. However, no particulars have been set out as to what facts are different from the order which is passed in the case of the respondent-assessee's son and the respondent-assessee. particularly, when the Tribunal has observed that the facts in both the cases are identical. The decision taken on the basis that the facts are not identical must be after recording the circumstances which evidence the difference of facts in two cases and must be so mentioned in the affidavit. The further contention that the officers of the Department who took the decision to file an appeal in this case were different from the officers who have taken the decision not to file appeal in the case of respondent-assessee's son, is no reason not to adopt a consistent stand in identical matters. The Income-tax Department functions as one unit and its stand in identical matters cannot be different merely because the officers dealing with the two files are different. In any case, if there are substantive reasons in facts or in law to take a different view the same should be set out in the affidavit and the explanation that a different view was taken because the officers who took the two decisions were different, is no justification.”
It is further noticed that as per the statement of income and assessment order, the assessee has declared income from Salary, rental income and & 3215/DEL/2025 income under head other sources and there is no allegation or evidence in support of any other source of income as may have been used for making unrecorded investment in terms of section 69 of the Act. Thus, the allegation of unexplained investment is erroneous and misconceived. We further note that while framing assessment particularly in a search case, there is no scope for drawing arbitrary presumption or inferences without any credible material as held by Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. Vs. CIT 26 ITR 775 (SC).
Considering the legal and factual infirmities in the assessment order, lack of credible evidence and the assessment order passed in the case of M/s. Mahagun (India) P. Ltd which is clinching, we are of the considered view that the additions in the present case have no legs to stand and same deserves to be deleted. In reaching the above conclusion, we are guided by the principle laid down by Supreme Court in the case of Common Cause (A Registered Society) v. UOI [2017] 394 ITR 220 (SC), DCIT vs. Sunil Kumar Sharma [2024] 469 ITR 271 (SC) and Pr.CIT v. Krutika Land P. Ltd. [2019] 261 Taxman 454 (SC). Accordingly, we direct the deletion of addition of Rs.22,50,75,000/- u/s 69 and Rs. 22,50,750/- u/s 69A of the Act and hence the Ground No. 2 and 4 stands allowed.
In the result, the appeal filed by the assessee being ITA No.3214/.Del/2025 for AY 2020-21 is allowed.
& 3215/DEL/2025 23. Since the facts and issues are exactly similar to AY 2021-22 our above findings in AY 2020-21 are applicable mutatis mutandis in Assessment Year 2020-21. Accordingly, the appeal filed by the assessee being AY 2021-22 is allowed. 24. To sum up : both the appeals filed by the assessee are allowed. Order pronounced in the open court on this 15TH day of October, 2025.