ACIT Vs Master Chain Pvt. Ltd (ITAT Mumbai)
ITAT Mumbai upholds Rs. 4.63 Cr addition deletion: ITAT Rules assessment based solely on unverified third-party WhatsApp data and denied cross-examination violates natural justice; Statement Without Cross-Exam is Just Noise – ITAT Turns Off the Volume. ITAT Mumbai confirmed that the Assessing Officer’s reliance on uncorroborated third-party search material (WhatsApp Excel sheet) to presume undisclosed sales, while ignoring the assessee’s audited books and statutory returns, was fundamentally flawed. The assessment was vitiated because the assessee was not given a reasonable opportunity to confront the evidence. The court affirmed that the AO wrongly ignored the gold jewellery manufacturer’s complete books of account, invoices, bank statements, and TCS/GST returns which reflected recorded sales. The addition, based purely on unverified third-party data and without disproving the assessee’s reconciliation of weight differences, was correctly deleted.
Assessee is a manufacturer & wholesale trader of gold jewellery. During assessment for AY 2022-23, AO learned that a search was conducted on a third party, Mohinder Singh Jewellers, from whose WhatsApp chat an Excel sheet was retrieved showing certain gold weight transactions. AO presumed that Assessee had entered into unrecorded sales with the searched party amounting to 9,380.676 grams of jewellery. Further relying on a statement of an employee of the searched party, Shri Sunil, AO treated these entries as undisclosed sales made by Assessee & valued them at ₹4,63,40,539 using a rate of ₹4,940 per gram. Assessee, however, explained that it had in fact made regular recorded sales of 12,533.92 grams to the same parties, which were duly supported by invoices, ledgers, bank statements, GST returns & TCS deduction at 1%. The difference in weight was explained as normal industry practice involving labour charges & conversion from gross weight to fine weight. Assessee also pointed out that the alleged WhatsApp Excel sheet was never confronted to it in full, nor was any opportunity provided to cross-examine the person whose statement was being relied upon.
