PENTAPHOS INDUSTRIES PRIVATE LITD, MUMBAI V. DY COMMISSIONER OF INCOME TAX, CENTRAL CIRCEL-6(3), MUMBAI

CO 141/MUM/2022

AI Insights

The case involves Pentaphos Industries Private Limited, which faced an addition of INR 1,00,00,000 to its income for the Assessment Year 2019-20, claimed to be unexplained cash credit. This addition was based on WhatsApp messages and a statement from Mr. Arun C Ashar, the director of the Assessee, during a search operation under Section 132 of the Income Tax Act, 1961. The Assessing Officer concluded that this amount was paid in cash for a land transaction. However, the CIT(A) deleted this addition, leading to the Revenue's appeal and the Assessee's cross-objections. The Tribunal found that the WhatsApp messages lacked evidential value as they were not supported by a certificate under Section 65B of the Indian Evidence Act, 1972, and the draft agreement found was never acted upon.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 113455 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 26-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-01-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 21-11-2022
• Other Referred Cases: Chuharmal Vs. CIT, Chentan Gupta Vs. Assistant Commissioner of Income Tax, Central Circle \\u2013 5, New Delhi
• Laws Referred To: Income Tax Act, 1961, Indian Evidence Act, 1972
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 68; 132; 250; 69A; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 2416/MUM/2022 (Assessment Year: 2019-20) Deputy Commissioner of Income Tax, Central Circle – 6(3), Mumbai, Room No. 1903, 19 th Floor, Air India Building, Nariman Point, Mumbai - 400021 Pentaphos Industries Private Limited, 101, Muktangan, Sarojini Road, Santacruz (West), Mumbai - 400054 [PAN: AADCG0481D] .................. Vs ................ Assessee Respondent CO No. 141/MUM/2022 (In ITA No. 2416/Mum/2022) (Assessment Year: 2019-20) Pentaphos Industries Private Limited, 101, Muktangan, Sarojini Road, Santacruz (West), Mumbai - 400054 [PAN: AADCG0481D] Deputy Commissioner of Income Tax, Central Circle – 6(3), Mumbai, Room No. 1903, 19 th Floor, Air India Building, Nariman Point, Mumbai - 400021 .................. Vs ................ Assessee Respondent Appearances For the Assessee/Department For the Respondent/Assessee : : Shri Dilip K. Shah Shri Nitish Joshi Date of conclusion of hearing Date of pronouncement of order : : 05.01.2023 27.01.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. The present appeal filed by the Revenue and Cross-Objection filed ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 2 by the Assessee arise from the order of Commissioner of Income Tax (Appeals)-54, Mumbai [hereinafter referred to as ‘the CIT(A)’] passed on 23.06.2022 for the Assessment Year 2019-20, which in turn arose from the Assessment Order, dated 26.07.2021, passed under Section 153C of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]. 2. The Revenue has raised the following grounds of appeal: 1. "Whether Ld. CIT(A) erred in ignoring the evidence being the extract of the whatsapp chat taken from Iphone X Belonging to Shri Arun Ashar who in his statement accepted the contents of the said whatsapp chat including the payments by cheques but did not accept the content regarding the cash payment of Rs. 1,00,00,000/-. 2. Whether Ld. CIT(A) erred in deleting the addition made of Rs. 1,00,00,000/- without appreciating the evidence of whatsapp chat found during the search proceedings indicating undisclosed cash payments. 3. The Assessee has raised the following grounds of Cross Objections: "1. The evidence in the nature of Whatsapp chat does not have any evidential value and cannot be the sole basis of making an addition to the total income. 2. The addition made by invoking the provisions of section 68/69A is liable to be deleted since they have no applicability in the instant case. 3. The Assessing Officer erred in making an addition of Rs. 100,00,000 without appreciating the fact that the difference in gross consideration payable as mentioned in the Whatsapp chat (viz. 4,39,95,600) and actual consideration paid (viz. 4,09,62,790) was Rs. 30,32,810.” Since the appeal and cross-objections involve connected issues, both are being taken up together hereinafter. ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 3 4. The relevant facts, in brief, are that the Assessee filed return of income for the Assessment Year 2019-20 on 28.09.2019 declaring ‘Nil’ income. A search and seizure action under Section 132 of the Act was carried out in the case of UPL Group on 22.01.2020. During the search operation certain Whatsapp messages were found in the mobile of Mr. Arun C Ashar, the Director of Assessee-Company (i.e. Pentaphos Industries Private Limited earlier known as Gabo Products Private Limited). A draft agreement relating to purchase of land was found in the premises of Mr. Arun C Ashar. Statement of Mr. Arun C Ashar was recorded under Section 132(4) of the Act. On the basis of the aforesaid, notice under Section 153C, dated 31.12.2020, was issued to the Assessee. In response thereto, the Assessee filed its return of income on 14.01.2021 declaring ‘Nil’ income. During the assessment proceedings, the Assessing Officer analyzed the Whatsapp Chat, dated 07.02.2019, and 10.05.2019 between the Mr. Arun C Ashar, the director of the Assessee- Company and Mr. Prafulbhai Patel Bharadia as well as the statement of Mr. Arun C Ashar. The Assessing Officer concluded that the Assessee had purchased land bearing Plot No. 830/4 at GIDC, Jhagadia, Gujarat from M/s. JC Engineers and paid cash of INR 100,00,000/- in relation to the aforesaid transaction. Notices dated 28.01.2021, 16.07.2021 and 23.07.2021 were issued to the Assessee asking him to show cause why addition of INR 100,00,000/- should not be made in the hands of the Assessee. In the reply filed by the Assessee, it was submitted by the Assessee that the acquisition of the plot of land at GIDC, Jhagadia, Gujarat was concluded after prolonged negotiations on 05.09.2018 for total consideration of INR 4,51,45,150/-. However, due to difference in the plot size, the consideration was reduced to INR 4,09,61,790/-. The entire payment was made through cheque. The Assessee also ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 4 filed a copy of confirmation issued by JC Engineering and the bank statement for the relevant period in support of its contention that all payment was made through normal banking channel and no cash was involved. However, the Assessing Officer was not convinced and made an addition of INR 100,00,000/- under Section 69A of the Act holding the same to be unexplained cash credit vide Assessment Order, dated 26.07.2021, passed under Section 153C of the Act. 5. Being aggrieved, the Assessee preferred appeal before the CIT(A) against the Assessment Order, dated 26.07.2021. The CIT(A) granted relief to the Assessee by deleting the addition of INR 1,00,00,000/- vide order, dated 23.06.2022. 6. Being aggrieved, the Revenue has preferred the present appeal, while the Assessee has filed cross-objections supporting the order passed by the CIT(A), inter alia, challenging the evidentiary value of the Whatsapp chat messages. 7. The Learned Departmental Representative submitted that the Assessing Officer had made the addition of INR 100,00,000/- by relying upon incriminating material found during the course of search. Taking us through the Whatapp Chat, dated 07.02.2019, and 10.05.2019, reproduced in the assessment order, he submitted that the Whatsapp Chats clearly showed that an amount of INR 100,00,000/- was paid on 02.01.2019. Mr. Arun C Ashar had admitted in the statement recorded under Section 132(4) of the Act that the Mr. Prafulbhai Patel was engaged by the Assessee for the purpose of purchasing land from J.C. Enterprises. The draft sale agreement seized during search also showed that a consideration of INR 4.31 Crore was agreed upon between the parties. He ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 5 concluded his arguments by placing reliance on the assessment order. 8. In response, the Learned Authorised Representative for the Assessee mounted challenge to the evidentiary value of Whatsapp Chats. He submitted that the Whatsapp Chat could not be relied upon since the provisions of Section 65B of the Indian Evidence Act, 1972 were not complied with. Without prejudice of the aforesaid, he submitted that the contents of the Whatsapp Chat contained discrepancies and therefore, could not be relied upon. The draft agreement found at during search was nothing more than a draft which was never acted upon. Relying upon the confirmation, dated 09.03.2020, issued by JC Engineers (hereinafter referred to as the ‘Confirmation’), Memorandum of Understanding, dated 05.09.2018, between JC Engineers and the Assessee [operating under the name ‘Gabo Products Private Limited’ at the relevant time]. (hereinafter referred to as the ‘MoU’) and relevant extract of the bank statement, placed before us as part of the paper-book, the Learned Authorised Representative for Assessee submitted that no cash was involved in the transaction as entire payment was made through the normal banking channel. He submitted that the CIT(A) has rightly observed that Mr. Arun C Ashar had denied making any payment in cash in his statement recorded under Section 132(4) of the Act. 9. We have considered the rival submission and perused the material on record. The Assessee had placed on record the MoU. As per this MoU, under offer cum allotment letter dated 31.03.2012, JC Engineers was granted leasehold rights of a plot of land bearing Plot No. 830/4 by GDIC. JC Engineers had not paid the entire ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 6 consideration for allotment of leasehold rights and an amount of INR 1.42 Crores (along with interest) was outstanding as on 05.09.2018. Area of around 3,100 Sq. Mtrs out of allotted area of 19,000 Sq. Mtrs was allotted to JC Engineers was acquired for canal, leaving total assignable area of 15,900/- Sq. Mtrs. As per the Confirmation, the Assessee had paid INR 2,18,65,000/- to JC Engineers and aggregate amount of INR 1,20,62,040/- [INR 1,20,46,390/- to GDIC + 15,650/- Water Bill Expenses] on behalf of JC Engineers for acquiring the plot of land. Taking the total consideration paid for acquiring the plot of land to by normal banking channel to INR 4,09,62,790/- as has been claimed by the Assessee. Mr. Arun C Ashar, director of the company, in his statement recorded under Section 132(4) of the Act clearly stated that no cash was paid for acquiring the plot of land. We note that the Whatsapp Chats were sent to Mr. Prafulbhai Bharadia and not to JC Engineers. The sellers, have issued the Confirmation to support stand of the Assessee that no cash has been received and have provided details of payments received through cheque. The sole basis of addition is, therefore, Whatsapp Chats sent to Mr. Prafulbhai Bharadia who was neither been examined nor confronted with the Whatsapp Chat messages or the statement given by Mr. Arun C Ashar. As rightly observed by the CIT(A) nothing has been brought on record to show that INR 100,00,000/- was paid in cash by the Assessee. In view of the aforesaid, we hold that the Assessing Officer did not have any cogent material for making addition of INR 100,00,000/- in the hands of the Assessee either under Section 68 or under Section 69A of the Act. 10. In view of the above, Ground No.1 and 2 raised by the Revenue are dismissed and Grounds of 2 & 3 of Cross Objection are dismissed as ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 7 being infructuous. 11. As regards, the Ground No. 1 of Cross Objections, we note that during the course of hearing, it was contended by the Learned Authorised Representative for the Assessee that Whatsapp Chats could has no evidentiary value since the Revenue had not filed certificate in compliance with Section 65B of the Indian Evidence Act, 1882 and thus, not proved the same. We reject the aforesaid contention raised on behalf of the Assessee for the following reasons. Firstly, it is settled legal position that what is admitted need not be proved. Mr. Arun C Ashar had, in reply to Q.21 forming part of his statement recorded under Section 132(4) of the Act, admitted that the IphoneX (with phone number 9820025080 bearing IMEI number 357963080072760) belonged to him and the Whatsapp chat of the phone was also operated by him. He never contended that the Whatsapp Chat was not sent/received by him. Further, in reply to Q27 forming part of his statement, Mr. Arun C Ashar had corroborated the Whatsapp Chat under consideration, though to a limited extent, by stating that Mr. Prafulbhai Bhagaria had stated that JC Engineers wanted cash for the land deal, however, he did not make any payment in cash. The stand of the Assessee before the assessment proceedings and before the CIT(A), in effect, was that the Whatsapp chats were never acted upon and the agreement seized during the search operations was only a draft agreement. Thus, the requirement to comply with the provisions of Section 65B of the Indian Evidence Act, 1882 does not arise in the facts and circumstances of the present case. Secondly, the assessment proceedings are non-adversarial in nature and the entire exercise is directed to ensure a fair and proper assessment on the assessee. The rigors of the rules of evidence contained in ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 8 the Indian Evidence Act 1882 are not applicable to the assessment proceedings. The provisions of the Indian Evidence Act apply to judicial proceedings. The proceedings before the income tax authorities are regarded as judicial proceedings for the limited purpose specified under Section 136 of the Act. However, income tax authorities desirous of invoking the principles contained in the Indian Evidence Act, 1882 in proceedings before them are not prevented from doing so. Thus, evidence relied upon by the income tax authorities cannot be rejected solely for the reason that the provisions contained in the Indian Evidence Act, 1882 have not been complied with. Our view draws strength from the judgment of the Hon’ble Supreme Court in the case of Chuharmal Vs. CIT : [1988] 172 ITR 250 (SC) and the decision of the Delhi Bench of the Tribunal in the case of Chentan Gupta Vs. Assistant Commissioner of Income Tax, Central Circle – 5, New Delhi: [2014] 160 TTJ 9 (Delhi - Trib.)[21-06-2013]. 12. In view of the aforesaid, cross-objection no.1 raised by the Assessee is dismissed. 13. In result, the present appeal by the Revenue and the Cross Objections by the Assessee are dismissed. Order pronounced on 27.01.2023. Sd/- Sd/- (B.R. Baskaran) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 27.01.2023 Alindra, PS ITA. No. 2416/Mum/2022 & CO No. 141/Mum/2022 Assessment Year: 2019-20 9 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Assessee 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai