DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, SURAT, MAJURA GATE V. DHAVAL BHARATKUMAR SHAH, NANPURA

ITSSA 3/SRT/2025

AI Insights

The case involves an appeal by the revenue against the order of the Commissioner of Income-tax (Appeals) - 4, Surat, which had deleted an addition of Rs.65,00,000 made by the Assessing Officer (AO) on account of unexplained investment and restricted another addition of Rs.29,50,000 to Rs.29,500. The additions were based on WhatsApp images and chats, which the CIT(A) found lacked corroborative evidence and were based on unjustified extrapolations by the AO. The revenue contended that the CIT(A) erred in her decision, while the assessee defended the CIT(A)'s order, citing the absence of any direct connection between the WhatsApp materials and the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775313 (ITAT-SURAT)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2021-2022
• Appeal Filed On: 13-02-2025
• Other Referred Cases: Sumati Dayal Vs. CIT, CIT vs. Durga Prasad More, CIT vs. Maulik Kumar K. Shah, ACIT vs. Shankar Benhumal Uttamchandan, ACIT vs. Shri Jaiprakash D. Agarwal, CBI Vs. VC Shukla, Ashokkumar Premchandbhai Patel Vs. DCIT, Cir \\u2013 2(1)(1) & ANR., The Pr. CIT (Central), Surat Vs. Jayantibhai Virjibahi Baraiya, The DCIT, CC-2, Surat Vs. Jayantibhai Virjibahi Babariya, The DCIT, CC-2, Surat Vs. Shri Pravinchandra Dahyabhai Umriger, CIT Vs. Indeo Airways (P.) Ltd., ACIT Vs. Sharad Chaudhary, SMC Share Brokers Ltd. Vs. DCIT, Bansal Strips (P) Ltd. Vs. ACIT, CC-5, Atul Kumar Jain Vs. DCIT, DCIT, CC-2(1), Nagpur Vs. M/s. Metrocity Homes, Harvinder Kaur Vs. ACIT, CC-1, Ludhiana, Sh. Lalman Yadav Vs. ACIT, CC-16, New Delhi
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P. M. JAGASHETH
• Assessee Lawyers: AASHISH POPHARE
• Keywords: Set aside; Corroborative evidences; Unexplained investment

