Addition based on WhatsApp chat without E-certificate or corroborative evidence deleted

Addition made on the basis of WhatsApp chat without certificate u/s 65B(4) of the Indian Evidence Act (E-certificate) deleted

In a recent judgment, the ITAT Hyderabad has deleted addition made on the basis of WhatsApp Chat without certificate u/s 65B(4) of the Indian Evidence Act (E-certificate) holding that in the absence of such E-certificate, the electronic data must be supported by corroborative evidences.

ABCAUS Case Law Citation:
ABCAUS 4090 (2024) (06) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) confirming the addition to income of the assessee on the basis of WhatsApp chat data.

The appellant assessee was an individual and Managing Director of a construction company. A Search and Seizure Operation u/s 132 of the Act was conducted in the case of the assessee and the said company.

During the search in the premises of the company, one seized document was obtained in the form of printout from WhatsApp data/messages in the mobile “electronic data” of one of the employees of the company.

In the said electronic data there was some working regarding payment of interest to the assessee on the advances given by the assessee with regard to one dealing of the land.

On the basis of the said electronic data, the AO concluded that interest was to be payable to the assessee for the year under consideration. Consequently, the Assessing Officer (AO) completed the assessment u/s 153A of the Act on making an addition to the income of the assessee.

Before the Tribunal, the assessee contended that the AO and Ld. CIT(A) sustained the addition on the basis of only electronic data. Relying on various decisions of the Hon’ble Supreme Court/High Court/ITAT, the assessee further submitted that the said electronic data cannot be used in isolation for making any addition.

It was also submitted that no certificate as mandated u/s 65B(4) of the Indian Evidence Act (“E-certificate”) was obtained by the AO in accordance with the manual on Digital Evidence Investigation issued by the CBDT in 2014.

Further, it was contended that no corroborative material had also been brought into the record by the Revenue authorities that the said interest amount had been actually received by the assessee. Hence, the action taken by the Revenue Authorities was on the basis of suspicion and without any concrete evidence.

On the contrary, the Income Tax Department  contended that CBDT manuals is not issued u/s 119 of the Act and is only recommendatory in nature. It was further argued that the provisions of the Indian Evidence Act are not applicable on the revenue authorities being quasi-judicial authority. Hence the requirement of obtaining E-certificate is not required under the facts of the present case. The Revenue in its support placed reliance on the decisions of Hon’ble Supreme Court and Hon’ble High Court.

Further, relying on the decision of Hon’ble Madras High Court the Revenue submitted that, even if the instruction of the CBDT manual are not followed, if the electronic data obtained are supported by corroborative evidence, addition can be made on the basis of such electronic data.

The Tribunal observed that undisputedly the Revenue authorities had not filed the certificate u/s 65B of the Indian Evidence Act. However as per the decision of the Hon’ble Madras High Court, it was held the Digital Evidence Investigation Manual had been issued by the CBDT by virtue of powers available u/s 119 of the I.T. Act and hence, the Income Tax Authorities and all the other persons employed in the execution of this Act are bound to observe and follow such orders, Instructions and directions issued by CBDT.

The Hon’ble High Court also held that if the procedure as specified under the CBDT Manual have not been followed while relying on the electronic record, the said record must be supported by corroborative evidence.

The Tribunal noted that from the decision of the Hon’ble Madras High Court it was abundantly clear that in the absence of such E-certificate, (65-B Certificate) the electronic data must be supported by corroborative evidences.

The Tribunal opined that in the instant case, the sale deed on which the Revenue was relying as corroborative evidence did not confirm that whether any interest was to be payable or paid to the assessee. Further, there was no reference of paying of on money or cash amount or interest by the assessee in the said sale deed. Hence, under such circumstances, the sale deed could not be taken as corroborative evidence.

The Tribunal opined that the Revenue Authorities has made the addition without obtaining any E-certificate and without any corroborative evidence with regard to the electronic data.

Accordingly, the Tribunal deleted the addition made by the Revenue authorities and allowed the appeal of the assessee. 

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