ITAT Mumbai: WhatsApp Chats Without Section 65B Certificate Cannot Sustain Addition for Undisclosed Income

Overview of the Ruling

The Mumbai Bench of the Income Tax Appellate Tribunal delivered a significant ruling in Vikas Vilas Rasal Vs ACIT (ITAT Mumbai), categorically holding that WhatsApp conversations extracted from a mobile device during search proceedings carry zero evidentiary weight unless accompanied by a valid certificate under Section 65B of the Indian Evidence Act. The Tribunal deleted an addition of ₹66,82,000 that had been framed as undisclosed income, finding that the Revenue relied exclusively on unverified digital messages with no supporting corroborative material whatsoever.

This decision reinforces a critical legal principle that has been gaining judicial momentum: electronic records are not self-authenticating, and income-tax authorities cannot bypass the statutory requirements of evidence law simply because they are operating under the Income Tax Act, 1961.

Background and Facts of the Case

The Search Action and Its Aftermath

During the course of search proceedings conducted at the assessee's premises, the Revenue's search team accessed the assessee's iPhone and extracted WhatsApp chat exchanges involving a person identified as Shri Vilas Pawar. Based on a reading of these messages, the Assessing Officer drew the inference that the assessee had been parking unaccounted cash with Shri Vilas Pawar, thereby concealing it from tax authorities.

Acting on this inference, the AO framed an addition of ₹66,82,000 under the head of undisclosed income for Assessment Year 2017-18. This addition was purely anchored on the WhatsApp communications — no unaccounted cash was seized during the search, no parallel set of books was discovered, no bank trail was uncovered, and no independent inquiry was initiated to verify whether any of the amounts referenced in the chats actually belonged to the assessee.

The Assessee's Actual Relationship with Vilas Pawar

A key factual dimension of this case is the nature of the relationship between the assessee and Shri Vilas Pawar. As brought on record, the assessee had known Shri Vilas Pawar for approximately six to seven years. Shri Vilas Pawar reportedly possessed sound knowledge of financial markets, including movements in gold, silver, the US dollar, and other currencies. The assessee occasionally sought his views and financial guidance on such matters.

Additionally, Shri Vilas Pawar was known to arrange loans for various individuals from different sources, earning a modest commission for such facilitation services. The assessee, on occasion, recommended Shri Vilas Pawar's name to friends and acquaintances for this purpose. Crucially, the assessee himself never entered into any financial transaction with Shri Vilas Pawar, and no evidence to the contrary was unearthed during the search.

Compounding this, a careful examination of the WhatsApp chats revealed that neither the assessee's name nor the names of any family members of the assessee appeared anywhere within the conversations. The messages, therefore, had no direct or identifiable connection to the assessee.

Core Question: Can an addition for undisclosed income be sustained solely on WhatsApp chats recovered during search when (a) no certificate under Section 65B of the Indian Evidence Act was obtained, and (b) no independent corroborative material was placed on record?

Issue 1 — Admissibility of Electronic Evidence