WhatsApp Chats and Seized Notebooks Cannot Substitute Cogent Evidence of Cash Transactions: ITAT Chennai in DCIT Vs Ivar Estates Private Limited
Background and Context
A significant ruling has emerged from the Income Tax Appellate Tribunal (ITAT), Chennai, in the case of DCIT Vs Ivar Estates Private Limited, concerning Assessment Year 2023-24. The Tribunal was called upon to adjudicate a Revenue appeal challenging the order of the CIT(A)-19, Chennai, dated 29.01.2026, which had granted relief to the assessee by deleting two substantial additions made by the Assessing Officer under Section 143(3) of the Income-tax Act, 1961.
The assessee, Ivar Estates Private Limited, is a company forming part of the Appaswamy Group and operates in the real estate development sector, primarily engaged in the construction and sale of residential apartments. For AY 2023-24, the assessee had filed its return of income declaring a total income of ₹55,10,63,550. Following a search and seizure action under Section 132 of the Act on 03.11.2023, the assessment was completed with total income determined at ₹75,73,72,793, reflecting two key additions:
- ₹1,76,09,243 — alleged unaccounted cash receipts from flat sales
- ₹18,87,00,000 — alleged unexplained cash payment for acquisition of land at Vadapalani
Both additions were deleted by the CIT(A), and the Revenue carried the matter to the Tribunal. The Tribunal ultimately dismissed the Revenue's appeal, affirming the CIT(A)'s findings on both counts.
Facts Leading to the First Addition: Alleged Unaccounted Cash from Flat Sales
Search Findings and Revenue's Case
During the search of Appaswamy Group premises, the investigation team examined mobile phones of sales personnel and extracted WhatsApp conversations. According to the Revenue, these messages indicated negotiations involving a cash component over and above the consideration reflected in the books of account. Additionally, loose sheets were found containing columns labelled "actual price" and "final price," from which the Revenue inferred that flats were sold at rates higher than what was ultimately recorded.
Statements under Section 132(4) were recorded from multiple employees including sales managers and personnel connected with the ERP system. Certain employees stated that cash was collected from flat purchasers and the sale consideration was thereafter reduced in the ERP system — a software called Build Super Fast (BSF) — to exclude the cash component. The implementation consultant of the software vendor confirmed that price modifications were technically permissible post-booking.
The Median Rate Methodology
For quantification purposes, the Assessing Officer devised a methodology based on what was termed a "median rate per sq. ft." This rate was derived from ERP data and treated as the presumptive actual selling price. Any transaction where the final recorded consideration was lower than this assumed median — after allowing a standard 5% discount — was treated as having a cash component equal to the differential. Using this approach, the AO computed aggregate alleged cash receipts of ₹102,04,27,807 across eight group projects spanning multiple assessment years, attributing ₹1,76,09,243 to the assessee for AY 2023-24.
Assessee's Defence
The assessee comprehensively challenged the addition on factual and legal grounds: