DCIT Vs Manoj Kumar Gupta (ITAT Jaipur)
ITAT Jaipur Deletes Additions Based on WhatsApp Messages & Rough Diaries – Notional Interest Also Struck Down
Background
- Assessee, engaged in grain trading & commission agency, was searched on 08.02.2018.
- Evidence seized:
Notebooks with entries during demonetisation period.
WhatsApp chats allegedly showing coded cash transactions (e.g., “kg” interpreted as lakhs with five zeros suppressed).
AO
- Added ₹2.76 Cr. (AY 2017-18) based on diaries u/s 68.
- Added ₹80 lakh (AY 2017-18) & ₹10.37 Cr. (AY 2018-19) on WhatsApp messages.
- Further added ₹25–26 lakh as notional interest on related party advances, applying 13% instead of 6–9%.
CIT(A):
- Sustained part additions, confirming ₹1.74 Cr. (AY 2017-18) & ₹1.66 Cr. (AY 2018-19) as peak balances from WhatsApp/diary evidence.
- Confirmed interest additions in part.
Tribunal’s Observations
On Seized Diaries :
- Found in brother’s room (Naresh Gupta). Presumption u/s 292C applies to him, not assessee.
- Entries showed receipts/payments with overlapping dates; entire receipts cannot be treated as income.
- Tribunal estimated only 10% commission on total turnover of ₹2.76 Cr. → taxable income = ₹27.66 lakh.
On WhatsApp Messages:
- Over 1500 chats retrieved. AO assumed “kg” = lakhs with 5 zeros suppressed.
- Tribunal: No evidence that chats materialised into transactions. Many were inquiries, duplicate or related to commodities (e.g., coriander seeds).
- No incriminating assets or expenditure found to corroborate.
- Hence, all additions based on WhatsApp chats deleted.
On Notional Interest:
- AO applied 13% arbitrarily.
- No incriminating material found.
- Cited SC in Hero Cycles (379 ITR 347) – AO cannot step into businessman’s shoes.
- Further, sec.40A(2) applies only to excessive payments, not to interest charged.
- Thus, additions of ₹23.67 lakh (AY 2017-18) & ₹25.72 lakh (AY 2018-19) deleted.
Decision
- Diary addition scaled down to ₹27.66 lakh (AY 2017-18).
- All WhatsApp-based additions deleted.
- Notional interest additions deleted.
- Revenue’s appeals dismissed; assessee’s appeals partly allowed.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
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