The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has upheld the deletion of a ₹81.40 lakh unexplained investment addition against homebuyer Deepika Sanjay Patil, ruling that the tax department's case rested entirely on unauthenticated WhatsApp chats between developer employees without proper corroborative evidence. According to the ITAT order dated September 4, 2026, the tribunal emphasized that "digital data without accompanying certificate under section 65B of the India Evidence Act, 1872, are not admissible as an evidence." The case concerned Patil, who filed her return for Assessment Year 2022-23 declaring total income of ₹25,59,290, and demonstrated that a message or electronic record recovered from a third party does not automatically establish that the taxpayer made an unexplained investment. The tribunal concluded that "no addition can be made purely on the basis of third-party statements, without discharging onus by A.O. placing corroborative evidence to substantiate its prime allegation of payment of on-money in cash by the assessee."
The dispute originated from a search and seizure operation conducted on September 23, 2021 at Transcon Developers Pvt Ltd premises. As reported by Mint, during the search, the developer's General Manager (Sales) stated that on September 29, 2021, Patil and one Laksh Rastogi purchased a flat for an agreement amount of ₹2,21,00,000 against a deal value of ₹3,02,40,000, implying the difference of ₹81,40,000 was paid in cash. The assessing officer found entries corresponding to this payment during the financial year 2021-22 and attributed it to Patil, who denied the WhatsApp messages represented her transactions. The taxpayer's return was selected for scrutiny under Computer-Assisted Scrutiny Selection (CASS) over the alleged cash payment, and the assessing officer made an addition of ₹81.40 lakh under Section 69, treating it as unexplained investment.
The ITAT focused on the evidentiary basis of the addition, noting that the entire case rested on WhatsApp chats dated June 28 and 29, 2021 between Makhija and Lalit Birla, an accountant at the developer's head office, which discussed the ₹81.40 lakh cash collected from the flat sale. According to the tribunal, the Revenue had not established the authenticity of the WhatsApp data by fulfilling the requirements relating to electronic evidence under the Supreme Court's decision in Anvar P.V. vs. P.K. Basheer case of 2014, which dealt with the requirement of a certificate under Section 65B of the Indian Evidence Act for electronic records. The court also noted that the Revenue had not demonstrated compliance with Section 79A of the Information Technology Act concerning examination of electronic evidence. Crucially, the tribunal found that there was no other independent evidence available with the department apart from the WhatsApp chat, and set aside the Commissioner of Income Tax (Appeals) order while dismissing the revenue's appeal.
The ruling establishes significant implications for property buyers facing tax additions based on material recovered during searches at developers' offices, as reported by Mint. The decision emphasizes that where electronic chats constitute the sole basis for an unexplained-investment addition, the Revenue must establish that the digital evidence is reliable and legally usable before it can support a tax demand. The tribunal found that there was no other independent evidence available with the department apart from the WhatsApp chat, and set aside the Commissioner of Income Tax (Appeals) order while directing the Assessing Officer to delete the addition. The ruling does not prevent WhatsApp messages from being used in tax proceedings, but establishes that proper authentication and independent corroboration are essential for such evidence to be legally admissible. For homebuyers, this recent ITAT Mumbai ruling establishes that the tax department cannot add cash payment allegations to income based solely on chats between developer employees or statements recorded during searches at developer premises.
The case demonstrates the importance of proper electronic evidence authentication in tax proceedings, as reported by Mint. The ruling shows that where electronic chats constitute the sole basis for an unexplained-investment addition, the Revenue must establish that the digital evidence is reliable and legally usable before it can support a tax demand. The decision emphasizes that a message or electronic record recovered from a third party does not automatically establish that the taxpayer made an unexplained investment, and taxpayers should examine the source of evidence used against them and ask whether the material has been independently corroborated. The case also shows why taxpayers should examine the source of evidence used against them and ask whether the material has been independently corroborated, as the department's case rested on WhatsApp data recovered from another person's device in the absence of required electronic-evidence certification. The tribunal relied on the coordinate bench ruling in Amit Shanta Ram Bagade vs. ITO, which held that "no addition can be made for on-money payment in absence of any corroborative evidence."