Judgement Text

"1 IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकरअपीलसं./IT(SS)A No.3/SRT/2025 Assessment Year: (2021-22) (Hybrid hearing) DCIT, Central Circle - 1, Surat बनाम/ Vs. Shri Dhaval Bharatkumar Shah, 10-F, Siddhshhila Apartment, Nanpura, Surat - 395001 èथायीलेखासं./जीआइआरसं./PAN/GIR No: ACTPS6405Q (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) िनधाŊįरती की ओर से/Appellant by Shri P. M. Jagasheth, CA राजˢकी ओर से /Respondent by Shri Aashish Pophare, CIT -DR with Shri Kevin Langaliya, CA सुनवाई की तारीख/Date of Hearing 08/08/2025 उद ्घोषणा की तारीख/Date of Pronouncement 11/09/2025 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the revenue emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, 'the Act’) dated 16.12.2024 by the Commissioner of Income-tax (Appeals) - 4, Surat [in short, “the CIT(A)”] for the assessment year (AY) 2021-22. 2. The grounds of appeal raised by the revenue are as under: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.65,00,000/- made by the AO on account of unexplained investment by way of cash loan which were unearthed after investigation and were in coded form with 2 zero suppressed on the basis of cogent incriminating documents/evidences found and impounded and which Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 2 were duly examined by the Assessing Officer in the body of the assessment order. 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in restricting the addition to Rs.29,500/- as against the addition of Rs.29,50,000/- made by the AO on account of unaccounted money on WhatsApp chat which were unearthed after investigation on the basis of cogent incriminating documents/evidences found and impounded and which were duly examined by the Assessing Officer in the body of the assessment order. 3. In addition to the ground no. 2 above, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in partly accepting the investigation and its outcome and accepting that the amount 29500 connected to be dastavej and has restricted addition to that extent only and giving relief of Rs.29,20,500/- which was totally unwarranted. 4. In addition to above grounds, on the facts and in the circumstances of the case and in law, the CIT(A) has granted relief de horse provisions of section 292C of the Assessee. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO ignoring the principles of \"Human Probability Test\", i.e. preponderance of probabilities which is applicable to Income tax proceedings as laid down in Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540.” 3. The facts of the case in brief are that the assessee was engaged in the construction work during the year. The assessee was a partner in several partnership firms. In this case, the original return of income u/s.139(1) of the Act was filed on 22.12.2021 declaring total income at Rs.12,52,760/- for the A.Y. 2021-22. A Search action u/s.132 of the Act was carried out in case of PVS Sarma group of Surat on 21.10.2020 and the assessee was one of the persons covered in the search action. During assessment proceedings, notices and questionnaires were issued to the assessee from time to time. In response to Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 3 the same, the assessee filed various replies and details. Subsequently, assessment u/s.143(3) of the Act was completed on 25.09.2022 assessing total income at Rs.1,07,02,760/- after making additions of (i) Rs.65,00,000/- on account of unexplained investment by way of cash loan based on WhatsApp image and (ii) Rs.29,50,000/- on account of unaccounted money on WhatsApp chat. 4. Aggrieved by the assessment order, assessee preferred appeal before CIT(A) on 13.10.2022. Regarding the addition made of Rs.65,00,000/- on account of unexplained investment, the CIT(A) observed that basis for aforesaid addition was a WhatsApp image which had been reproduced on Page no.3 of the assessment order. In Para 6.10 of the assessment order on page no. 7, the AO has stated that – ‘the name of the assessee has been written on the top of the sheet’. It was, however, observed by CIT(A) on perusing the WhatsApp image that no name had been written there. 4.1 Further, the AO observed at page 3 of the order that date has nowhere been mentioned in the image; therefore, transactions mentioned in the said pages were there are treated to be pertaining to the year of search, i.e., AY 2021-22. The AO also observed that as per general market practice, five zeros (00000) are to be added after the number in the image. After decoding, amounts were read as under: Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 4 Sr. No. Name Amount 1 Anandbhai Shah T/o Rajanbhai Rs.10,00,000/- 2 S.K. Sheth T/o Rajanbhai Rs.25,00,000/- 3 Vijaybhai/Vinodbhai Rs.30,00,000/- 4.2 The CIT(A) considered the aforementioned observations of AO as surmise and conjecture because there was no supporting evidence or corroboration. Therefore, addition of Rs.65,00,000/- was deleted by CIT (A) by relying on the following decisions, viz., (i) CIT vs. Maulik Kumar K. Shah, 307 ITR 137 (Guj.), (ii) ACIT vs. Shankar Benhumal Uttamchandan, 161 taxmann.com 536 (Surat – Trib.) and (iii) ACIT vs. Shri Jaiprakash D. Agarwal, IT(SS)A No.78, 60 & 57/SRT/2022 (Surat -Trib.). 4.3 Regarding the addition of Rs.29,50,000/- as unexplained money, the CIT(A) observed that the same was also made on the basis of a WhatsApp chat. The assessee replied in a WhatsApp message to Dhoombhai, Universal that ‘Yes, 29.50 cash received’. On this basis, addition of Rs.29,50,000/- was made by adding 00000 to 29.50. The CIT(A) observed that only part of WhatsApp message has been taken, and the lower part of messages had been ignored by the AO. The CIT(A) found that there were other messages also, viz., ‘Have you received all pending dues’, ‘now only maintenance whatever chat remaining’, ‘I’ll send chk’ and ‘Now tell me on which day I have to come for Dastavej to Govt. office’. It was observed by CIT(A) that there is no corroborative evidence relating to the addition of Rs.29,50,000/- and unjustified extrapolation has been Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 5 done by the AO. It was further observed that even though it is stated ‘000’ is to be added, however, in fact that ‘00000’ had effectively been added since 29.50 had been decoded as Rs.29,50,000/-. In view of the same, the addition was restricted to Rs.29,500/- by adding ‘00000’. In view of the same, the appeal of the assessee was partly allowed by the CIT(A). 5. Aggrieved by the above order of the CIT(A), the Revenue has preferred appeal before this Tribunal. The Ld. Sr. D.R. for the revenue relied on the order passed by AO and contended that the addition of Rs.65,00,000/- as unaccounted investment was made on the basis of cogent incriminating material recovered during the search proceedings and therefore, the same may be upheld. Regarding the restriction of addition to Rs.29,500/- by CIT(A), the ld. Sr. DR contended that the addition of Rs.29,50,000/- was made by the AO on account of unaccounted money received by the appellant. The same was unearthed after investigation of the cogent incriminating evidence found and impounded during the search proceedings. He submitted that the income tax proceedings are based on the principles of preponderance of human probability and rigors of Evidence Act do not apply as it applies to criminal and civil cases. 6. The ld. AR submitted a paper book containing compilation of case laws relied upon by the assessee. Reliance has also been placed on the following decisions, viz., (i) CBI Vs. VC Shukla [1998] 1998 taxmann.com 2155 (SC), (ii) Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 6 Ashokkumar Premchandbhai Patel Vs. DCIT, Cir – 2(1)(1) & ANR. (R/SCA No. 6462 of 2022 of Guj. HC), (iii) The Pr. CIT (Central), Surat Vs. Jayantibhai Virjibahi Baraiya (R/Tax Appeal No. 397 of 2023 of Guj. HC), (iv) The DCIT, CC-2, Surat Vs. Jayantibhai Virjibahi Babariya (ITA No.195/SRT/2021 (ITAT, Surat), (v) The DCIT, CC-2, Surat Vs. Shri Pravinchandra Dahyabhai Umriger – ITA Nos. 134 to 137/SRT/2021 (ITAT, Surat), (vi) CIT Vs. Maulikkumar K. Shah [2008] 307 ITR 137 (Gujarat HC), (vii) DCIT vs. Sunil Kumar Sharma [2024] 159 taxmann.com 179 (Karnataka HC), (viii) Mohd. Yusuf and ANR. vs. D and ANR. AIR 1968 BOM 112 (Bombay HC), (ix) CIT Vs. Indeo Airways (P.) Ltd. [2012] 26 taxmann.com 244 (HC of Delhi), (x) ACIT Vs. Shanker Nebhumal Uttamchandani, 161 taxmann.com 536 (Surat ITAT), (xi) ACIT, Surat Vs. Shri Jaiprakash D. Agarwal IT(SS)ADJ No.78,60, 57/SRT/2022 (ITAT, Surat), (xii) ACIT vs. Sharad Chaudhary, 55 taxmann.com 324 [Delhi Trib.], (xiii) SMC Share Brokers Ltd. Vs. DCIT [2008] 22 SOT 7 (Delhi) (URO) (ITAT, Delhi), (xiv) Bansal Strips (P) Ltd. Vs. ACIT, CC-5 [2006] 99 ITD 177 (ITAT, Delhi), (xv) Atul Kumar Jain Vs. DCIT [1999] 64 TTJ 786 (ITAT, Delhi), (xvi) DCIT, CC-2(1), Nagpur Vs. M/s. Metrocity Homes (ITA No. 165/Nag/2023 (ITAT, Nagpur), (xvii) Harvinder Kaur Vs. ACIT, CC-1, Ludhiana (ITA No. 691 & 692/CHD/2023 (ITAT, Chandigarh), (xviii) Sh. Lalman Yadav Vs. ACIT, CC-16, New Delhi (ITA No. 5869/Del/2018 (ITAT, Delhi). The ld. AR contended that no name, date or context connects the WhatsApp image with the assessee. Besides, Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 7 interpretation of \"29.50\" as Rs. 29,50,000/- is arbitrary and the chat suggests smaller amounts and legitimate dealings. 7. We have heard both the parties and perused the material available on record. We have also deliberated upon the decisions relied upon by the ld. AR. Regarding the addition of Rs. 65,00,000/-, we find that the name of the assessee does not appear on the WhatsApp image. Besides, the aforesaid image is undated and no nexus is established with AY 2021-22. It is further noted that the decoding method adopted by AO by adding two zeros is not substantiated by any independent or corroborative material. Also, no statement, confession, or documentary evidence has been obtained which connects these entries to the assessee. It is pertinent to mention that presumption under section 292C of the Act applies only when the document is found in possession of the assessee and is relevant. 7.1 It is noticed that inference drawn by AO is based on assumption and is not supported by any corroborative evidence. In the case of Maulik Kumar K. Shah (supra), the Hon’ble jurisdictional High Court held that notings on loose sheets, without supporting evidence, cannot justify additions. We find no infirmity in the decision of the CIT(A) in deleting this addition. Ground No.2 is accordingly dismissed. Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 8 7.2 As regards the addition of Rs.29,50,000/-, it is noted that the WhatsApp chat relied upon by the AO was only partially considered. It has been rightly noted by the CIT(A) that the entire conversation referred to “prior dues”, “cheques”, and “dastavej” (legal registration), indicating a formal transaction. Besides, the figure “29.50” was decoded by AO as Rs. 29,50,000/- by adding five zeros, without any justification. The CIT(A)’s inference that it refers to Rs. 29,500/- is more plausible in context. No cash seizure, statement, or supporting material is on record to support the decoding done by AO. Even under the test of human probability, there is no coherence in the AO’s decoding. The Hon’ble Supreme Court in case of V. C Shukla (supra), held that entries in diaries, not maintained in regular course of business, are not admissible unless corroborated by independent evidence. Similar view was taken by the Hon’ble High Court of Karnataka in the case of DCIT Vs. Sunil Kumar Sharma (2024) 159 taxmann.com 179 (Kar.), wherein it was held as below: “Loose sheets of paper/diaries found during the search containing typed entries, not shown to form part of books of account regularly maintained by assessee or his business entities, did not constitute material evidence and thus, impugned notices issued under section 153C to assessee based on material contained in diaries/loose sheets, were required to be set aside, being void and illegal.” 7.3 In view of the facts discussed above and the decisions cited supra, we do not find any infirmity in the finding of the CIT(A) in restricting additions to Rs.29,500/-. Ground No.3 is accordingly dismissed. Printed from counselvise.com IT(SS)A No.3/SRT/2025/AY 2021-22 Dhavan Bharatkumar Shah 9 8. For the reasons given above, we find no merit in the revenue’s appeal. The CIT(A) has recorded clear and reasoned conclusion after considering the material on record and relevant legal principles. There is no perversity in the findings of fact warranting interference under the appellate jurisdiction of this Tribunal. Accordingly, the appeal filed by the revenue is dismissed and the order of the CIT(A) is upheld. 9. In the result, the appeal of the revenue is dismissed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 11/09/2025. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 11/09/2025 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat Printed from counselvise.com "