ITAT Pune Deletes Section 69 Addition Based on Uncertified WhatsApp Chats

Rameshwar Fakirchand Totala Vs ITO (ITAT Pune)

Unauthenticated WhatsApp chats recovered from the mobile phone of a third party, unsupported by independent corroborative evidence and without establishing their legal authenticity, cannot by themselves form the basis for making an addition under section 69 as unexplained investment in the hands of another assessee. Further, the presumption arising under section 132(4A) from search material is not automatically available against a third party.

Facts of the Case: The assessee was an individual and a practicing advocate. A search and seizure operation under section 132 was conducted on 30 November 2023 in the cases of Manjeet Pride Group, Gadiya Group and their associated entities. During the course of the search, the mobile phone of Shri Prakash Motwani was examined, and certain WhatsApp chats were allegedly found indicating unaccounted “Bhisi” transactions involving various persons. Based upon information allegedly emerging from the WhatsApp data recovered from the mobile phone of Shri Motwani, information concerning the assessee was forwarded by the Investigation Wing to the Assessing Officer. Consequently, reassessment proceedings were initiated by issuing notice under section 148.

During the reassessment proceedings, the Assessing Officer alleged that the WhatsApp data reflected payments aggregating to ₹10,52,450 made by the assessee towards Bhisi transactions during the relevant financial year. The assessee disputed the allegation and denied that the WhatsApp messages constituted reliable evidence of any unexplained investment made by him. Nevertheless, the Assessing Officer treated the alleged amount as unexplained investment under section 69 of the Income-tax Act and added ₹10,52,450 to the income of the assessee.

Finding of the Assessing Officer. The Assessing Officer proceeded primarily on the basis that the information recovered during the search operation, including the WhatsApp chats found in the mobile phone of Shri Prakash Motwani, established the involvement of the assessee in unaccounted Bhisi transactions. The Assessing Officer also relied upon the statement recorded during the search and invoked the presumption contained in section 132(4A) of the Act. According to the Assessing Officer, once incriminating documents or electronic data were found during the search and the material indicated the assessee’s involvement, the burden shifted upon the assessee to satisfactorily rebut the presumption.

The Assessing Officer further relied upon the principle of preponderance of probabilities, referring to the decision of the Supreme Court in Sumati Dayal v. CIT, and concluded that the surrounding circumstances and the search material sufficiently established that the assessee had made cash payments towards Bhisi transactions. Since, according to the Assessing Officer, the assessee failed to satisfactorily explain the source of such alleged cash payments, the amount of ₹10,52,450 was treated as unexplained investment under section 69. The assessment was accordingly completed under section 147 read with section 144 of the Act.

Finding of the CIT(A)/NFAC. The CIT(A)/NFAC affirmed the addition made by the Assessing Officer. The appellate authority accepted the Revenue’s position that the assessee had failed to furnish satisfactory evidence explaining the source of the alleged cash payments. It was held that the assessee had not provided a plausible explanation or supporting material sufficient to rebut the adverse information gathered during the search operation. Consequently, the addition of ₹10,52,450 under section 69 was sustained.

The assessee, however, contended before the Tribunal that the appellate order was cryptic and non-speaking and that the CIT(A)/NFAC had substantially reproduced or accepted the reasoning of the Assessing Officer without independently examining the legal objections relating to third-party evidence, authenticity of WhatsApp chats, cross-examination and the applicability of section 69.

Assessee’s Main Contentions Before the ITAT

Before the Tribunal, the assessee strongly challenged the addition on the ground that the entire case of the Revenue rested upon WhatsApp chats recovered from the mobile phone of a third party, namely Shri Prakash Motwani. It was argued that there was no independent material establishing that the assessee had actually made any investment or cash payment. No bank entry, cash book entry, asset acquisition, admission by the assessee or other independent corroborative evidence was brought on record to demonstrate an actual outflow of funds from the assessee.

The assessee further contended that electronic evidence could not be relied upon without establishing its authenticity in accordance with the legal requirements applicable to electronic records. Reliance was placed upon the decision of the Supreme Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, wherein the Supreme Court held that the certificate contemplated under section 65B(4) of the Indian Evidence Act is a condition precedent for admissibility of electronic records in the circumstances covered by that provision.

It was also argued that the statutory presumption under section 132(4A), relating to material found during the course of a search, could not automatically be extended against a person other than the person from whose possession or control the material was found. The assessee further raised objections regarding non-supply of complete electronic material, denial of cross-examination and the absence of any specific statement by Shri Motwani directly implicating the assessee.

ITAT’s Findings on Third-Party Search Material

The Tribunal carefully examined the foundation of the addition and found that the entire basis of the addition was the WhatsApp chats retrieved from the mobile phone of Shri Prakash Motwani. The Tribunal noted that the material had been recovered from the device of a third party and that no other independent evidence had been brought on record by the Department to establish that the assessee had actually made the alleged investment.

A significant finding of the Tribunal was that the presumption under section 132(4A) could not be mechanically applied against a third party. The Tribunal observed that a presumption arising from material found during a search is connected with the person from whose possession or control such material is found and cannot automatically bind another assessee merely because his name or alleged mobile number appears in such material.

Thus, the Revenue could not simply rely upon the statutory search presumption to shift the burden onto the assessee without first establishing, through reliable evidence, that the material genuinely related to the assessee and represented actual transactions undertaken by him.

ITAT’s Findings on WhatsApp and Electronic Evidence

The Tribunal gave particular importance to the issue of authenticity and admissibility of the WhatsApp chats. It noted that the Revenue had not established the authenticity of the electronic data by fulfilling the requirement relating to certification of electronic evidence under section 65B of the Indian Evidence Act. The Tribunal relied upon the judgment of the Supreme Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, which held that the certificate required under section 65B(4) is a condition precedent to the admissibility of electronic records in the relevant circumstances.

The Tribunal further observed that the Revenue had not demonstrated compliance with the requirements referred to by it regarding extraction and authentication of electronic evidence. Consequently, the WhatsApp chats, which constituted the very foundation of the addition, had not been legally authenticated in a manner sufficient to establish their reliability against the assessee.

The Tribunal therefore held that mere extraction of WhatsApp chats from a third party’s mobile phone cannot, by itself, conclusively establish that the transactions reflected therein were actually undertaken by the assessee.

Absence of Independent Corroborative Evidence

Another decisive factor was the complete absence of independent corroboration. The Tribunal specifically recorded that no other independent evidence was available with the Department apart from the WhatsApp chats recovered from Shri Motwani’s mobile phone.

There was no evidence of actual movement of money from the assessee, no bank transaction, no accounting entry, no independent confirmation specifically establishing the alleged investment and no other material demonstrating that ₹10,52,450 had actually been paid by the assessee in cash towards Bhisi transactions.
The Tribunal thus rejected the approach of making an addition solely by drawing an inference from third-party WhatsApp chats. The principle of preponderance of probabilities could not substitute the requirement of reliable foundational evidence where the basic electronic material itself had not been properly authenticated and was unsupported by independent corroboration.

Cases Relied Upon

The Tribunal’s conclusion was substantially supported by the principle laid down by the Supreme Court in Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal [2020 (7) TMI 740 – Supreme Court], regarding the requirements for admissibility of electronic records. The assessee had also relied upon CIT v. Odeon Builders Pvt. Ltd. [2019 (8) TMI 1072 – Supreme Court] concerning reliance on third-party information, Andaman Timber Industries v. CCE [2015 (10) TMI 442 – Supreme Court] concerning the importance of cross-examination and natural justice, and Kishinchand Chellaram v. CIT [1980 (9) TMI 3 – Supreme Court] regarding the assessee’s right to controvert evidence relied upon by the Department.

Reference was also made to P.R. Metrani v. CIT [2006 (11) TMI 136 – Supreme Court] concerning the scope of the presumption arising from search proceedings and Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan [2010 (9) TMI 886 – Supreme Court] concerning the requirement that quasi-judicial authorities must provide reasons for their decisions.

The assessee additionally relied upon several Tribunal decisions concerning the evidentiary value of electronic and third-party material, including DCIT v. Niru Dhiren Shah, ACIT v. Ashokkumar Babulal Bambharoliya, Designers Point (India) Pvt. Ltd. v. ACIT, Atul Tantia v. DCIT, and Prarthana Construction (P.) Ltd. v. DCIT.
Final Outcome

The ITAT Pune held that the addition of ₹10,52,450 under section 69 could not be sustained. Since the entire addition was founded upon WhatsApp chats recovered from the mobile phone of a third party, whose authenticity had not been properly established, and since there was no independent corroborative evidence connecting the assessee with the alleged unexplained investment, the Tribunal set aside the order of the CIT(A)/NFAC.

The Assessing Officer was directed to delete the addition, and the appeal of the assessee was accordingly allowed in full.

Ratio / Principle Laid Down

The important ratio emerging from this decision is that third-party electronic evidence, particularly WhatsApp chats recovered from another person’s mobile device, cannot by itself constitute a legally sufficient foundation for making an addition in the hands of an assessee unless the authenticity and reliability of such electronic material are properly established and the material is supported by independent corroborative evidence connecting the assessee with the alleged transaction.

Further, the presumption under section 132(4A) is not automatically transferable to a third party merely because the third party’s name or details allegedly appear in search material found from another person. The Revenue must independently establish the nexus between the seized material and the assessee and cannot make an addition merely on suspicion, inference or unverified electronic communications.

In short, suspicion arising from third-party WhatsApp data—even when recovered during a search—cannot take the place of legally authenticated evidence and independent proof of an actual unexplained investment.

Cases Discussed

• CIT vs. Odeon Builders (P) Ltd., (2019) 110 taxmann.com 64 (SC).
• Kishanchand Chellaram vs. CIT, (1980) 125 ITR 713 (SC).
• Andaman Timber Industries vs. CCE, (2015) 127 DTR 241 (SC).
• Prarthana Construction (P) Ltd vs. DCIT, (2001) 118 Taxman 112.
• Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal, (2020) 7 SCC 1.
• DCIT v. Niru Dhiran Shah, ITA No.4294/MUM/2025, order dated 27.10.2025, AY 2022-23.
• Atul Tantia v. DCIT, ITA No.492/KOL/2021, order dated 28.03.2023, AY 2018-19.
• ACIT v. Ashokkumar Babulal Bambharoliya, ITA No.1130/AHD/2025, order dated 30.09.2025, AY 2018-19.
• Designers Point (India) P. Ltd. v. ACIT, ITA No.2517/DEL/2022, order dated 06.09.2023, AY 2020-21.
• Sumati Dayal v. CIT, (1995) AIR 2109.
• Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan, (2010) 9 SCC 496.
• Addl. CIT v. Lata Mangeshkar.
• V.C. Shukla (Jain Hawala Diary).
• Chuharmal v. CIT.
• P.R. Metrani Vs. CIT, 287 ITR 209 (SC).
• Anvar P.V. v. P.K. Basheer & Ors.
• Shafhi Mohammad v. State of Himachal Pradesh.

FULL TEXT OF THE JUDGMENT/ORDER OF ITAT PUNE

This appeal filed by the assessee is directed against the order dated 15.01.2026 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2020-21.

2. Facts of the case, in brief, are that the assessee is an individual and a practicing lawyer. A search and seizure action u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was conducted by the DDIT(Inv), Aurangabad on 30.11.2023 in the case of Manjeet Pride Group, Gadiya Group and their associated entities. Specific information in respect of the assessee was found and seized during the search action which was forwarded to the Assessing Officer by the office of the DDIT(Inv), Aurangabad. On the basis of such information the case of the assessee was reopened by issue of notice u/s 148 of the Act after obtaining the prior approval of the competent authority. The assessee in response to the notice issued u/s 148 filed his return of income declaring total income at Rs.36,62,110/-.

3. During the course of assessment proceedings the Assessing Officer confronted the assessee regarding the various payments made by him towards Bhisi account amounting to Rs.10,52,450/- during the financial year 2019-20 which was found from the mobile data of Shri Prakash Motwani. The assessee in response to the same submitted that the said Whats App message do not belong to him. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and made addition of Rs.10,52,450/- to the total income of the assessee by observing as under:

6.1 In reply to this office notice u/s 142(1), the assessee did not furnish any reply. No explanation/reply has been produced by the assessee. The case of the assessee was reopened on the basis of the information collected during the Search action in the Manjeet Pride Group, Gadiya Group and their associated entities. The information was regarding involvement in unaccounted bhisi transactions. The data found during the Search clearly confirms that assessee is involved in the said transactions. Further, the key persons of the builder group have confirmed the same in their statements recorded u/s 132(4). It is very relevant to reproduce the provisions of Section 132(4A) of the Act here:

“132. (4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed—

1. that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

2. that the contents of such books of account and other documents are true; and

3. that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.”

The Hon’ble Supreme Court in the case of P. R. Metrani Vs. CIT, 287 ITR 209 has elaborated the scheme of Section 132 of the Act by stating that this Section is a Code in itself. It has its own procedure for search, seizure, determination of the point in dispute, the quantum to be retained and also the quantum of tax etc. Sub Section (4A) was inserted by Taxation Law (Amendment) Act, 1975, which permitted the presumption to be raised in the circumstances mentioned therein. Before the insertion of this sub-Section (4A), the onus of proving that the books of account, other documents, money bullion, jewellery etc. found in possession or control of a person in the course of a Search belonged to that person was on the Department. This sub-section enables a searching authority to raise a rebuttable presumption that such, documents etc. found in the Search belonged to such person; that the contents of such documents are true.

6.2. Once there was a presumption [enabled by the provisions of Section 132(4A)] raised on the basis of documents/pendrives, it was upon the assessee to rebut the presumption by offering plausible explanation. It cannot be the AO who will bring evidence to show that the assessee had passed some money outside the account books with regard to the purchase of property in question. If there is evidence indicating that an assessee has paid more than the disclosed consideration for a property, the onus shifts to the assessee to rebut the presumption. If the assessee fails to prove otherwise, the Department can make an addition.

6.3 The principle of “preponderance of probabilities” applies in tax cases. It has been underlined by the Hon. Supreme Court in the case of Sumati Dayal Vs. CIT, Bangalore (1995 AIR 2109). Even if direct evidence is unavailable, surrounding circumstances, documents found during the Search action, sworn- in statements of the key persons of the builder group can be relied upon to determine the actual transaction value. The assessee has not furnished any reply in this regard. However, it is pertinent to note that –

i) Documents indicating the name of the assessee were found during the Search. Further, the Searched person has made the statement on oath, in all his sanity and without any fear, force or coercion. In that statement, the Searched person has confirmed the said transactions with the persons including the assessee.

ii) The assessee is one of the customers of Mr. Motwani. Assessee was involved in unexplained bhisi transactions.

iii) It is not only the assessee whose name has been found during the Search and confirmed by the Searched party. There are several other customers like the assessee. It is not the assessee who is solely being named by the Searched party.

iv) The assessee has not demonstrated any specific purpose/malafide intention/animosity of the searched person with respect to the assessee which made that person deliberately record the name of the assessee in the documents regarding the bhisi payment.

Thus, all the probabilities clearly prove that the assessee was involved in ‘bhisi’ transactions with Mr. Motwani. The assessee remained non-compliant throughout the assessment proceeding. The quote attributed to the French mathematician Laplace fittingly summarizes the rational that: “The weight of evidence for an extraordinary claim must be proportioned to its strangeness.“

7. Thus, it is clear from the above discussion that the assessee has paid bhisi money in cash. The documents/pen drives found and seized during the Search action, the statements on oath of the key persons of the builder group and the other facts mentioned in details above confirm the same.

Assessee has asked for the hard disk and information during the assessment proceedings. This office has already provided the assessee with the relevant excerpts of the above mentioned documents.

The assessee has failed to explain the sources of the cash payments made. The assessee has not given any explanation/ evidences regarding the same. Hence, this amount of ‘Bhisi’ payment in cash of Rs.10,52,450/- is held as unexplained investment of the assessee u/s 69 of the Act and added to the total income of the assessee. Penalty u/s 271AAC of the Act is initiated separately.

4. In appeal, the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer on the ground that the assessee failed to explain the source of cash payment made and the assessee has not given any explanation / evidence regarding the same. He, therefore, held that the payment of Bhisi amount in cash of Rs.10,52,450/- is liable to be treated as unexplained investment of the assessee u/s 69 of the Act.

5. Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds:

1. The Ld. CIT(A) failed to appreciate that the reassessment proceedings were initiated solely on the basis of third-party information obtained during a search in the case of Manjeet Pride Group, without any independent application of mind by the Assessing Officer.

2. The Ld. CIT(A) erred in upholding the addition despite the fact that crucial electronic evidence, namely the Toshiba Hard Disk, full WhatsApp chat records etc were never provided to the appellant in complete and verifiable form.

3. The Ld. CIT(A) failed to appreciate that denial of copies of relied-upon material and denial of opportunity to cross-examine Shri Prakash Motwani renders the entire addition illegal and void in law.

4. The Ld. CIT(A) failed to appreciate that no statement of Shri Prakash Motwani specifically names or implicates the appellant in any unexplained “bhisi” transaction.

5. Incorrect and Unlawful Application of Section 69 of the Act:

5.1. The Ld. CIT(A) erred in law and on facts in confirming the addition u/s 69 of the Act without establishing the existence, nature, source or ownership of any alleged investment by the appellant.

5.2. The Ld. CIT(A) failed to appreciate that mere WhatsApp messages, unverified electronic data and presumptions cannot constitute “investment” within the meaning of section 69 of the Act.

6. The appellant craves leave to add, alter, amend or withdraw any of the above grounds at the time of hearing.

6. The Ld. Counsel for the assessee at the outset submitted that the entire controversy has arisen from a search and seizure action conducted on 30.11.2023 under section 132 of the Act in the case of Manjeet Pride Group, Gadiya Group and their associated entities. The Assessing Officer, based on WhatsApp message in the mobile phone of Shri Prakash Motwani, reopened the assessment u/s 148 of the Act and thereafter completed the assessment u/s 144 by making addition of Rs.10,52,450/- as ‘unexplained investment’ under section 69 of the Act. He submitted that the re-assessment proceedings were initiated solely on the basis of third party information received from the Investigation Wing consequent to the search action in the case of Manjeet Pride group / Gadiya group. However, the Assessing Officer has not applied his mind independently.

7. Referring to the decision of the Hon’ble Supreme Court in the case of CIT vs. Odeon Builders (P) Ltd. reported in (2019) 110 taxmann.com 64 (SC), he submitted that the Hon’ble Supreme Court in the said decision has held that no addition can be made solely on the basis of third party information gathered by the Investigation Wing. He submitted that in the instant case the Assessing Officer’s act of mechanically reopening the assessee’s case without conducting any independent inquiry to verify whether the WhatsApp messages actually pertained to the assessee’s financial transactions amounts to precisely such impermissible borrowing. He submitted that the Ld. CIT(A) / NFAC without addressing this fundamental challenge proceeded to upheld the addition merely on the ground that the Assessing Officer has properly confronted the findings of search. He submitted that confrontation of information without independent verification cannot substitute for the Assessing Officer’s own application of mind which is a mandatory requirement as per the provisions of section 147.

8. In his next plank of argument, he submitted that when the assessee has appeared and participated in the assessment proceedings the Assessing Officer should not have invoked the provisions of section 144.

9. In his third plank of argument, he submitted that the Assessing Officer has violated the principles of natural justice. He submitted that in the instant case the Assessing Officer has selectively reproduced only one reply of the assessee deliberately omitting elaborate written submissions filed in response to multiple notices. He submitted that non-consideration of material before the Assessing Officer is a jurisdictional error going to the root of the matter.

10. The Ld. Counsel for the assessee in his another plank of argument submitted that the Assessing Officer has not supplied the documents which were relied upon by him for the reopening of the assessment. Therefore, the re-opening proceedings are invalid and liable to be quashed.

11. Referring to the decision of the Hon’ble Supreme Court in the case of Kishanchand Chellaram vs. CIT reported in (1980) 125 ITR 713 (SC), he submitted that the Hon’ble Supreme Court in the said decision has held that the department is bound to afford an opportunity to the assessee to controvert and cross-examine the evidence on which the Department places its reliance.

12. Referring to the decision of the Hon’ble Supreme Court in the case of Andaman Timber Industries vs. CCE reported in (2015) 127 DTR 241 (SC) he submitted that the Hon’ble Supreme Court in the said decision has held that failure to give the assessee the right to cross-examine witnesses whose statements are relied upon results in a breach of natural justice – a serious flaw which renders the order a nullity. He submitted that in the instant case the entire addition was made on the basis of statement of Shri Prakash Motwani recorded during the search action u/s 132(4) read with WhatsApp chats recovered from his phone. However, the assessee was never given an opportunity to cross-examine Shri Prakash Motwani. Further, the statement of Shri Prakash Motwani does not implicate the assessee.

13. Referring to question No.38 put to Shri Prakash Motwani during the course of search he submitted that Shri Motwani in his statement recorded u/s 132(4) in his answer to question No.28 does not implicate the assessee. The name of the assessee does not find a place in the statement of Shri Motwani. Therefore, in absence of any evidence, the addition could not have been made.

14. The Ld. Counsel for the assessee submitted that the provisions of section 69 of the Act requires, as a threshold condition that the assessee must have made investments in the relevant financial year. The word ‘investment’ connotes an actual outflow of funds that money actually left the hands of the assessee. However, there is no presumption of investment arising from a chat record. The Assessing Officer has not demonstrated any independent material such as bank account entries, cash book entries, any admission or statement of the assessee or any third party corroboration beyond Motwani’s general statement or any asset creation to show that money has actually flowed from the assessee to Shri Motwani. The Assessing Officer suddenly jumped from the existence of WhatsApp messages to the conclusion of an unexplained investment.

15. Referring to the decision of the Ahmedabad Bench of the Tribunal in the case of Prarthana Construction (P) Ltd vs. DCIT reported in (2001) 118 Taxman 112, he submitted that the Tribunal in the said decision has held that loose papers and documents seized from the premises of third parties and statements recorded at the back of the assessee without an opportunity to interrogate those documents without bringing on record any supporting evidence cannot be the basis for adding undisclosed income.

16 . The Ld. Counsel for the assessee next submitted that the WhatsApp messages are not admissible evidence without section 65B Certificate of the Indian Evidence Act, 1872. He submitted that electronic records are admissible as evidence only if they satisfy the requirements of section 65B of the Indian Evidence Act, 1872. He submitted that a certificate u/s 65B is mandatory for the admissibility of electronic evidence. For the above proposition, he relied on the decision of the Hon’ble Supreme Court in the case of Arjun Panditrao Khotkar vs. Kailash Kushanrao Goratyal reported in (2020) 7 SCC 1. He submitted that the Revenue in the instant case has not produced any such certificate in relation to the WhatsApp data extracted from the Toshiba Hard Disk. He also relied on the following decisions:

a. DCIT v. Niru Dhiran Shah vide ITA No.4294/MUM/2025 order dated 27.10.2025 for assessment year 2022-23

b. Atul Tantia v. DCIT vide ITA No.492/KOL/2021 order dated 28.03.2023 for assessment year 2018-19

c. ACIT v. Ashokkumar Babulal Bambharoliya vide ITA No.1130/AHD/2025 order dated 30.09.2025 for assessment year 2018-19

d. Designers Point (India) P. Ltd. v ACIT vide ITA No.2517/DEL/2022 order dated 06.09.2023 for assessment year 2020-21

17. The Ld. Counsel for the assessee submitted that as per the provisions of section 79A of the Information Technology Act, 2000, electronic evidence from a digital device is admissible only if it has been extracted by an Examiner of Electronic Evidence. The Revenue has not demonstrated compliance with this requirement. In the absence of a proper section 65B certification and compliance with the IT Act, 2000, the WhatsApp data is inadmissible and cannot form the basis of any addition.

18. The Ld. Counsel for the assessee submitted that the preponderance of probabilities cannot substitute for evidence. He submitted that the Assessing Officer in the instant case relying on the decision of the Hon’ble Supreme Court in the case of Sumati Dayal v. CIT reported in (1995) AIR 2109) invoked the principle of preponderance of probabilities to justify the addition. He submitted that this reliance is misconceived. He submitted that the principle of preponderance of probabilities comes into play only after some credible, admissible evidence is before the authority. It does not permit the authority to create evidence by inference or to hold that mere probability of involvement constitutes proof of the making of an investment.

19. So far as the findings of the Ld. CIT(A) / NFAC that the assessee has not even denied that the impugned mobile number belongs to him is concerned, he submitted that this observation reveals a dangerous reversal of the burden of proof. He submitted that the onus is on the Revenue to affirmatively establish through subscriber records or otherwise that the mobile number appearing in the WhatsApp chat belongs to the assessee. He submitted that the assessee’s failure to deny a connection does not amount to an admission. The Department cannot shift its own burden of proof onto the assessee.

20. Finally, he submitted that the order of the Ld. CIT(A) / NFAC is cryptic and non-speaking order as he has disposed of all the grounds of appeal in a perfunctory manner with a near verbatim reproduction of the Assessing Officer’s order and the bare observation that the Assessing Officer has properly confronted the findings of search relating to the assessee for which the assessee has not furnished any plausible reply. He submitted that no independent reasoning has been given for rejecting the detailed legal arguments and case law placed before the Ld. CIT(A) / NFAC. He submitted that the non-speaking, cryptic appellate order which does not engage with the submissions of the assessee and the case law cited is liable to be set aside. For the above proposition, he relied on the decision of the Hon’ble Supreme Court in the case of Kranti Associates Pvt. Ltd. v. Masood Ahme Khan reported in (2010) 9 SCC 496 where it has been held that all quasi-judicial authorities including Income-tax Appellate Authorities must give reasons for the decisions. He submitted that the impugned order of the Ld. CIT(A) / NFAC fails this test. He accordingly submitted that the order of the Ld. CIT(A) / NFAC be set aside and the addition made by the Assessing Officer be deleted.

21. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. He submitted that the re-assessment proceedings were undertaken by following due procedure of law and the Assessing Officer did not mechanically rely on information but applied his mind independently to the material received from the Investigation Wing before issuing the section 148 notice. He submitted that when the information from the Investigation Wing discloses prima facie material indicating escapement of income such as the sworn statement of a searched person linking specific mobile numbers to unaccounted transactions, is a valid basis for formation of a reason to believe under section 147. The Assessing Officer is not required to conduct a full-fledged investigation before issuing a notice, he is only required to have a reason to believe, which is a lower threshold. So far as the decision of the Hon’ble Supreme Court in the case of CIT v. Odeon Builders (P) Ltd. (supra) relied on by the assessee is concerned, he submitted that in that case the information was vague and general. However, in the instant case, the information is specific i.e. a named mobile number associated with quantified amounts in the context of a sworn statement by a searched person identifying the very nature of the transactions. Therefore, the said decision is not applicable to the facts of the present case. He submitted that the assessee having participated in the reassessment proceedings has in any event waived any jurisdictional objection to the issuance of the notice by responding on merits without raising a timely specific jurisdictional challenge before the Assessing Officer. He submitted that the assessee who engages on merits cannot subsequently seek to invalidate the notice on jurisdictional grounds at the appellate stage as a matter of course.

22. So far as the allegation of illegality of section 144 invocation is concerned, he submitted that the invocation of section 144 is justified in the facts of this case. He submitted that the assessee’s replies were evasive, uninformative and devoid of substantive material explanation rendering a best judgment assessment not only permissible but necessary.

23. So far as non-supply of documents and cross-examination is concerned, he submitted that the Assessing Officer has provided sufficient opportunity and material to the assessee to meet the case against him and there is no actionable violation of natural justice.

24. So far as the argument of the Ld. Counsel for the assessee that the examination of Shri Motwani was not provided is concerned, he submitted that the statement of Shri Motwani was recorded on oath under section 132(4) during the search which is a solemn statutory proceeding. He submitted that the cross-examination is a right available in court/tribunal proceedings. However, there is no absolute unqualified right to cross-examine a person whose statement is recorded during a search.

25. Referring to his synopsis, the Ld. DR drew the attention of the Bench to the following propositions:

“The right to cross-examination in tax proceedings is a rule of fairness, not a rigid rule of law. The absence of cross-examination does not automatically vitiate the order what matters is whether the assessee had a real and effective opportunity to meet the material.

The assessee was confronted with the WhatsApp material and given adequate opportunity to respond. His response was a bare denial. The mere denial without any documentation, corroboration or affirmative explanation is not a ‘meeting’ of the evidence in any meaningful sense

The precedents in Kishanchand Chellaram and Andaman Timber are distinguishable: those cases involved specific witnesses whose identity was known and who could have been produced. Here, Motwani’s statement was recorded on oath during the search itself, under statutory compulsion it is not hearsay or a private communication.”

26. He submitted that if the assessee genuinely needed cross-examination of Shri Motwani to controvert the evidence he was at liberty to seek this opportunity before the Ld. CIT(A) / NFAC or before the Tribunal. However, the assessee has not made any application before the Tribunal for summoning Shri Motwani, which itself demonstrates that the demand for cross-examination is primarily a legal technique and not a genuine evidential need.

27. So far as the argument of the Ld. Counsel for the assessee that Shri Motwani has not implicated the assessee is concerned, he submitted that Shri Motwani’s sworn statement read with the WhatsApp data is sufficient to raise a strong inference of cash investment by the assessee in bhisi transactions. The absence of a name-specific question does not negate this inference. He submitted that the assessee’s argument proceeds on an improbably narrow reading of Shri Motwani’s statement. Referring to question No.38, he submitted that in his reply to question No.38, Shri Motwani has confirmed on oath that the WhatsApp chats record bhisi transactions with amounts written with suppression of two zeros.

28. So far as various decisions relied on by the Ld. Counsel for the assessee such as Addl. CIT v. Lata Mangeshkar, V.C. Shukla (Jain Hawala Diary) and Chuharmal v. CIT etc are concerned, he submitted that these decisions are misplaced. All these decisions deal with a situation where entries were recorded by third party in their own books without a contemporaneous on-oath confirmation of the nature of those entries. However, in the present case, the owner of the data himself confirmed on oath that the entries record bhisi transactions. This sworn explanation by the data-owner distinguishes the present case fundamentally from cases involving unexamined diary entries. He submitted that the documents found in the possession of a connected person read with the search/seizure context and confirmed by the deponent’s own statement, constitute admissible and reliable evidence of undisclosed transactions by the persons named therein.

29. So far as the argument of the Ld. Counsel for the assessee that alleged non-satisfaction of section 69 requirements are concerned, he submitted that section 69 does not require the Assessing Officer to produce a bank statement or cash book entry evidencing an outflow before an addition can be made. By its very nature, unrecorded cash investments do not appear in the assessee’s own books. If they did, they would not be ‘unrecorded investments’. He submitted that the Assessing Officer is entitled to infer the fact of investment from surrounding circumstances, and the WhatsApp records showing the assessee’s number against bhisi entries confirmed by Motwani’s sworn statement constitute exactly such surrounding circumstances.

30. So far as section 65B certificate is concerned, he submitted that this issue was raised by the assessee for the first time before the Tribunal which is a purely technical and procedural objection, which in the context of income-tax assessments, must be assessed in terms of its actual prejudice to the assessee. He submitted that the Tribunal being a final fact finding authority is not strictly bound by the Indian Evidence Act, 1872. He submitted that section 136 of the Indian Evidence Act provides that proceedings before the Tribunal shall be deemed to be judicial proceedings but the rules of evidence applicable in civil courts do not apply in their entirety to income-tax proceedings. He submitted that the requirement of a section 65B certificate is primarily intended to ensure authenticity of electronic records. However, in the present case, the authenticity of the WhatsApp data is corroborated by the sworn statement of the very owner of the device on which the data resided arguably the most reliable form of authentication possible. The certificate requirement adds nothing substantively to this authentication. He submitted that the provisions of section 79A of the IT Act, 2000 relates to the admissibility of electronic evidence in court proceedings and the assessment before the Assessing Officer and appellate proceedings before the CIT(A)/ITAT are not ‘court proceedings’ in the strict sense, and therefore, the strict admissibility rules of the IT Act, 2000 do not automatically apply in their full rigour to income-tax assessments.

31. So far as the argument of the Ld. Counsel for the assessee that the Revenue must establish ownership of the mobile number through subscriber records is concerned, he submitted that this plea is at variance with the record. The assessees in all his replies during assessment and appellate proceedings has at no point denied that mobile number 9423191575 is his number. He submitted that since the assessee is a legally trained professional who represented during the proceedings, the omission to deny ownership of the number is significant and meaningful. It is not a case where the assessee did not understand the allegation. He understood it perfectly and chose not to specifically deny it. Therefore, an adverse inference is legitimately drawn from this silence.

32. So far as the allegation of cryptic order of the Ld. CIT(A) / NFAC is concerned, he submitted that the order of the Ld. CIT(A) / NFAC although concise is not a non-speaking order. It demonstrates application of mind to the material and the assessee’s replies. He submitted that the Ld. CIT(A) / NFAC confirmed the addition after considering the assessee’s submissions. The order records the fact that the Assessing Officer properly confronted the adverse material and that the assessee failed to provide a plausible reply. He submitted that the requirement of a speaking order does not mandate a paragraph-by-paragraph response to every case law citation, it requires that the authority demonstrate awareness of the issue and give a reason for its conclusion which the Ld. CIT(A) / NFAC has done.

33. So far as the argument of the Ld. Counsel for the assessee that the reasons should have been given, he submitted that the department does not dispute this. It is the position of the department that the reasons have been given namely that the adverse material was properly confronted, the assessee’s response was not substantive and the addition is therefore upheld. This is a reason. It may be a reason that the assessee disagrees with but it is not no reason. The appropriate remedy for an inadequate reason is a remand not deletion of the addition. He accordingly submitted that the order of the Ld. CIT(A) / NFAC be upheld and the grounds raised by the assessee be dismissed.

34. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is a practicing advocate in Maharashtra and filed his return of income declaring total income of Rs.36,62,110/-. A search and seizure action u/s 132 of the Act was conducted at the premises of Manjeet Pride Group, Gadiya Group and their associated entities on 30.11.2023 during which the mobile phone of Shri Prakash Motwani was found. On examination of WhatsApp data, entries were found indicating a systematic pattern of unaccounted Bhisi (chit fund) transactions involving multiple parties including that of the assessee as per mobile number of the assessee. During the search, the statement of Shri Prakash Motwani was recorded u/s 132(4) of the Act. In question No.38, he was shown the print out of WhatsApp chats and he was asked to explain their contents. Shri Motwani in his reply had stated that most of WhatsApp chats contain the details of Bhisi related transactions and that amounts are written in suppression of two zeros. The case of the assessee was accordingly reopened by issue of notice u/s 148 of the Act. Although the assessee filed the return in response to notice u/s 148, however, he did not furnish sufficient details during the course of assessment proceedings for which the Assessing Officer in the order passed u/s 147 r.w.s. 144 of the Act made addition of Rs.10,52,450/- u/s 69 as unexplained investment. We find in appeal the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer.

35. It is the submission of the Ld. Counsel for the assessee that Shri Prakash Motwani in his statement recorded u/s 132(4) has not taken the name of the assessee, no cross-examination was allowed, reasons were not supplied, investment is not established, section 65B of the Indian Evidence Act, 1872 certificate was not obtained and therefore, the addition made by the Assessing Officer and upheld by the Ld. CIT(A) / NFAC in a cryptic order cannot be sustained.

36. A perusal of the assessment order shows that the whole basis of the addition is the retrieval of WhatsApp chats from the mobile number of Shri Prakash Motwani. Although according to the Assessing Officer, various cases including the one pertaining to the assessee were reopened on the basis of information collected during the search action in Manjeet Pride Group, Gadiya Group and their associated entities, however, nothing has been brought on record by the Assessing Officer as to the finality of the additions in any of the cases. The relevant observations of the Assessing Officer at clause VIII of para 6 read as under:

“VIII. Various cases, including the one pertaining to the assessee, were reopened on the basis of the information collected during the Search action in the Manjeet Pride Group, Gadiya Group and their associated entities. The type of information was the same involved in unaccounted bhisi transactions.”

37. Further, the presumption u/s 132(4A) is binding on the person who has made the statement u/s 132(4A) but it cannot bind a third party. Moreover, the authenticity of WhatsApp chat is not established by fulfilling the mandatory requirement of certificate u/s 65B of the Indian Evidence Act, 1872. No other independent evidence is available with the department other than the WhatsApp chat in the mobile number of Mr. Motwani.

38. The Hon’ble Supreme Court in the case of Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal order dated 14.07.2020 has held that the certificate required u/s 65B(4) of the Indian Evidence Act, 1872 is a condition precedent to the admissibility of evidence by way of electronic record. While holding so, the Hon’ble Supreme Court has relied on the decision of Hon’ble Supreme Court in the case of Anvar P.V. v. P.K. Basheer & Ors and Shathi Mohammad v. State of Himachal Pradesh. Further, as per section 79A of the Information Technology Act, 2000, electronic evidence from a digital device is admissible only if it has been extracted by an Examiner of Electronic Evidence. Since the Revenue in the instant case has not demonstrated compliance with this requirement as per 79A of the Information Technology Act, 2000 and the certificate as per section 65B of the Indian Evidence Act, 1872, therefore, the addition made merely on the basis of WhatsApp data of Shri Prakash Motwani in the hands of the assessee, in our opinion, cannot be the basis for making addition. In this view of the matter, we set aside the order of the Ld. CIT(A) / NFAC and direct the Assessing Officer to delete the addition. The grounds raised by the assessee are accordingly allowed.

39. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open Court on 21^st August, 2026.