ITAT deleted addition of undisclosed income made solely on the basis of WhatsApp chat message
In a recent judgment, ITAT Ahmedabad deleted addition made solely on the basis of WhatsApp chat message on account of undisclosed income being unaccounted cash received as ‘on-money’ on sale of land.
ABCAUS Case Law Citation:
4765 (2025) (10) abcaus.in ITAT
In the instant case, the Revenue/ITD had challenged the order passed by the CIT(A) in deleting the addition towards unaccounted cash received as ‘on-money’ on sale of land.
The issue involved in instant appeals was with respect to assessment under section 153C of the Act on the basis of a common alleged incriminating material in the form of a Whatsapp message found during search conducted on a third party.
The said whatsapp chat extracted from the phone of a person who was subjected to search action u/s 132 of the Act, revealed that the land sold by the assessee alongwith other co-owners had a much higher fair market value as compared to amount at which it was sold.
Therefore, the allegation of the Income Tax Department (ITD) was that the assesses had received on money in cash on sale of the said land, which had not been returned to tax.
During the year under consideration, the appellant, along with five other co-owners, sold a land. After one year from the date of the sale, a search was conducted on and a WhatsApp chat on the mobile phone from the searched person was found. The chat was read as containing the prevailing market rate of land during the immediately following previous year. The AO observed that assessee(s) in preceding financial year had sold land in the same area at a rate per sq yard lower than fifteen time. Based on this WhatsApp chat, the AO inferred that land within the same Scheme should have similar market rates and that the appellant’s sale price was significantly undervalued.
Accordingly, the AO treated a difference as undisclosed income in the hands of the assessee.
The CIT(A) found no merit in the addition made by the AO noting that it was based on evidence found with a third party who had no relation at all to the sale made by the assessees nor did he find any relationship established by the Revenue; the person from whom the WhatsApp chat was found was noted to be never examined by the Revenue for explaining the said chat nor any opportunity of cross-examination given to the assessee.
Further, the CIT(A) noted that the WhatsApp chat was taken place one year after the actual sale took place and there was no basis with the department for linking the two events for holding on the basis of the said chat for the assessee to have received on-money.
Therefore, in view of the fact that besides the WhatsApp chat found from a third unconnected party to the deal, there was no other evidence with the department pointing/leading to the fact that the assessee had received on- money on the sale of land, The CIT(A) deleted the addition made by the AO.
Before the Tribunal, the Revenue contended that it was not denied that the piece of land sold by the assessee and the land referred in whatsapp chat found was the same and the rate mentioned therein was much higher than the rate at which the assessee had sold the same.
It was stated that the rate mentioned in the WhatsApp chat and the rate at which land was sold had a huge difference. It was stated that though admittedly the whatsapp chat was exchanged one year subsequent to the actual sale of land but still there could not have been such marked and substantial difference in the rate of sale of and which many more times the rate at which the assessee had sold; that the WhatsApp chat was a clear indicator that the value of land sold by the assessee was much higher than that at which it was actually sold.
The Tribunal observed that the basis for holding the assessee to have received on money was only a WhatsApp chat message that too found during search conducted on a third person. The message has been interpreted by the Revenue as revealing the fair value of the land sold by the assessee, and noting the actual rate of sale to be much less at the Revenue has alleged assessee to have received on money on sale of land to the extent of difference between the same.
The Tribunal further noted that the findings of the CIT(A) remained uncontroverted and the only logical derivation from them was that the addition made was based merely on a WhatsApp chat, that too found from a third party totally unconnected to the assessee and without even conducting any basic inquiry supporting and evidencing the interpretation of the message as revealing the fair value of the land sold.
The Tribunal opined that the extent of presumption exercised by the Revenue can be gauged from the fact that no attempt was made by the Revenue to inquire about the purport of the message from the recipient of the message before interpreting it themselves. When the land was admittedly sold a year back, that too by parties totally unconnected to the recipient of the message. Why would any message relating to land sold a year back be exchanged between parties who had nothing to do with the said land? and without addressing this aspect, the message can not be read as revealing the fair value of land sold by the assessees.
The Tribunal expressed agreement with the CIT(A) that the entire case of the AO was based on unfounded assumption and presumptions and the addition made on account of alleged on money received by the assessee on sale of land was clearly not sustainable.
Accordingly, the Revenue dismissed the appeal made by the Revenue.
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