WhatsApp Messages Deemed Insufficient Evidence for Section 69A Additions: ITAT Delhi Ruling

In an era where digital footprints are increasingly scrutinized by tax authorities, the evidentiary value of instant messaging applications has become a focal point of legal debate. A recent, significant judgment by the Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the case of DCIT Vs Krrish Realtech Private Limited, has set a crucial precedent regarding the admissibility and weight of WhatsApp conversations in income tax assessments.

The Tribunal categorically held that private WhatsApp exchanges between two individuals, even if one is a majority shareholder, cannot be treated as incriminating evidence against a corporate entity in the absence of corroborating material. This ruling provides substantial relief to corporate assessees facing additions based solely on third-party digital communications.

Case Background and Factual Matrix

The dispute originated from a search and seizure operation conducted on 16.05.2017 at the premises of the Krrish Group of companies. During the course of this operation, the investigation team seized various digital devices and documents.

The core controversy arose from the analysis of a mobile phone belonging to Shri Amit Katyal. The authorities discovered WhatsApp messages exchanged between Shri Amit Katyal and one Shri R.P. Gupta. The content of these messages allegedly referenced cash receipts totaling Rs. 24.75 Crores.

The Assessing Officer’s Standpoint

The Assessing Officer (AO), while framing the assessment for the Assessment Year 2017-18, took cognizance of these messages. The AO noted that Shri Amit Katyal held a commanding 99.99% shareholding in the assessee company, Krrish Realtech Private Limited.

Based on this shareholding pattern, the AO drew an inference that the alleged cash receipts mentioned in the private chats of the shareholder actually represented the undisclosed income of the company. Consequently, the AO invoked Section 69A of the Income Tax Act 1961, treating the sum of Rs. 24.75 Crores as unexplained money in the hands of the assessee company.

The First Appellate Authority's Intervention

Aggrieved by the high-pitched assessment, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) conducted a thorough examination of the facts and the seized material.

In an order dated 27.01.2021, the CIT(A) deleted the entire addition, highlighting several critical flaws in the AO's approach: