DIVYESH RAMESHCHANDRA DHANANI,BHIWANDI V. DCIT-CC-3, THANE, THANE

ITSSA 1075/MUM/2025

AI Insights

The case involves an appeal by Divyesh Rameshchandra Dhanani against the order of the Commissioner of Income Tax (Appeals)-11, Pune, which upheld the addition of Rs. 1,75,000 to the assessee's income for the Assessment Year 2020-21. This addition was initially made by the Assessing Officer based on a WhatsApp chat screenshot, alleged to show that the assessee received unexplained cash. The Tribunal examined whether the WhatsApp chat could be considered conclusive evidence of cash receipt by the assessee. It was determined that the chat, being a communication between third parties and not found in the assessee's premises, lacked the necessary corroborative evidence to support the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126442 (ITAT-MUMBAI)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Other Referred Cases: Prashant Prakash Nilawar vs DCIT, Ambalal Sarabhai Enterprise vs. KS Infraspace LLP Ltd, Mr. A. Johnkumar vs. DCIT, ACIT vs. Lata Mangeshkar, Common Cause v. UOI
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANYOGITA NAGPAL
• Assessee Lawyers: SIDHARTH KOTHARI
• Keywords: Corroborative evidences; Unexplained expenditure; Documents seized; Search and seizure; Loose papers; Grounds of appeal; No evidence; Tax settlement; Election expenses; Commissioner; Commissioner of Income Tax; AMP; Voucher; Transactions; Deleted; Department; Hon'ble Apex Court; Loose Paper; Explanation; Section 132; Seized document; Whatsapp conversation
• Section: 143(3); 11; 132; 69A; 696

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & MS PADMAVATHY S, AM IT(SS)A No.1075/Mum/2025 (Assessment Year: 2020-21) Divyesh Rameshchandra Dhanani, Flat No. 203, 2nd Floor, A-Wing, H.No. 1346, Akshay Park, Kamatghar, Maharashtra-421302. PAN: AIFPD9515L Vs. DCIT-CC-3, Room No. 12, A Wing, 6th Floor, Ashar IT Park, Thane (West), Maharashtra-400604. Appellant) : Respondent) Appellant /Assessee by : Mr. Sidharth Kothari, AR Revenue / Respondent by : Smt. Sanyogita Nagpal- CIT-DR Date of Hearing : 15.04.2025 Date of Pronouncement : 24.04.2025 O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)-11, Pune [In short 'CIT(A)'] dated 20.01.2025 for AY 2020- 21. The assessee raised the following grounds of appeal: “1. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 1,75,000/-u/s 69A r.w.s 115BBE of the Act made by the Ld. Assessing Officer in the assessment order passed u/s 143(3) of the Income Tax Act, 1961 dated 28.09.2021 on account of alleged unexplained money on the basis of a screenshot of whatsapp chat seized from Party No. MN-1, Bundle No 1, page no. 28. 2 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani 2. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 1,75,000/- completely disregarding the reply of the appellant and ignoring the fact that it is a printout of screenshot of whatsapp chat, where it is alleged that the assessee has received cash of Rs. 1,75,000/- which was not found from the premises of the appellant. 3. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 1,75,000/- ignoring the fact that a printout of screenshot of whatsapp message seized from third person, though containing the name of assessee is not sufficient to make additions in the hands of assessee. Presumption u/s 132(4A)/292C can be used only against the person from whose premises the document is found and not against the person whose name appears in the seized document. The allegation of the department is solely based on the seized document which has not been corroborated by independent inquires / corroborative evidence. 4. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 1,75,000/- made by the Assessing Officer even though no unaccounted assets in the form of cash, jewellery or stock were found. 5. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the action of Assessing Officer in invoking provision of section 69A despite the fact that the appellant was not found to be the owner of any unexplained money, bullion, jewellery or other valuable article. 6. On the facts and the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) consequently erred in directing AO to recompute the interest u/s 2348 of the Act to the extent of the additions confirmed by him.” 2. The assessee is an individual and filed the return of income for AY 2020-21 on 10.01.2021 declaring a total income of Rs. 4,34,040/. There was a search and seizure operation under section 132 of the Income Tax Act, 1961 (the Act) carried out in the business as well as residential premises of Dodhia Group including the assessee on 27.11.2019. The case was centralized and the AO issued a show cause 3 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani notice calling on the assessee to provide details pertaining to the printout of the Whatsapp chat seized from the residence of Mr.Bhadresh Masukhlal Dodhia and also pertaining to cash voucher seized during the course of search. The assessee submitted that the cash voucher for Rs.50000 seized is unsigned and cannot be treated as an evidence that the assessee has received cash. With regard to the printout of Whatsapp chat where it is alleged that cash of Rs.1,75,000 is paid, the assessee submitted that paper was seized from a third party premises and that documents seized from assessee's premises only can be used for making any addition. The assessee also requested the AO to provide with an opportunity to cross examine. However the AO did not accept the submissions of the assessee and held that though the assessee has received cash he failed to provide satisfactory explanation towards the source. Accordingly the AO proceeded to make addition of both Rs.50000 and Rs.1,75,000 under section 69A of the Act. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) deleted the addition made by the AO to the extent of Rs. 50,000/- by holding that “27. The ground no. 2 is regarding the addition of Rs. 50,000/- made by the AO on the basis of page no. 15 of bundle no.1. The said seized page is scanned as under: “28. A perusal of the above cash voucher suggest that it is unstamped and unsigned and therefore it cannot be ascertained as to whether the cash payment was actually 4 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani made. Furthermore, the name mentioned on the said cash voucher does not match with the name of the appellant except first three alphabets. It is further seen that the AO has not brought anything on record to suggest that the said payment was actually made and was paid to the appellant. It may also be mentioned that the AO has not referred to any statement of members of Dodhia family wherein it was admitted that this amount of Rs. 50,000/- was paid to the appellant. 29. To sum up, the said seized document by itself is not sufficient to hold that the appellant has received a sum of Rs. 50,000/- in cash. Accordingly, the addition of Rs. 50,000/- made by the AO is directed to be deleted. The ground no. 2 raised by the appellant is ALLOWED. 3. The CIT(A) however confirmed the addition made to the extent of Rs. 1,75,000/- by holding that the assessee has not discharged the onus of explaining the source and the explanation for the WhatsApp message in which it is stated that Rs. 1,75,000/- is paid to the assessee. 4. The ld. AR argued that the addition merely based on the WhatsApp chat without any corroborative evidence cannot be sustained. The ld. AR further argued that in the statement recorded from Mr.Bhadresh Masukhlal Dodhia there is no mention of the WhatsApp chat based on which the addition is made. The ld. AR also submitted that the WhatsApp chat has got no evidentiary value and that a printout of the WhatsApp chat was not found in the premises of the assessee. Accordingly, the ld. AR argued that the addition made based on WhatsApp chat cannot be sustained. 5. The ld. DR on the other hand submitted that the assessee has not filed any details before the AO and that even before the CIT(A) the assessee failed to discharge the onus of explaining the source. The ld. DR accordingly supported the order of the lower authorities. 6. We heard the parties and perused the material on record. During the course of search in the case of Dodhia Group certain loose papers and documents were found. 5 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani The AO vide show-cause notice dated 17.09.2021 called upon the assessee to explain Bundle No.1 of party MN 1 & AB 1 found during the course of search and to submit whether the transaction has been recorded in the books of accounts. The assessee submitted before the AO that the printout of screeshoot of WhatsApp chat where it is alleged that assessee has received cash of Rs. 1,75,000/- was seized from the residence of Mr. Mansuklal Dhodia and Mr. Bhadresh Mansuklal Dhodia and not found in the premises of the assessee. The assessee also argued that the WhatsApp message seized from a third person's phone cannot be treated as sufficient evidence to make addition in the hands of the assessee. The printout of the WhatsApp chat seized is as extracted below - 7. We notice from the above that the message is received by Mr. Bhadresh Mansuklal Dhodia from one Mr.Bhupat Neksa mentioning the assessee's name. The 6 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani CIT(A) while confirming the addition has held that the above chat evidences that the transaction has actually occurred and that the onus is on the assessee to explain the entry. We are unable to appreciate the said observation of the CIT(A) for the reason that without any corroborative evidence that the cash is actually received by the assessee, the revenue cannot expect the assessee to substantiate the Whatsapp conversation that happened among third parties. During the course of hearing the ld AR was asked to submit the copy of the statement recorded from Mr. Bhadresh Mansuklal Dhodia. On perusal of the said statement we notice that the no query with regard to the printout of the whatsapp chat was raised and that Mr. Bhadresh Mansuklal Dhodia has not made any statement implicating that the assessee has received any cash. We also notice that the AO and the CIT(A) have not made any further enquiries in this regard and has not brought any material on record to prove that the assessee has received the cash. With regard to issue of whether the whatsapp chat between third parties can be used as a conclusive evidence for making an addition it is relevant to take note of the following observations of the coordinate bench in the case of Prashant Prakash Nilawar vs DCIT (ITA No.5073/Mum/2024 dated 12.02.2025) – “9. Before parting, in addition to our discussion and conclusions arrived in the context of compliance requirements of section 65B of Indian Evidence Act, it is important to note that the impugned additions in the present appeals are based on electronic images/sheets found and seized from the mobile of the concerned persons/third parties in the course of their respective searches. In the present era of technology and digital communication, additions cannot be simply based on extracts of WhatsApp conversation between third parties without placing on record corroborative evidence to support the allegations. We make a useful reference to certain provisions contained in the Information Technology Act, 2000, wherein the term “electronic record” is defined in Section 2(t). According to this section, it means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche. In this Act, section 11 deals with attribution of electronic records for the purpose of attributing the same to the originator of such electronic records. Section 11 is reproduced as under: 7 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani 11. Attribution of electronic records.— An electronic record shall be attributed to the originator— (a) if it was sent by the originator himself; (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or (c) by an information system programmed by or on behalf of the originator to operate automatically. 