DCIT Vs Kamal Shrigopal Khetan (ITAT Mumbai)
Mumbai ITAT Upholds Taxability of ‘On-Money’ Indicated by WhatsApp Chats but Restricts Addition to 25% Profit; Section 69C Held Inapplicable
The Mumbai ITAT upheld the CIT(A)’s finding that WhatsApp chats and related electronic material recovered during survey established receipt of unaccounted cash (“on-money”) by the promoter of a real estate group. Rejecting the Assessing Officer’s approach, the Tribunal held that the material did not establish unexplained expenditure under Section 69C, but instead indicated cash receipts arising from the assessee’s real estate business. Consequently, the Tribunal agreed that the entire receipts of ₹23 crore could not be taxed as unexplained expenditure and that only the profit element embedded in the alleged on-money receipts was liable to tax.
The Tribunal also rejected the assessee’s plea for complete deletion of the addition. It held that the WhatsApp messages had evidentiary value in income-tax proceedings, observing that the strict rules of the Indian Evidence Act do not govern assessment proceedings and that electronic records seized during survey/search could be relied upon along with surrounding circumstances and human probabilities. Accepting the CIT(A)’s estimation of 25% of the alleged on-money receipts as taxable business profit, the Tribunal dismissed both the Revenue’s appeal seeking taxation of the entire amount under Section 69C and the assessee’s appeal seeking deletion of even the estimated addition. It also upheld the validity of the reassessment proceedings initiated under Sections 148A/147.
Cases Discussed
- Raymond Woollen Mills Ltd. (Supreme Court of India), 236 ITR 34
- ACIT vs. Rajesh Jhaveri Stock Brokers (P.) Ltd. (Supreme Court of India), 161 Taxman 316
- Central Provinces Manganese Ore Co. Ltd. vs. ITO (Supreme Court of India), 191 ITR 662
- Sri Krishna (P) Ltd. vs. CIT (Supreme Court of India), 221 ITR 538
- Phool Chand Bajrang Lal & Anr. vs. ITO & Anr. (Supreme Court of India), 203 ITR 456
- ITO vs. Lakhmani Mewal Das (Supreme Court of India), 103 ITR 437
- Kalyanji Mavji & Co. vs. CIT (Supreme Court of India), 102 ITR 287
- Godhra Electricity Co. Ltd. vs. CIT (Supreme Court of India), (1997) 225 ITR 746
- Prime Developers vs. DCIT (ITAT Mumbai), ITA Nos. 175 to 178/Mum/2010 and ITA Nos. 321 to 324/Mum/2010
- DCIT vs. Panna Corporation (Gujarat High Court), ITA Nos. 323 to 325 of 2000
- CIT vs. Shri Hariram Bhambhani (Bombay High Court), I.T.A. No. 313 of 2013
- CIT v. President Industries (Gujarat High Court), [2002] 258 ITR 654
- Anand Builders (Gujarat High Court), ITA No. 52 of 2002
- Nalini V Shah vs. ACIT (ITAT Mumbai), ITA No. 6183/M/2006
- Kishor Mohanlal Teliwala vs. ACIT (ITAT Ahmedabad), 64 TTJ 543
- Mrs. Mehroo N. Irani vs. ACIT (ITAT Mumbai), 75 Taxmann (Mag.) 123
- CIT v/s Golani Brothers (Bombay High Court), ITXA 17, 19, 26, 27 & 42 of 2015
- Pranav Construction Co. v ACIT (ITAT Mumbai), [1998] 96 TAXMAN 323
- CIT v C Najeeb (Kerala High Court), [2019] 104 com 250
- DCIT v Adarsh Industrial Estate Pvt Ltd (ITAT Mumbai), [2021] 130 com 142
- Hersh W Chadha vs DDIT (ITAT Delhi), ITA No. 3088 to 3098 & 3107/Del/2005
- Addl. CIT v. Jay Engg. Works Ltd. (Delhi High Court), [1978] 113 ITR 389
- CIT v. Metal Products of India (Punjab & Haryana High Court), [1984] 150 ITR 714
- CIT v. S. Kader Khan (Madras High Court), 300 ITR 157
- CIT v. Mantri Share Brokers (P.) Ltd. (Rajasthan High Court), [96 taxmann.com 280]
- Arjun Panditrao Khotkar v. Kailash Kishanrao Goratyal (Supreme Court of India), Civil Appeal Nos. 20825-20826 of 2017
- Ravinder Singh Kaku Vs State of Punjab (Supreme Court of India), Criminal Appeal No. 1307 of 2019 @ SLP (Crl.) 9431 of 2011
- Vetrivel Minerals v. Assistant Commissioner of Income-tax, Central Circle-2, Madurai (Madras High Court), [2021] 129 taxmann.com 126
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross-appeals have been filed by the Department and the assessee against the respective order of the Ld. Commissioner of Income Tax (Appeals)-51, Mumbai, dated 17 September 2025, for the Assessment Year 2020-21.
