The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has dismissed an appeal filed by the Income Tax Department and upheld the deletion of an addition made on account of alleged unexplained cash receipt in a commercial property transaction, citing lack of credible and legally admissible evidence.
Background of the Case
The case pertained to the sale of a commercial property located in Pune, where the taxpayer had disclosed a sale consideration of Rs 3.38 crore through a duly registered sale deed. Notably, the declared consideration exceeded the stamp duty value of Rs 2.56 crore as reflected in the official Index-II records maintained by the Registration and Stamp Duty authorities.
Despite this, the Assessing Officer (AO) alleged that the actual market value of the property was Rs 6.55 crore, contending that the differential amount of over Rs 3 crore had been received by the taxpayer in cash. The alleged cash component was treated as unexplained income under the Income-tax Act, 1961.
Basis of the Allegation Questioned
The allegation of unaccounted cash receipt was primarily based on a screenshot of a WhatsApp chat recovered during a search conducted on a connected third party. The chat reportedly contained an Excel-style rough calculation of property rates prevailing in the locality.
The AO further relied upon property rates available on a government website applicable to adjacent properties and adopted the same to arrive at the alleged market value. However, no comparable sale instances were cited, nor were any inquiries made with the Registration or Stamp Duty authorities to substantiate the valuation.
Tribunal's Findings
After examining the facts and materials on record, the ITAT observed that the WhatsApp screenshot:
- Did not contain any authentication or signature
- Had no reference to the taxpayer or the specific property transaction
- Appeared to be a rough internal calculation exchanged between third parties
The Tribunal held that such unauthenticated digital material failed to establish any nexus with the assessee.
Importantly, the Tribunal reiterated that electronic evidence is admissible only when supported by a valid certificate under Section 65B(4) of the Indian Evidence Act, 1872. In the present case:
- No Section 65B certificate was produced
- The source device from which the chat was extracted was not placed on record
As a result, the digital evidence was held to be legally inadmissible.
No Incriminating Material Found
The ITAT further noted that no incriminating material, cash, documents, or corroborative statements were found during the search proceedings to support the allegation of receipt of unaccounted money.
The Tribunal also criticised the AO for disregarding the government-notified stamp duty valuation, which was lower than the declared sale consideration, and for adopting an arbitrary market rate without proper verification or statutory backing.
Conclusion
In view of the above observations, the ITAT concluded that the addition made by the Assessing Officer was based on assumptions and conjectures rather than concrete evidence. Accordingly, the Tribunal upheld the deletion of the addition by the appellate authority and dismissed the appeal filed by the Revenue.
The order was pronounced in open court on 27 October 2025.
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