9.1. In the present case, before us, additions have been made on the basis of electronic images / sheets found and seized from the mobiles of concerned persons/third parties which are electronic records. Section 132(4A) r.w.s. 292C contains presumption as to evidence which is admissible against the person in whose possession or control such evidence is found and such a presumption is a rebuttable presumption. Section 11 of the Information Technology Act also attributes the electronic record to its originator when it was sent by the originator himself or any person authorised on his behalf or by a system programmed by or on behalf of the originator. Keeping the provisions of the Act and of Information Technology Act discussed herein, there cannot be any presumption or attribution on the assessee in respect of the electronic records (electronic images / sheets found and seized from the mobiles) based on which additions have been made in the hands of the assessee. 9.2. In the given context, Hon'ble Supreme Court in the case of Ambalal Sarabhai Enterprise vs. KS Infraspace LLP Ltd, Civil Appeal No. 9346 of 2019 dealt on the aspect of WhatsApp chats and observed as under: \"The WhatsApp messages, which are virtual verbal communications, are matters of evidence with regard to their meaning and its contents to be proved during trial by evidence_ in_chief and cross- examination. The emails and WhatsApp messages will have to be read and understood cumulatively to decipher whether there was a concluded contract or not\". 9.3. Hon'ble Apex Court highlighted the importance of proving the contents of WhatsApp chat during trial by evidence and also cross examination. In the present case, ld. A.O neither provided any evidence in support of the WhatsApp chats relied upon by him nor did he provide the opportunity to cross examine the third parties even after a specific request was made by the assessee. 9.4. Also, Coordinate Bench of ITAT, Chennai in the case of Mr. A. Johnkumar vs. DCIT in ITA No.3092/Chny/2019 dealt with issues relating to additions made based on WhatsApp messages and observed as under: “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. ……The AO neither bring on record from which person, the assessee has 8 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani 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……….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. 9.5. Keeping the context of material found and seized from third parties, we also refer to decision in the case of ACIT vs. Lata Mangeshkar [1974] 97 ITR 696 (Bom) wherein Hon'ble Court has extensively discussed the importance and meaning of primary evidence. In this case, Income-tax authorities came across a sort of a ledger maintained by a firm known as Vasu Films of Madras which was seized by them. Department relied on the entries in the ledger which allegedly reflected payments to Ms. Lata Mangeshkar in white and black and took the view that no receipts were shown by the assessee (i.e. Ms. Lata Mangeshkar) in the regular books of accounts. Statements of the managing partner of Vasu Films and firm's Bombay manager were recorded in which they explained the entries stating that the letter \"W\" put against payment is \"White\" while the letter \"B\" were put against payment is \"Black\". Income- tax officer made additions on the basis of entries as in the seized material alleging that these payments were outside the books of accounts and also relied upon the statements made by these two persons. The Appellate Assistant Commissioner confirmed the additions made by the Incometax Officer. 9.5.1. Before the Tribunal, it was contended on behalf of the assessee that the entire evidence merely created suspicion and it did not take the place of proof. Tribunal after appreciating all the evidence came to a conclusion that evidence was not sufficient to prove that assessee had received money in \"black\" for which she did not pass a receipt in the regular books of accounts. In the statement recorded of managing partner, it was pointed out by the Tribunal that he had no personal knowledge of the actual payments made to the assessee and therefore his evidence could not carry the case of the Department any further. In the statement of firm's Bombay manager, he accepted that 9 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani he had made payments in \"black\" to the assessee. It was pointed out by the Tribunal that he used to receive amounts from Madras from which he used to make disbursements in Bombay but he maintained no account in respect of the same which made it difficult to rely on his evidence. Hence, Tribunal rejected the entries and disbelieved the statement of the two witnesses. 9.5.2. An appeal was filed before the High Court of Bombay. The High Court of Bombay after considering all the circumstances held that the Tribunal was justified in holding that the additions were wrongly made stating as below: \"Moreover, entries in books of account-whether in day-book or in the ledger-are merely corroborative evidence and in the absence of proper corroborative evidence the primary direct evidence would alone be required to be scrutinized and that evidence in this case consisted of the testimony of C. S. Kumar and the evidence of that witness was found to be thoroughly unreliable by the Tribunal. After all, the entries in the day-book or the ledger would be a corroborative piece of evidence and once the direct evidence of the person who is said to have made payments in \"black\" to the assessee is disbelieved, we do not think that any value could be attached to the entries in the ledger or to the entries in the daybook even if one had been produced. In the circumstances, we feel that the questions which are sought to be referred arise out of a finding of fact recorded by the Tribunal on pure appreciation of evidence.