Advance Strips Pvt. Ltd. Vs DCIT (ITAT Jaipur)
WhatsApp Chats, Screenshots & Suspicion Can’t Prove On-Money: ITAT Deletes ₹9.51 Crore Addition and Quashes U/s 153C Assessment
The Jaipur ITAT delivered a significant ruling by quashing the assessment under Section 153C and, on merits, also deleting the addition sustained on account of alleged on-money payment for purchase of land. The case arose from a search on the Om Kothari Group where WhatsApp chats, screenshots and statements of third parties were relied upon to allege that the assessee had paid unaccounted cash over and above the registered purchase consideration for a plot of land. The Assessing Officer ultimately made an addition of ₹22.54 crore under Section 69, which the CIT(A) reduced to ₹9.51 crore by adopting a proportional area-based approach.
On the jurisdictional issue, the Tribunal held that the search for purposes of Section 153C is deemed to commence only when the seized material is handed over to the Assessing Officer of the other person. In the present case, the seized documents were received by the assessee’s Assessing Officer on 15.03.2023, which was after the cut-off date of 01.04.2021. Therefore, the old Section 153C machinery could not be invoked. Following judicial precedents, the Tribunal held that the proceedings were time-barred, void ab initio and without jurisdiction, resulting in the assessment being quashed.
Even on merits, the Tribunal found that the entire addition rested on uncorroborated WhatsApp chats, screenshots and third-party statements. No independent evidence was found to establish actual cash payment, no trail of funds was unearthed, and no incriminating material directly linked the assessee with any on-money transaction. The Tribunal observed that loose chats and digital extracts, without corroboration, do not possess sufficient evidentiary value to sustain such a massive addition.
A crucial factor that weighed with the Tribunal was the denial of cross-examination. The assessee had specifically sought an opportunity to cross-examine the persons whose statements and WhatsApp communications formed the sole basis of the addition, but the request was rejected. Relying on Supreme Court and High Court decisions, the Tribunal held that an adverse conclusion cannot be drawn solely on third-party material without granting cross-examination.
The Tribunal also rejected the CIT(A)’s methodology of estimating on-money by applying the seller’s alleged cash receipt rate to the assessee’s purchase. It held that evidence of cash received by a seller does not automatically establish that a particular purchaser paid such cash, especially when there was no direct evidence connecting the assessee to the alleged payment. Accordingly, the addition of ₹9.51 crore sustained by the CIT(A) was deleted in full. The Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
