ITAT Remands WhatsApp-Based ss.69A/69C Additions for Transaction-Wise Verification

Mansur Mehta Vs DCIT (ITAT Mumbai)

A WhatsApp Chat Is a Clue, Not a Cash Book—ITAT Orders Transaction-Wise Verification Before ss.69A/69C Additions

The controversy

A search u/s 132 was conducted on 30 September 2021 in cases connected with the Rajiv Saxena Group, during which an iPhone belonging to Mr. Mansur Abubaker Mehta was found and cloned.

The extracted data contained WhatsApp chats and e-mails referring to various amounts allegedly received or paid in cash. Based principally on those conversations, additions running into several crores were made u/s 69A as unexplained money & u/s 69C as unexplained expenditure for AYs 2016-17 to 2022-23.

The assessee was engaged in hospitality and logistics through several group entities. He explained that the conversations concerned funds held as “Amaanat,” banking transactions, group-company dealings, charitable activities, assistance to relatives & transactions between third parties where he acted merely as an introducer, facilitator or coordinator.

Both the assessee & Revenue appealed against the CIT(A)’s transaction-wise relief and application of the peak-cash method.

Numbers in chats were treated as lakhs or crores

The assessee contended that expressions such as “15,” “25,” “35,” “50K” & “100K” had been interpreted by the AO as rupees in lakhs or crores without corroboration.

For example, the assessee claimed that “50K” meant ₹50,000 and not ₹50 lakh. Certain chats allegedly concerned distribution of fruits and chocolates, while others involved courier or angadia arrangements, registered charitable trusts, group concerns or transactions between friends and associates.

The assessee furnished bank statements, ledgers, confirmations, invoices, vouchers & trust accounts. The AO accepted some explanations wholly or partly but rejected several others through the standard observation that they were “not tenable and non-acceptable.”

CIT(A) treated chats as relevant—but not conclusive

The CIT(A) held that the WhatsApp chats could not be discarded because they were recovered from the assessee’s admitted mobile phone and were not alleged to be forged or fabricated. The statutory presumptions u/ss 132(4A) & 292C were relevant.

At the same time, the chats were not a parallel cash book. Each conversation had to be read in its complete context and tested against surrounding circumstances & documentary evidence.

The CIT(A) deleted entries supported by banking records, books, trust accounts or evidence showing that the assessee acted only as a facilitator. Unsupported cash references were sustained.

To avoid taxing both receipt and subsequent payment of the same circulating money, the CIT(A) applied the peak-fund-flow method. Incremental peaks ranging from ₹24.25 lakh to ₹1.97 crore were determined for different years.

Phone ownership is not ownership of every amount mentioned

The ITAT held that possession of the mobile phone established the source from which the electronic evidence was recovered. It did not automatically establish that the assessee owned every amount mentioned in the chats or that every numerical expression represented an actual money transaction.

No corresponding cash, bullion, jewellery or valuable article was found during the search. Therefore, decisions applying a presumption of ownership to tangible assets physically found in an assessee’s possession did not conclusively determine this case.

For invoking s.69A, the AO had to establish that the assessee was the owner of the unexplained money. For s.69C, it had to be shown that the assessee had actually incurred expenditure from an unexplained source.

A person possessing a phone may be discussing somebody else’s transaction, holding funds in trust or merely coordinating movement between identified third parties.

But chats cannot be dismissed as meaningless

The Tribunal also rejected the opposite extreme urged by the assessee.

The authenticity of the chats was not disputed. They referred to identifiable persons, specific figures and, in some instances, the assessee himself offered explanations concerning receipt, custody or payment of funds.

Therefore, absence of physical seizure did not render the electronic evidence worthless. The conversations were relevant material requiring a satisfactory explanation.

The assessee could not accept favourable findings based upon the same chats while simultaneously arguing that the material was wholly incapable of supporting any adverse inference. Nevertheless, each disputed transaction had to independently satisfy the statutory conditions.

Both AO & CIT(A) stopped halfway

The AO failed to record clear, transaction-specific findings on whether each amount represented money, goods or foreign currency; whether any receipt or payment actually occurred; whether it belonged to the assessee; and whether he acted personally or for someone else.

Conversely, the CIT(A) granted substantial relief on the ground that transactions belonged to third parties without independently verifying those identifiable persons through their statements, books or bank accounts.

Thus, neither blanket rejection by the AO nor partial acceptance by the CIT(A) rested upon complete third-party verification.

Peak theory cannot precede proof

The ITAT held that peak theory could be applied only after identifying transactions that actually belonged to the assessee and establishing that the same funds were available for rotation.

Unless ownership, nature, chronology & interrelationship of inflows and outflows were first proved, a peak computation would rest upon an uncertain factual foundation.

Accordingly, the CIT(A)’s relief, sustained additions & peak working were all set aside.

ITAT’s directions

The entire matter was restored to the AO for de novo, party-wise & transaction-wise examination. The AO must read complete chats, verify concerned parties, examine their books and bank accounts & determine whether the assessee was owner, custodian, intermediary or coordinator.

Any adverse statement must be confronted, with cross-examination allowed wherever legally warranted.

Importantly, the remand was strictly confined to the original parties, transactions & additions. The AO cannot introduce a fresh source, examine new transactions or exceed the aggregate additions originally made.

Author’s comments

The ruling strikes the correct evidentiary balance: WhatsApp evidence is neither gospel nor garbage.

Electronic conversations may trigger enquiry and shift an explanatory burden, but shorthand numbers cannot become crores through imagination. Equally, the assessee cannot escape by merely calling every transaction “Amaanat” or third-party facilitation.

The crucial inquiry is ownership and actual execution. Only thereafter can ss.69A/69C or peak theory enter the computation.

Mansur Abubaker Mehta v. DCIT, ITA Nos.3606 to 3612/Mum/2025 & connected Revenue appeals, AYs 2016-17 to 2022-23, order dated 17 August 2026

Cases Discussed

• Ramchandra Kanu Mendadkar Vs CIT (ITAT Mumbai)
• DCIT Vs Balmukund Sponge And Iron Private Limited (ITAT Kolkata)
• Commissioner of Income-tax Vs K. Chinnathamban (Supreme Court)
• Chuharmal Vs CIT (Supreme Court)

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, MUMBAI

This bunch comprises seven appeals filed by the assessee for assessment years 2016-17 to 2022-23 and five appeals filed by the Revenue for assessment years 2017-18 and 2019-20 to 2022-23. The appeals arise out of separate orders passed by the Commissioner of Income Tax (Appeals)-48, Mumbai [hereinafter referred to as “CIT(A)”], under section 250 of the Income Tax Act, 1961[hereinafter referred to as “the Act”]. Since the appeals arise from a common search, involve common facts and relate principally to additions made under sections 69A and 69C on the basis of WhatsApp chats recovered from the assessee’s mobile phone, they were heard together and are being disposed of by this common order.

2. The relevant particulars of the assessment and first appellate proceedings are tabulated below:

3. Facts of the case

3.1. The assessee is an individual engaged in the business of hospitality and logistics. The Assessing Officer recorded that the business entities associated with the assessee included Hotel Suba Palace Pvt. Ltd., Zircon Hotels Pvt. Ltd., Onyx Hotels Pvt. Ltd., Suba Hospitality Pvt. Ltd., Suba Realty Pvt. Ltd., Coldrush Logistics Pvt. Ltd. and Mehta Roadlines, among others.

3.2. A search under section 132 of the Act was conducted on 30.09.2021 in the cases of the beneficiaries of the Rajiv Saxena Group of companies and others, in which the assessee was also covered. During the search conducted at C-Wing, 3003, Raheja Viviera, Sane Guruji Road, Mumbai Central, Mumbai, an iPhone 12 Pro Max belonging to the assessee was found and cloned. The data retrieved from the said device was analysed during the post-search investigation. According to the Assessing Officer, the digital data contained WhatsApp chats and e-mail communications between the assessee and several persons, referring to the receipt and payment of amounts in cash.

3.3. During the post-search investigation, the statement of the assessee was recorded under section 131(1A) of the Act on 01.04.2022 at Room No. 118, C-Block, Dr. S.P.M. Civic Centre, New Delhi. The assessee was confronted with certain chats involving, inter alia, Hassan Moosa, Shabnam Mehta, Munawar Munshi, Fahim Kapadia and other persons. Copies of the relevant WhatsApp chats relied upon by the Assessing Officer were subsequently furnished to the assessee during the assessment proceedings.

3.4. The Assessing Officer observed that the WhatsApp data revealed several instances of receipt and payment of cash by the assessee involving different persons. According to the Assessing Officer, the cash receipts represented unaccounted funds forming part of the assessee’s cash in hand, while the alleged cash payments represented expenditure not recorded in the books of account. The Assessing Officer accordingly proposed to assess the cash receipts as unexplained money under section 69A and the cash payments as unexplained expenditure under section 69C.

3.5. For assessment years 2016-17 to 2020-21, the cases were reopened under section 147.For assessment years 2021-22 and 2022-23, the cases were selected for compulsory scrutiny. The relevant return and notice particulars are as under:

3.6. Various notices under section 142(1) were issued during the assessment proceedings. The assessee furnished party-wise explanations on the e-filing portal. The assessee broadly contended that the conversations related to funds belonging to friends and business associates which were held or disbursed as “Amaanat”; transactions undertaken through banking channels; transactions of the assessee’s group concerns; charitable activities undertaken through various trusts; transfer of funds between third parties in which the assessee acted only as an introducer, coordinator or facilitator; and assistance rendered to friends or family members. The assessee also contended that expressions such as “15”, “25”, “35”, “50K” and “100K” had been interpreted by the Assessing Officer as amounts in lakhs or crores without corroborative evidence. Bank statements, ledger accounts, confirmations, invoices, vouchers, trust accounts and other supporting documents were furnished in support of the explanations.

3.7. The Assessing Officer considered the explanations person-wise. Certain explanations were accepted either wholly or partly. The remaining explanations were rejected as untenable and unacceptable, and the additions under sections 69A and 69C were made as set out in paragraph 2 above. Separate penalty proceedings were also initiated under the provisions referred to in the respective assessment orders. The Assessing Officer further recorded that separate references would be made to the Additional Commissioner of Income Tax, Central Range-2, Mumbai, for proceedings under sections 269ST and 271DA.

4. Aggrieved by the assessment orders, the assessee preferred separate appeals before the CIT(A). The first appellate orders record that ITNS-51 was duly served upon the Assessing Officer. However, no input was received from the Assessing Officer on the points raised therein, nor was any communication received indicating that the Assessing Officer desired to be present at the hearing. The appeals were, therefore, disposed of on the basis of the material available on record after considering the written submissions filed by the assessee and the findings of the Assessing Officer.

5. Before the CIT(A), the assessee contended that WhatsApp chats, without corroborative material, could not form the sole basis for additions under sections 69A and 69C. It was contended that no money, bullion, jewellery or other valuable article belonging to the assessee was found so as to attract section 69A, and no expenditure incurred by the assessee was established so as to invoke section 69C. The assessee further contended that the Assessing Officer had interpreted numerical expressions in the chats as amounts in lakhs or crores without any independent inquiry.

6. The CIT(A) did not accept the assessee’s general contention that WhatsApp chats or electronic evidence had no evidentiary value. The CIT(A) observed that the assessee did not dispute that the chats were recovered from his mobile phone and did not contend that they were forged or fabricated. Reference was made to the statutory presumptions under sections 132(4A) and 292C. The CIT(A), however, also observed that the WhatsApp chats “per se are not a record of cash or unaccounted money transactions like a parallel cash book” and that each chat had to be considered in the context of the conversation, the surrounding circumstances and the explanation and evidence furnished by the assessee.

7. The CIT(A) observed that the Assessing Officer had principally relied upon the WhatsApp chats and that no cash or independent evidence of movement of cash had been discovered during the search. The chats could, therefore, neither be accepted nor rejected in their entirety. The CIT(A) examined the conversations person-wise and classified them broadly as transactions undertaken through banking channels; transactions of the assessee’s group concerns; charitable transactions; transactions in which the assessee acted as an introducer, mediator or facilitator; funds held as “Amaanat”; and transactions involving cash receipts or payments which remained unsupported.

8. On examining the individual entries, the CIT(A) deleted the amounts which were supported by bank statements, books of account, trust records and other documents, as also the transactions which pertained to third parties or in which the assessee had merely acted as a facilitator. The CIT(A), however, sustained those entries which, according to him, expressly disclosed receipt or payment of cash and in respect of which the assessee failed to furnish a satisfactory explanation or supporting evidence.

9. The CIT(A) also admitted the additional grounds raised by the assessee contending that the Assessing Officer had added both the receipts and the corresponding payments reflected in the chats. The CIT(A) held that assessment of the same funds both at the stage of receipt and at the stage of payment would result in duplication. Accordingly, after excluding the explained entries, the CIT(A) applied the peak cash-balance method to the remaining unexplained inflows and outflows.

10. The year-wise peak working recorded by the CIT(A) was as under:

11. The Assessing Officer was directed to verify the peak cash-balance working submitted by the assessee and, after verification, to add the relevant peak cash balance to the total income. The additional grounds were accordingly allowed. The appeals for assessment years 2017-18 to 2022-23 were partly allowed. For A.Y. 2021-22, the Assessing Officer was additionally directed to verify the assessee’s claim for short credit of tax deducted at source amounting to Rs.1,57,173/-.

12. Aggrieved by the orders of CIT(A), both, assessee and revenue are in appeal before us. The substantive controversy arising in these cross-appeals is confined to the additions made under sections 69A and 69C of the Act on the basis of the WhatsApp messages and other electronic material recovered during the course of search. The assessee has challenged the additions sustained by the learned CIT(A), including the additions sustained by applying the incremental peak-cash theory, contending that the electronic material, without independent corroboration, does not establish the receipt of unexplained money or the incurring of unexplained expenditure by the assessee. The Revenue, on the other hand, has challenged the relief granted by the learned CIT(A) against the additions made under sections 69A and 69C of the Act and has also questioned the admission and acceptance of the additional ground relating to peak cash without affording an effective opportunity to the Assessing Officer.

13. Since the underlying facts, evidentiary material and issues are substantially common, these grounds are taken up together for adjudication, subject to the year-specific amounts and factual variations.

14. During the course of hearing before us, The learned Authorised Representative (AR) reiterated the facts and grounds of appeal and submitted that the assessee is an individual deriving income from house property, share of profit and remuneration from partnership firms and income from other sources. The assessee’s group entities are engaged in the business of running hotels, cold-storage facilities and transportation activities. The learned AR submitted that no addition had been made in the hands of the assessee on account of any transaction with the Rajiv Saxena Group. The impugned additions were based exclusively upon the Assessing Officer’s interpretation of the WhatsApp conversations between the assessee and about 21 persons. These persons included the assessee’s wife, relatives, longstanding family friends, employees of the group entities, trustees of charitable trusts, business associates, customers and other persons known to the assessee. The conversations, according to the learned AR, did not constitute the assessee’s cash book or record any unexplained money received or unexplained expenditure incurred by him.

15. Elaborating upon the nature of the conversations, the learned AR submitted that they principally related to the assessee acting merely as a mediator or coordinator for courier or angadia services between third parties; charitable activities undertaken through registered charitable trusts, particularly during the Covid period; genuine banking transactions supported by the relevant records; assistance rendered to friends and relatives; updates received from employees or trustees; and loan transactions between third parties introduced by the assessee. It was contended that, in these transactions, the assessee neither received nor paid any money on his own account. Certain conversations with the assessee’s wife, Smt. Shabnam Mehta, related merely to the distribution of fruits and chocolates and contained no reference to money or currency. It was further submitted that certain figures appearing in the conversations had been incorrectly interpreted by the Assessing Officer, such as treating “50K” as Rs.50,00,000/- instead of Rs.50,000/-.

16. The learned AR further contended that the Assessing Officer had reproduced the assessee’s replies to the show-cause notices but had neither dealt with the explanations nor rebutted the supporting documents furnished by the assessee. The explanations were rejected by employing a standard observation that the reply concerning the cash transaction with the respective person was “not tenable and non-acceptable”. According to the learned AR, the assessment orders did not contain any independent reasoning or corroborative material demonstrating that the amounts appearing in the conversations constituted unexplained money or unexplained expenditure of the assessee. The additions made under sections 69A and 69C of the Act were, therefore, stated to be founded upon assumptions drawn from isolated conversations.

17. The learned AR, with respect to the additions made under section 69A of the Act on the basis of WhatsApp conversations, placed reliance upon the decision of the Co-ordinate Bench in Ramchandra Kanu Mendadkar v. CIT(A) [2023] 151 taxmann.com 356 (Mumbai-Trib.), dated 12.05.2023. Referring to paragraph 10 of the said decision, the learned AR submitted that an addition under section 69A could be made only where the assessee was found to be the owner of the money in question, such money was not recorded in the books of account and the assessee failed to furnish a satisfactory explanation regarding its source.The learned AR further placed particular reliance upon the decision of the Co-ordinate Bench in Deputy Commissioner of Income-tax v. Balmukund Sponge and Iron (P.) Ltd. [2025] 181 taxmann.com 464 (Kolkata-Trib.), dated 09.12.2025. It was submitted that the facts considered therein were substantially similar, inasmuch as the addition under section 69A had been made solely on the basis of WhatsApp conversations retrieved from mobile phones, without any corroborative evidence establishing actual receipt or payment of money.

18. On the strength of the aforesaid decisions, the learned AR contended that WhatsApp conversations, in the absence of corroborative material evidencing the actual receipt or possession of money by the assessee, could not satisfy the essential requirements of section 69A of the Act. It was emphasised that the conversations relied upon by the Assessing Officer did not clearly identify whether the figures represented receipts or payments, much less establish that the assessee was the owner of any corresponding money.

19. The learned AR submitted that the learned CIT(A), after examining the explanations and supporting documents, accepted the assessee’s contentions in respect of several transactions and granted substantial relief. However, certain additions under sections 69A and 69C were sustained and the taxable amount for each assessment year was ultimately determined by applying the date-wise peak-fund-flow method. Referring to the assessment-year-wise and person-wise statements placed on record, the learned AR contended that even the amounts sustained by the learned CIT(A) did not represent the assessee’s unexplained money or expenditure. It was accordingly submitted that the additions sustained in the assessee’s appeals deserved to be deleted and the corresponding grounds raised by the Revenue against the relief granted by the learned CIT(A) deserved to be dismissed.

20. Per contra, the learned Departmental Representative (DR) relied upon the assessment orders and submitted that the additions were founded upon incriminating material recovered during the course of search and not upon assumptions or conjectures. It was submitted that an Apple iPhone 12 Pro Max was found and seized during the search conducted under section 132 of the Act. The data extracted from the said mobile phone contained several WhatsApp conversations recording details of cash receipts and cash payments outside the regular books of account.

21. The learned DR submitted that the assessee had never disputed the ownership of the seized mobile phone or challenged the correctness and authenticity of the data extracted therefrom. Therefore, the WhatsApp conversations recovered from the assessee’s own device constituted relevant and reliable electronic evidence. It was further submitted that the assessee’s statement was recorded during the investigation, wherein it was affirmed that the money forming the subject matter of the conversations was not recorded in the regular books of account.

22. The learned DR contended that the Assessing Officer had specifically confronted the assessee with the WhatsApp conversations and afforded sufficient opportunity to explain the nature and source of the cash transactions reflected therein. However, the assessee failed to furnish books of account, bank statements or other corroborative documentary evidence demonstrating that the transactions were genuine, belonged to third parties or were duly accounted for. Mere denial and unsupported assertions, according to the learned DR, did not discharge the statutory burden resting upon the assessee under sections 69A and 69C of the Act.