\" 9.6. We also refer to the decision of Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla & Ors. 1998 (3 SCC 410) (SC), where Section 34 of the Evidence Act, 1872 has been explained and held that entries in a file containing loose sheets of papers were not \"book\" and hence entries therein were not admissible under Section 34 of the Evidence Act. Further, it was also held in this case that entries in books of account shall not alone be sufficient evidence to charge any person with liability. Entries, even if relevant, were only corroborative evidence. Independent evidence as to trustworthiness of those entries was necessary to fasten the liability. In view of these facts, it was held by the Hon'ble Court that entries made in the Jain Hawala diaries are under Section 34, but truthfulness thereof was not proved by any independent evidence. Hon'ble Supreme Court further went on to state that even correct and authentic entries in books of account cannot, without independent evidence of their trustworthiness, fix a liability upon a person. The relevant extracts are as under. 18. \"Book\" ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as \"book\" for they can be easily detached and replaced in dealing with the word \"book\" appearing in 10 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani Section 34 in Mukundram v. Dayaram a decision on which both sides have placed reliance, the Court observed:- \"In its ordinary sense it signifies collection of sheets of paper bound together in a manner, which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book.... I think the term 'book' in Section 34 aforesaid may properly be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of Section 34, and I have no hesitation in holding that unbound sheets of paper, in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of Section 34.\" We must observe that the aforesaid approach is in accord with good reasoning and we are in full agreement with it. Applying the above tests it must be held that the two spiral note books (MR 68/91 and MR 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are \"books\" within the meaning of section 34, but not the loose sheets of papers contained in the two files (Mrs 72/91 and 73/91).' 9.7. Also, Hon'ble Supreme Court in case of Common Cause v. UOI [2017] 394 ITR 220 (SC), wherein searches were conducted on the Birla and Sahara Group of Companies and incriminating material in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. were found, held that noting on loose sheet/diary does carry any evidentiary value under the provision of section 34 of the Evidence Act. Relevant extract reads as under. “It is apparent from the aforesaid discussion that loose sheets of paper are wholly irrelevant as evidence being not admissible U/s 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. ……………. In case of Sahara, in addition we have the adjudication by the Income-tax Settlement Commission. The order has been placed on record along with I.A. No. 4. The Settlement Commission has observed that the scrutiny of entries on loose papers, computer prints, hard disk, pen drives etc. have revealed that the transactions noted on documents were not genuine and have no evidentiary value and that details in these loose papers, computer print outs, hard disk and pen drive etc, do not comply with the requirement of the Indian Evidence Act and are not admissible evidence. It further observed that the department has no evidence to prove that entries in these loose papers and electronic data were kept regularly during the course of business of the concerned business house and the fact that these entries were fabricated, non-genuine was proved. It held as well that the PCIT/DR have not been able to show and substantiate, the nature and source of receipts as well as nature and reason of payments and have failed to prove 11 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani evidentiary value of loose papers and electronic documents within the legal parameters. The Commission has also observed that Department has not been able to make out a clear case of taxing such income in the hands of the applicant firm on the basis of these documents. It is apparent that the Commission has recorded a finding that transactions noted in the documents were not genuine and thus has not attached any evidentiary value to the pen drive, hard disk, computer loose papers, computer printouts. Since it is not disputed that for entries relied on in these loose papers and electronic data were not regularly kept during course of business, such entries were discussed in the order dated 11-11-2016 passed in Sahara's case by the Settlement Commission and the documents have not been relied upon by the Commission against assessee, and thus such documents have no evidentiary value against third parties. On the basis of the materials which have been placed on record, we are of the considered opinion that no case is made out to direct investigation against any of the persons named in the Birla's documents or in the documents A-8,A-9 and A-10 etc. of Sahara....” 8. From the perusal of the above observations where several judicial precedences has been relied on, it is clear that mere whatsapp chat without any other corroborative materials to support cannot be used as a conclusive evidence for making an addition. This has been the consistent view of the coordinate bench where the impugned issue has been considered in other cases also. Therefore respectfully following the judicial precedence, we hold that no addition can be made merely based on whatsapp chat between third parties without bringing any material in support of the chat on record. Accordingly we direct the AO to delete the addition made under section 69A to the tune of Rs.1,75,000/-. 9. In result, appeal of the assessee is allowed. Order pronounced in the open court on 24-04-2025. Sd/- Sd/- (AMIT SHUKLA) (PADMAVATHY S) Judicial Member Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 12 IT(SS)A No. 1075/Mum/2025 Divyesh Rameshchandra Dhanani 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "