2025 (7) TMI 364 - AT - Income Tax

Addition on the basis of copy of seized digital document u/s 69A - reliance on WhatsApp messages - cash paid to Shiva Brick against cheque received as per the copy of account found in received WhatsApp messages in the mobile phone of assessee s son - HELD THAT - The only photo seized from mobile phone which is relied upon by the AO in making the addition in dispute being digital record and cannot be admitted as evidence as the mandatory certificates 65B(4) of the Indian Evidence Act 1872 is not provided to the assessee rendering the said photo as non-est in the eye of law. This view has been fortified by the decision in the case of Ritu Tuli 2025 (1) TMI 170 - ITAT DELHI wherein it has been held that no addition for unexplained investment in property can be made u/s 69B of the Act based on an illegible unsigned copy of an image or photo extracted from the mobile phone of the searched person in the absence of a certificate u/s 65B of the Indian Evidence Act 1872. We further find that in the case of Dell International India Pvt. Ltd. vs. Adeel Feroze 2024 (7) TMI 1656 - DELHI HIGH COURT has held that WhatsApp messages will be admissible or not and it was ultimately held that such a message would be inadmissible unless accompanied by a proper certificate as given u/s 65B of the Indian Evidence Act 1872 which has not been given to the assessee as pleaded by AR. Hence addition made on this account deserve to be deleted. Assessee s appeal is allowed

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this appeal are:

- Whether the addition of Rs. 9,98,000/- under section 69A of the Income Tax Act, 1961, based on a seized digital document (WhatsApp messages) without corroborative evidence, is justified and sustainable.

- Whether the digital evidence in the form of WhatsApp messages seized from the mobile phone of the assessee's son is admissible as evidence in the absence of a certificate under section 65B(4) of the Indian Evidence Act, 1872.

- Whether the ledger accounts maintained and audited books of the assessee, which do not reflect the alleged cash payment, can be disregarded in favor of the seized digital records.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legitimacy of addition under section 69A based on seized WhatsApp messages

Relevant legal framework and precedents: Section 69A of the Income Tax Act, 1961, deals with unexplained cash credits and permits addition to income where the assessee fails to satisfactorily explain the nature and source of such credits. However, the addition must be supported by credible and admissible evidence. The Indian Evidence Act, 1872, particularly section 65B, governs the admissibility of electronic records.

Court's interpretation and reasoning: The Tribunal examined the basis of the addition, which was the WhatsApp messages seized from the mobile phone of the assessee's son showing alleged cash payments to Shiva Brick against cheque receipts. The assessee contended that these messages were only for confirmation of accounts and did not indicate actual cash transactions. The Tribunal noted that the ledger accounts from audited books did not corroborate the alleged cash payments; in fact, the ledger showed an opening balance of Rs. 31,72,795/-, whereas the WhatsApp ledger lacked such an opening balance.

Key evidence and findings: The Tribunal found that the only evidence relied upon by the Assessing Officer (AO) for the addition was a photo of WhatsApp messages. The assessee also produced a confirmed copy of account from Shiva Brick with PAN details, which did not reflect the cash entries alleged by the AO. This evidence was neither confronted nor considered by the AO or the CIT(A).

Application of law to facts: The Tribunal applied the principle that additions under section 69A require credible and corroborative evidence. Since the ledger accounts and confirmed account statements did not support the AO's case, and the digital evidence was uncorroborated, the addition lacked a firm evidentiary basis.

Treatment of competing arguments: The Revenue relied on the WhatsApp messages as primary evidence, whereas the assessee challenged their authenticity and evidentiary value. The Tribunal found the assessee's argument more convincing, especially given the absence of corroborative evidence and the existence of audited accounts reflecting no such cash payments.

Conclusions: The addition under section 69A based solely on the WhatsApp messages was not sustainable.

Issue 2: Admissibility of digital evidence (WhatsApp messages) in absence of certificate under section 65B(4) of the Indian Evidence Act, 1872

Relevant legal framework and precedents: Section 65B of the Indian Evidence Act, 1872, mandates that electronic records must be accompanied by a certificate under subsection (4) to be admissible as evidence. This certificate authenticates the electronic record and ensures its integrity. Several precedents, including decisions of the ITAT and the Hon'ble Delhi High Court, have held that electronic evidence without such certification is inadmissible.

Court's interpretation and reasoning: The Tribunal noted that the photo of WhatsApp messages seized from the mobile phone was digital evidence. The assessee contended that no certificate under section 65B(4) was provided by the Revenue, rendering the evidence inadmissible. The Tribunal agreed, stating that the absence of such a certificate makes the digital record "non-est in the eye of law."

Key evidence and findings: The Tribunal relied on recent decisions, including Ritu Tuli Vs. DCIT and M/s Monica Kamarpal Banda vs. ACIT, which held that electronic evidence without compliance with section 65B is not admissible. It also cited the Delhi High Court ruling in Dell International India Pvt. Ltd. vs. Adeel Feroze, which affirmed that WhatsApp messages require proper certification to be admitted as evidence.

Application of law to facts: Since the Revenue failed to produce the mandatory certificate, the WhatsApp messages could not be accepted as evidence to justify the addition.

Treatment of competing arguments: The Revenue did not dispute the absence of the certificate but relied on the orders of lower authorities. The Tribunal found this insufficient in light of the statutory requirements and judicial precedents.

Conclusions: The digital evidence relied upon by the AO was inadmissible without compliance with section 65B(4), and therefore, the addition based on such evidence could not stand.

3. SIGNIFICANT HOLDINGS

The Tribunal held that:

"The only photo seized from mobile phone, which is relied upon by the AO in making the addition in dispute, being digital record and cannot be admitted as evidence as the mandatory certificate/s 65B(4) of the Indian Evidence Act 1872 is not provided to the assessee rendering the said photo as non-est in the eye of law."

It further observed:

"No addition for unexplained investment in property can be made under section 69B of the Act based on an illegible, unsigned copy of an image or photo extracted from the mobile phone of the searched person, in the absence of a certificate under Section 65B of the Indian Evidence Act, 1872."

The Tribunal conclusively determined that the addition of Rs. 9,98,000/- under section 69A was not sustainable due to the inadmissibility of the digital evidence and the lack of corroborative evidence from the audited accounts and confirmed ledger statements. The appeal was allowed accordingly, setting aside the addition.