23. It was further submitted that the assessee had neither established that the conversations were fabricated or manipulated nor produced any material demonstrating that the transactions recorded therein belonged to any other person. Once incriminating material evidencing unaccounted cash transactions was recovered from the assessee’s own device, the burden shifted upon the assessee to satisfactorily explain their nature and source. In the absence of any satisfactory rebuttal, the Assessing Officer was justified in drawing an adverse inference and treating the amounts as unexplained money and unexplained expenditure under sections 69A and 69C of the Act.

24. The learned DR placed reliance upon the decision of the Hon’ble Supreme Court in CIT v. K. Chinnathambanfor the proposition that the burden of establishing the nature and source of unexplained money rests upon the assessee and that an adverse inference may be drawn where such burden is not discharged by satisfactory evidence. Reliance was also placed upon the decision of the Hon’ble Supreme Court in Chuharmal v. CIT [1988] 3 SCC 588, wherein it was held that possession constitutes evidence of ownership unless the contrary is established and that, although the strict rules of the Evidence Act do not apply to income-tax proceedings, the principles underlying section 110 thereof may be invoked.

25. Applying the aforesaid principles, the learned DR submitted that the ownership of the mobile phone and the authenticity of the extracted data having remained undisputed, and the assessee having failed to produce cogent evidence showing that the cash transactions did not belong to him or were duly accounted for, the statutory burden remained undischarged. It was accordingly contended that the additions made by the Assessing Officer under sections 69A and 69C of the Act deserved to be sustained. The learned DR further submitted that the relief granted by the learned CIT(A), including the restriction of the additions by applying the peak-fund-flow method, was not justified and ought to be reversed.

26. In rejoinder, the learned AR submitted that the decisions relied upon by the learned DR were distinguishable on facts. In those cases, tangible assets, such as watches, were physically found and seized from the possession of the concerned assessee and, therefore, the question of ownership arose on the basis of actual possession. In the present case, however, no corresponding money, bullion, jewellery or other valuable article was found or seized. The only material relied upon by the Assessing Officer consisted of WhatsApp conversations retrieved from the assessee’s mobile phone. The learned AR, therefore, contended that possession of the mobile phone could not, by itself, establish the assessee’s ownership or possession of the amounts mentioned in the conversations. Accordingly, the presumption based upon possession, as applied in the decisions relied upon by the learned DR, had no application to the facts of the present case.

27. We have considered the rival submissions and perused the material available on record. The common dispute in these appeals concerns additions made under sections 69A and 69C of the Act on the basis of WhatsApp conversations retrieved from an Apple iPhone 12 Pro Max found during the course of search. The ownership of the mobile phone and the authenticity of the extracted conversations have not been specifically disputed by the assessee. However, no corresponding cash, bullion, jewellery or other valuable article representing the amounts mentioned in the conversations was found or seized during the search. Therefore, possession of the mobile phone establishes the source from which the electronic material was recovered, but does not, by itself, establish the assessee’s ownership of every amount referred to therein or that every numerical expression represents an actual receipt or payment of money.

28. The learned DR has demonstrated from the assessment orders that the Assessing Officer examined the WhatsApp conversations party-wise and, in certain instances, accepted the explanations furnished by the assessee. For Assessment Year 2017-18, the figures of Rs.10,00,000/- and Rs.75,00,000/- appearing in the conversations with Shri Hassan Moosa were accepted as Rs.10,000/- and Rs.75,000/-, respectively. The explanation concerning Shri Ehsan Gadawala was accepted and no corresponding addition was made. Partial relief was also allowed in respect of certain transactions with Shri Fahim Kapadia. Similarly, for Assessment Year 2018-19, the figure appearing in the conversation with Shri Hassan Moosa was interpreted with reference to the bank statement of Suba Hotel LLC, while the proposed addition of Rs.40,00,000/- relating to Shri Akshay Shetty was not made after the complete conversation was considered.

29. At the same time, in respect of several remaining transactions, the Assessing Officer rejected the assessee’s explanation principally by recording that it was “not tenable and non-acceptable”. The assessment orders do not contain clear findings, supported by independent verification, as to whether each amount represented an actual receipt or payment, whether the alleged money belonged to the assessee, whether the alleged expenditure was incurred by him and whether the transactions were undertaken on the assessee’s own account or on behalf of the third parties named in the conversations. The distinction between the assessee acting as the owner of the money and acting merely as a custodian, intermediary or coordinator was not conclusively examined.

30. On the other hand, the learned CIT(A) accepted the assessee’s explanation concerning several transactions and granted substantial relief on the reasoning that the assessee had acted merely as a facilitator or that the transactions belonged to third parties. However, the concerned third parties were identifiable persons, comprising relatives, friends, employees, trustees and business associates of the assessee. The impugned orders do not indicate that confirmations or statements were obtained from such persons, or that their books of account, bank statements or other contemporaneous evidence were independently verified before the relief was granted. Thus, the conclusions reached by the learned CIT(A), both while deleting and sustaining the additions, are not supported by complete third-party verification.

31. We also note that the assessee has accepted the relief granted by the learned CIT(A) in respect of several transactions on the basis of the same WhatsApp conversations, explanations and surrounding material, while questioning the evidentiary value of that material insofar as certain additions have been sustained. The assessee cannot selectively accept a favourable appreciation of a common set of material and simultaneously contend that the same material is wholly incapable of being considered for sustaining any addition. Nevertheless, acceptance of the relief granted by the learned CIT(A) does not, by itself, establish that the remaining transactions constitute unexplained money or unexplained expenditure under sections 69A or 69C of the Act. Each transaction must independently satisfy the statutory requirements.

32. The decisions relied upon by the learned AR support the proposition that an addition under section 69A requires a finding that the assessee was the owner of the money in question and that an uncorroborated WhatsApp conversation cannot, in every case, be treated as conclusive evidence of unexplained money. However, the application of these principles necessarily depends upon the facts and the complete evidentiary record of each transaction. The present case involves several conversations containing identifiable parties, specific amounts and, in certain instances, the assessee’s own explanation regarding the receipt, custody or payment of money. The entire electronic material, therefore, cannot be discarded as meaningless without examining the context and corroborative evidence.

33. Likewise, the decisions relied upon by the learned DR concerning the presumption arising from possession do not conclusively resolve the present controversy. As rightly pointed out by the learned AR in rejoinder, those decisions involved tangible assets, such as watches, being physically found and seized from the possession of the concerned assessee. In the present case, the mobile phone was found in the assessee’s possession, but no corresponding money or valuable article represented by the figures appearing in the conversations was found or seized. The ownership of the mobile phone cannot automatically be equated with ownership of every amount mentioned in the conversations. Nevertheless, the conversations recovered from the assessee’s device constitute relevant material which cannot be ignored and which the assessee is required to explain.

34. The evidentiary value of the WhatsApp conversations, therefore, lies between the two extreme positions canvassed before us. The conversations cannot, by themselves and without contextual examination, establish every addition under sections 69A and 69C. Equally, they cannot be disregarded merely because no corresponding cash was physically seized. They must be examined along with the assessee’s statement, the complete conversation, the identity and confirmation of the concerned parties, the books of account, bank statements and other contemporaneous evidence.

35. We further find that the learned CIT(A), after sustaining certain receipts and payments, determined the taxable amounts by applying a date-wise peak-fund-flow method. The Revenue has challenged the admission and acceptance of the additional ground concerning peak cash without affording an effective opportunity to the Assessing Officer. In our considered view, peak theory can be applied only after identifying the receipts and payments which are proved to represent the assessee’s unaccounted transactions and after establishing that the same funds were available for rotation. Unless the ownership, nature, chronology and interrelationship of the transactions are first determined, computation of peak cash would rest upon an uncertain factual foundation.

36. Thus, the material presently available does not enable us to either confirm or delete the disputed additions with any degree of certainty. The Assessing Officer’s rejection of several explanations lacks clear transaction-specific findings, whereas the relief granted by the learned CIT(A) is not supported by adequate verification from the identified third parties. The selective acceptance of the same material by both sides further reinforces the necessity of applying a uniform standard of examination to all the disputed transactions.

37. Considering the large number of parties and transactions involved and the necessity of independently verifying the explanations from the concerned third parties, we are of the considered view that the entire issue relating to the additions already made under sections 69A and 69C of the Act requires fresh examination. The findings of the learned CIT(A), both in respect of the additions sustained and the relief granted, arise from the same set of WhatsApp conversations, explanations and supporting material and are inseparably interconnected. We, therefore, set aside the impugned orders of the learned CIT(A) on these issues in their entirety and restore the entire matter, including the additions sustained as well as the additions deleted by the learned CIT(A), to the file of the Assessing Officer for de novo adjudication in accordance with law.

38. In the de novo proceedings, the Assessing Officer shall examine each party and each transaction forming the subject matter of the additions originally made in the assessment orders. He shall consider the complete context and continuity of the relevant WhatsApp conversations and ascertain whether the numerical expressions appearing therein represent money, goods, foreign currency or any other item. He shall further verify whether the transactions were actually carried out; whether the amounts represent receipts or payments; whether the assessee was the owner of any money so as to attract section 69A of the Act; and whether any expenditure was actually incurred by the assessee from an unexplained source so as to attract section 69C of the Act.

39. The Assessing Officer shall also determine whether the assessee acted on his own account or merely as a custodian, intermediary or coordinator for an identified third party. For this purpose, he shall obtain and verify confirmations or statements of the concerned parties and examine their books of account, bank statements and other relevant records. The applicability of the peak-fund-flow method, including the availability and rotation of the same funds, shall be examined only after identifying those receipts and payments which, upon verification, are established to represent transactions belonging to the assessee.

40. The Assessing Officer may exercise the powers available under the Act, including the issuance of notices or summons to the concerned parties, wherever required. Any material or statement proposed to be used adversely against the assessee shall be confronted to him. The assessee shall be afforded an effective opportunity to rebut such material and, wherever legally warranted, to cross-examine the person whose statement is proposed to be relied upon. The assessee shall furnish complete confirmations and supporting evidence in support of his contention that the transactions belonged to third parties and shall extend due cooperation in the proceedings.

41. We make it clear that the Assessing Officer shall neither treat every numerical reference appearing in the WhatsApp conversations as unexplained money or unexplained expenditure merely because it forms part of the seized electronic material, nor accept the assessee’s explanation merely on the basis of an unsupported assertion. Each transaction shall be adjudicated independently on the basis of the complete conversation, surrounding circumstances, evidence gathered upon verification and the statutory requirements of sections 69A and 69C of the Act.

42. Since the matter is restored in its entirety, the findings and conclusions recorded by the learned CIT(A), including the relief granted, the additions sustained and the application of the peak-fund-flow method, stand set aside. The Assessing Officer shall decide afresh the sustainability and quantum of the additions originally made in the respective assessment orders, uninfluenced by the conclusions previously reached by either of the authorities below, and shall pass a reasoned and speaking order after affording a reasonable opportunity of hearing to the assessee.

43. We, however, expressly clarify that the scope of the de novo proceedings shall remain strictly confined to the parties, transactions and additions under sections 69A and 69C which were already considered and made in the original assessment orders. The restoration shall not authorize the Assessing Officer to examine any fresh transaction, introduce any new item or source of addition, or make an addition exceeding the subject matter and aggregate amount of the additions originally made for the respective assessment year. The direction for de novo adjudication is intended only to determine afresh whether, and to what extent, the additions already made are sustainable in law upon proper verification.

44. Accordingly, the substantive grounds raised by the assessee and the corresponding grounds raised by the Revenue concerning the additions under sections 69A and 69C of the Act and the application of the peak-fund-flow method are restored to the file of the Assessing Officer and are treated as allowed for statistical purposes.

Order pronounced in the open court on 17.08.2026.