{"id":1405,"date":"2026-05-18T20:06:16","date_gmt":"2026-05-18T15:36:16","guid":{"rendered":"https:\/\/caalokkumar.com\/my-writing\/?p=1405"},"modified":"2026-05-18T20:20:44","modified_gmt":"2026-05-18T15:50:44","slug":"section-69a-third-party-mobile-entries-itat-mumbai-naresh-chheda","status":"publish","type":"post","link":"https:\/\/caalokkumar.com\/my-writing\/section-69a-third-party-mobile-entries-itat-mumbai-naresh-chheda\/","title":{"rendered":"WhatsApp Chat Alone Cannot Create Tax Liability – ITAT Rejects Tax Addition Based on Mobile Data Alone"},"content":{"rendered":"\n

No Evidence, No Section 69A Addition: ITAT Mumbai on WhatsApp Chats and Third-Party Mobile Entries<\/h1>\n\n\n\n

In income-tax search and assessment proceedings, the Department often relies on mobile phone data, WhatsApp chats, loose papers, third-party statements and digital entries. But can such material alone justify a large addition under Section 69A of the Income-tax Act, 1961<\/strong>?<\/p>\n\n\n\n

The Mumbai Bench of the Income Tax Appellate Tribunal has answered this issue in favour of the taxpayer in Naresh Bhavanji Chheda v. ACIT \/ DCIT<\/strong>, where additions under Section 69A were deleted due to lack of corroborative evidence, denial of cross-examination and absence of physical cash or valuable article found during search. The official ITAT order is dated 05.12.2024<\/strong>, in ITA Nos. 2607\/Mum\/2024 and 2999\/Mum\/2024<\/strong>, for AY 2021-22<\/strong>. (Income Tax Appellate Tribunal<\/a>)<\/p>\n\n\n\n

This decision is important for taxpayers facing income tax notice reply and demand notice response<\/a>, search assessment proceedings, reassessment, faceless assessment and appellate litigation before CIT(A) or ITAT.<\/p>\n\n\n\n

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Case Details<\/h2>\n\n\n\n
Particulars<\/strong><\/td>Details<\/strong><\/td><\/tr><\/thead>
Case Name<\/td>Naresh Bhavanji Chheda v. ACIT \/ DCIT<\/td><\/tr>
Forum<\/td>ITAT Mumbai \u201cB\u201d Bench<\/td><\/tr>
Appeal Nos.<\/td>ITA Nos. 2607\/Mum\/2024 & 2999\/Mum\/2024<\/td><\/tr>
Assessment Year<\/td>AY 2021-22<\/td><\/tr>
Date of Hearing<\/td>26.09.2024<\/td><\/tr>
Date of Pronouncement<\/td>05.12.2024<\/td><\/tr>
Main Section<\/td>Section 69A of the Income-tax Act, 1961<\/td><\/tr>
Key Issue<\/td>Whether additions can be made only on third-party mobile entries, WhatsApp chats and statements without independent evidence<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Background of the Case<\/h2>\n\n\n\n

The assessee was engaged in real estate development and was also associated with certain partnership firms. Search and seizure action under Section 132 was carried out in the case of certain persons and groups. Based on material found from third parties and statements recorded during search, the Assessing Officer made additions under Section 69A. (Income Tax Appellate Tribunal<\/a>)<\/p>\n\n\n\n

The additions included:<\/p>\n\n\n\n

    \n
  1. \u20b946.24 crore<\/strong> based on the statement of Shri Shailendra Rathi;<\/li>\n\n\n\n
  2. \u20b91 crore<\/strong> based on the statement of Shri Ashish Chhangani;<\/li>\n\n\n\n
  3. \u20b942.80 lakh<\/strong> based on the statement of Shri Javed Shaikh; and<\/li>\n\n\n\n
  4. \u20b91.73 crore<\/strong> based on WhatsApp chat with Shri Jignesh Gopani. (Income Tax Appellate Tribunal<\/a>)<\/li>\n<\/ol>\n\n\n\n

    The CIT(A) deleted the first three additions but sustained the addition of \u20b91.73 crore. Therefore, both the Revenue and the assessee approached the ITAT.
    The CIT(A) deleted the first three additions because they were founded only on third-party statements and mobile-phone images\/material found from those third parties, not from the assessee. The assessee had denied knowledge of such material, and the AO did not bring any independent corroborative evidence to link the assessee with the alleged cash transactions. CIT(A) held that third-party material may be a starting point for investigation, but it cannot by itself justify an addition under Section 69A. Since suspicion and presumption cannot replace proof, the additions of \u20b946.24 crore, \u20b91 crore and \u20b942.80 lakh were deleted. The ITAT upheld the deletion.\u00a0<\/p>\n\n\n\n

    For taxpayers involved in search-related cases, proper tax litigation services<\/a> and timely legal response become very important because such cases often involve interpretation of documents, digital evidence, statements and evidentiary presumptions.<\/p>\n\n\n\n

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    What Section 69A Requires<\/h2>\n\n\n\n

    Section 69A applies where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article, and such asset is not recorded in the books of account, and the assessee either fails to explain its nature and source or the explanation is not found satisfactory by the Assessing Officer. (Etds<\/a>)<\/p>\n\n\n\n

    Therefore, the basic requirement of Section 69A is that the assessee must be found to be the owner of money, bullion, jewellery or other valuable article<\/strong>. This requirement became central in the present case because the ITAT noted that no physical cash, bullion, jewellery or valuable article was found from the assessee in relation to the disputed additions. (Income Tax Appellate Tribunal<\/a>)<\/p>\n\n\n\n

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    Key Findings of ITAT Mumbai<\/h2>\n\n\n\n

    1. Third-Party Material Alone Cannot Justify Addition<\/h3>\n\n\n\n

    The additions were mainly based on material found from the mobile phones of third parties and statements recorded from those persons. The assessee denied the alleged transactions and requested cross-examination.<\/p>\n\n\n\n

    The ITAT observed that there was no independent corroborative evidence linking the assessee with the alleged transactions. It held that uncorroborated third-party evidence could not be made the basis for addition in the hands of the assessee. (Income Tax Appellate Tribunal<\/a>)<\/p>\n\n\n\n

    This finding is highly relevant in cases involving faceless assessment, scrutiny assessment and income tax appeal<\/a>, where the Department may rely upon third-party records, loose papers, digital files or statements.<\/p>\n\n\n\n

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    2. Denial of Cross-Examination Makes Addition Unsustainable<\/h3>\n\n\n\n

    The assessee had requested an opportunity to cross-examine the persons whose statements were relied upon by the Assessing Officer. However, such opportunity was not granted.<\/p>\n\n\n\n

    The ITAT held that when the Department relies on third-party statements against the assessee, denial of cross-examination violates the principles of natural justice. The Tribunal also referred to the Supreme Court ruling in Andaman Timber Industries<\/strong>, where denial of cross-examination was treated as a serious flaw making the order unsustainable. (Income Tax Appellate Tribunal<\/a>)<\/p>\n\n\n\n

    This principle is very useful for taxpayers who receive notices based on third-party information. In such cases, a properly drafted income tax demand notice reply<\/a> should specifically ask for:<\/p>\n\n\n\n