The ITAT Ahmedabad has delivered a significant ruling affirming that digital evidence seized during search operations - such as WhatsApp chats and handwritten notes on mobile phones - cannot form the sole basis for tax additions unless corroborated by independent evidence, direct admission by the assessee, or verified documentation. The Tribunal consistently rejected speculative interpretations of coded figures and emphasized the necessity of procedural rigor in assessing unexplained cash in land transactions.
Background & Facts
The Dispute
The disputes arose from search operations conducted on 15.10.2019 under Section 132 of the Income Tax Act, 1961, targeting a group of land brokers and developers in Ahmedabad. The search targeted premises of Shri Suresh R. Thakkar, a land mediator, and the residential and office premises of the assessee brothers, Deepak Rambhai Mevada and Anil Rambhai Mevada, who were co-owners of multiple land parcels in Makarba and Ambli. The Assessing Officer (AO) relied heavily on digital data recovered from mobile phones to make substantial additions of unexplained cash income under Sections 69A and 115BBE for Assessment Years 2019-20 and 2020-21.
Key Facts
- The assessee brothers, Deepak and Anil Mevada, were co-owners with their brother Dhiren Bharwad and sister Jiviben Bharwad in multiple land parcels, including Survey Nos. 340/1, 341, 736/2, 255, and 361.
- During the search, digital images and WhatsApp chats were seized from the mobile phones of Suresh Thakkar, Alpesh Thakore (employee of Dharnidhar Developers), and Chirag Kheradia (employee of Dharnidhar Developers).
- The AO interpreted coded entries in these images as representing cash payments in crores, including:
- A handwritten note on page 66 of Annexure A-10, referencing Survey No. 736/2, with figures "7500" and "3,26,32,500", which the AO decoded as Rs. 75,000 per sq. yard and Rs. 32.63 crore total consideration.
- WhatsApp chats between Suresh Thakkar and Ashok Damani, referencing land purchases.
- A WhatsApp chat on page 140 from Chirag Kheradia’s phone, with entries like "27/09-300", "28/09-100", etc., which the AO interpreted as Rs. 3 crores, Rs. 1 crore, etc., representing capital contributions to a partnership firm.
- A handwritten note on page 17 of seized material referencing "7/50" and "3/00", which the AO decoded as Rs. 12.50 crores per installment for four installments, totaling Rs. 50 crores for surrender of possession.
- The sale deeds for the properties were registered at significantly lower values (e.g., Rs. 12 crore for Survey No. 736/2, Rs. 8.26 crore circle rate for Survey No. 255).
- The AO made additions of:
- Rs. 19.67 crore for on-money in land sales (Survey Nos. 340/1 and 341)
- Rs. 6.87 crore for cash component in Survey No. 736/2
- Rs. 19.03 lakh as unexplained cash found during search
- Rs. 16.50 crore for alleged cash capital contribution to partnership firm
- Rs. 50 crore for alleged cash receipt for surrender of possession
Procedural History
- 15.10.2019: Search conducted under Section 132 at premises of Suresh Thakkar, Deepak Mevada, Anil Mevada, and Dharnidhar Developers.
- 16.07.2021: Assessment order passed under Section 153A for AY 2019-20 against Deepak Mevada.
- 27.07.2021: Assessment order passed under Section 153A for AY 2020-21 against Deepak Mevada.
- 12.08.2025: Order of Commissioner of Income Tax (Appeals)-12, Ahmedabad, dated 12.08.2025, partially deleted additions for Deepak Mevada (AY 2019-20).
- 18.08.2025: Order of Commissioner of Income Tax (Appeals)-12, Ahmedabad, dated 18.08.2025, partially deleted additions for Anil Mevada (AY 2019-20).
- 25.02.2026: ITAT Co-ordinate Bench order in IT[SS]A No. 117/Ahd/2025 (Dhiren Bharwad) upheld deletion of Rs. 20.63 crore cash addition for Survey No. 736/2.
- 27.08.2025: ITAT Co-ordinate Bench order in IT[SS]A No. 68/Ahd/2025 (Jiviben Bharwad) deleted Rs. 12.36 crore on-money addition.
- 26.02.2026: Hearing held before ITAT Ahmedabad.
- 26.03.2026: Judgment pronounced.
The Parties' Positions
For the Assessee
- Argued that digital evidence was uncorroborated, lacked authenticity, and was not in the handwriting of the assessee.
- Contended that WhatsApp chats were with third parties (e.g., Ashok Damani, Chirag Kheradia) and not with the assessee.
- Submitted that the figures in the seized material were ambiguous and could represent lakhs or crores, as admitted by the source (Chirag Kheradia).
- Highlighted that the same AO had dropped reassessment proceedings against other partners in the same firm under Section 148A(d), concluding no income escaped assessment.
- Pointed out that the circle rate and registered sale deed values were far below the AO’s assumed values, making the alleged cash payments implausible.
- Emphasized that no independent inquiry was conducted to verify the claims with sellers, buyers, or bank records.
For the Revenue
- Argued that the seized digital evidence, including WhatsApp chats and handwritten notes, constituted incriminating material under Section 292C of the Act.
- Contended that the AO’s decoding of figures was reasonable and consistent with market practices in land deals.
- Asserted that the assessee failed to explain the source of cash found during search or the discrepancy between registered value and actual transaction value.
- Relied on the presumption under Section 292C that documents seized during search are presumed true unless disproved.
Relief Sought
The assessee sought deletion of all additions, including:
- Rs. 19.67 crore for on-money in land sales
- Rs. 6.87 crore for cash component in Survey No. 736/2
- Rs. 19.03 lakh as unexplained cash
- Rs. 16.50 crore for partnership capital contribution
- Rs. 50 crore for surrender of possession
The Revenue sought restoration of the full additions made by the AO.
The Legal Issue
Can uncorroborated digital evidence - such as WhatsApp chats and handwritten notes recovered from third-party mobile phones - be used to sustain tax additions under Sections 69A and 115BBE without independent verification, direct linkage to the assessee, or corroborative documentary proof?
Arguments Presented
For the Appellant/Petitioner
The assessee relied on multiple precedents, including ACIT v. Shanker Nebhumal Uttamchandani [2024] 161 taxmann.com 536 (Surat), where the ITAT held that loose sheets of paper and uncorroborated digital images cannot form the basis for additions. The counsel emphasized that the seized material lacked:
- The assessee’s signature or handwriting
- Any reference to the assessee’s name in the documents
- Corroboration from bank statements, sale deeds, or third-party statements
- Independent inquiry into the source of the figures
The counsel also cited the retraction statement of Suresh Thakkar, wherein he clarified that the seized papers were "Kachi Bana Chitthi" - informal, unverified broker notes exchanged on WhatsApp, often false or speculative. The Tribunal had previously accepted this retraction in IT[SS]A No. 68/Ahd/2025. The counsel further argued that the AO’s decoding of "7500" as Rs. 75,000 per sq. yard was arbitrary, as no market data or DVO valuation supported it.
For the Respondent/State
The Revenue argued that Section 292C of the Income Tax Act creates a presumption of truth for documents seized during search, shifting the burden to the assessee to disprove them. It contended that the AO’s interpretation of the figures was logical, given the context of land deals in Gujarat, where cash transactions are common. The Revenue also pointed to the discrepancy between the registered sale value and the alleged actual consideration as evidence of suppression. However, it failed to produce any independent evidence linking the WhatsApp chats to the assessee or proving that the figures represented cash payments.
The Court's Analysis
The Tribunal conducted a meticulous review of the evidence and consistently applied the principle that digital evidence, however incriminating it may appear, cannot substitute for proof. The Court emphasized that Section 292C does not create an absolute presumption but merely allows the AO to rely on seized material as prima facie evidence, subject to rebuttal.
"The entries in this seized document categorically mentions that the document would be made at jantri value, which corroborates the conclusion that the payments recorded in this document were not to be accounted for. Further, the payments recorded in this seized document were also not appearing in the sale deed. Therefore, the Ld. CIT(A) had rightly held that the entries at page No. 66 were in respect of payments made in cash over and above the documented value."
The Tribunal noted that the AO failed to conduct any independent inquiry into the identity of the parties in the WhatsApp chats, the authenticity of the handwritten notes, or the source of the figures. In the case of Survey No. 736/2, the AO assumed that "7500" meant Rs. 75,000 per sq. yard, but no market survey, DVO report, or comparable sale deed was produced to substantiate this rate. The Tribunal observed that the amount "3,26,32,500" was written plainly, not in code, and the dates "1.10", "1.10", "1.06" were the only coded entries, representing payments made before the sale deed on 27.12.2018. Thus, only Rs. 1.10 crore paid before registration could be considered, not the full Rs. 3.26 crore.
Regarding the Rs. 50 crore addition for surrender of possession, the Tribunal found it wholly implausible. The land in question had a circle rate of Rs. 8.26 crore, and the buyer later sold the entire parcel - including the land in question - for Rs. 13.98 crore. To claim that Rs. 50 crore was paid merely for surrender of possession by a non-owner was economically absurd. The Tribunal held:
"The AO also failed to provide any previous noting relied upon for such inference... The decoding of the figures in the message in crores by the AO is without any evidence."
The Tribunal also noted that the same AO had dropped reassessment proceedings against other partners in the same firm under Section 148A(d), concluding that the WhatsApp chats did not establish any income escape. This inconsistency undermined the Revenue’s case.
The Court further held that the statement of Chirag Kheradia, who admitted he did not know whether the figures were in lakhs or crores, could not be the sole basis for an addition of Rs. 16.50 crore. The Tribunal cited Common Cause v. Union of India (2017) 394 ITR 220 (SC), which held that loose sheets of paper have no evidentiary value.
The Verdict
The assessee succeeded on all material grounds. The ITAT Ahmedabad:
- Deleted the addition of Rs. 19.67 crore for on-money in land sales (Survey Nos. 340/1 and 341)
- Restricted the addition for cash component in Survey No. 736/2 to Rs. 36,66,667 (one-third of Rs. 1.10 crore paid before registration)
- Deleted the addition of Rs. 16.50 crore for alleged cash capital contribution to partnership firm
- Deleted the addition of Rs. 50 crore for surrender of possession
- Set aside the addition of Rs. 19.03 lakh as unexplained cash and directed the AO to re-examine the cash book and bank statements with a fresh opportunity to the assessee
The Revenue’s appeals were dismissed in their entirety.
What This Means For Similar Cases
Digital Evidence Alone Is Insufficient
- Practitioners must challenge any addition based solely on WhatsApp chats, images, or handwritten notes recovered from third-party devices.
- The burden shifts to the Revenue to prove direct linkage between the seized material and the assessee.
- Absence of signature, handwriting, or direct reference to the assessee renders the evidence inadmissible.
Decoding Must Be Reasonable and Corroborated
- AO’s interpretation of coded figures (e.g., "7500" as Rs. 75,000) must be supported by market data, DVO reports, or contemporaneous documents.
- Assumptions based on market practices cannot override the requirement for concrete evidence.
- If the source of the note admits uncertainty (e.g., "could be lakhs or crores"), the addition cannot be sustained.
Consistency in AO’s Actions Is Critical
- If the same AO drops reassessment proceedings against co-owners or buyers on identical evidence, the addition against the seller is legally untenable.
- Inconsistent treatment of similar facts by the same AO undermines the credibility of the assessment.
- Practitioners should obtain and cite such orders under Section 148A(d) as binding precedents.
Possession Rights Cannot Be Valued Like Ownership
- Additions for "surrender of possession" without title must be challenged on the grounds of market value and legal impossibility.
- A person without title cannot command a premium exceeding the fair market value of the land.
- Circle rate and registered sale deed values are decisive in testing the plausibility of alleged cash receipts.
Section 292C Does Not Create Absolute Presumption
- Section 292C permits reliance on seized material but does not eliminate the need for corroboration.
- The Supreme Court and ITATs have repeatedly held that presumption is rebuttable and cannot substitute for proof.
- Practitioners must argue that the presumption is extinguished when the assessee provides a plausible explanation supported by documents.
