ITAT Pune: Unauthenticated WhatsApp Messages Recovered from Third Party's Device Cannot Sustain Addition Under Section 69

Overview of the Ruling

The Income Tax Appellate Tribunal, Pune Bench, delivered a significant ruling in Rameshwar Fakirchand Totala Vs ITO (ITAT Pune) vide ITA No.1303/PUN/2026, adjudicated on 21st August 2026, pertaining to Assessment Year 2020-21. The Tribunal categorically held that WhatsApp communications extracted from the mobile device of a third party — lacking proper authentication and unsupported by any independent corroborating material — cannot, by themselves, constitute a legally valid foundation for treating any amount as unexplained investment under Section 69 of the Income Tax Act, 1961. The Tribunal further clarified that the statutory presumption available under Section 132(4A) cannot be automatically extended to implicate a person other than the one from whose possession the seized material was actually recovered.

Background and Factual Matrix

The assessee, an individual practicing as an advocate in Maharashtra, had filed his return of income for Assessment Year 2020-21 declaring a total income of Rs. 36,62,110/-. A search and seizure operation under Section 132 of the Income Tax Act, 1961 was carried out on 30th November 2023 at the premises of the Manjeet Pride Group, Gadiya Group and their associated entities by the DDIT (Investigation), Aurangabad.

In the course of this search, the mobile phone belonging to one Shri Prakash Motwani was examined. WhatsApp chat data extracted from his device allegedly revealed a systematic pattern of unaccounted "Bhisi" (chit fund) transactions involving numerous persons. A mobile number purportedly linked to the assessee was found in these chats alongside entries suggesting payments. The Investigation Wing forwarded this information to the Assessing Officer, on the basis of which the assessee's case was reopened through a notice under Section 148 of the Act after obtaining the requisite prior approval.

During the search, the statement of Shri Prakash Motwani was recorded under Section 132(4). In response to Question No. 38, wherein he was shown printouts of the WhatsApp chats, Shri Motwani confirmed that most of the chats pertained to Bhisi-related transactions and that the amounts therein were recorded with the suppression of two zeros.

The Assessing Officer's Action

The Assessing Officer confronted the assessee with entries from the WhatsApp data found in Shri Motwani's mobile phone, alleging that the assessee had made cash payments aggregating to Rs. 10,52,450/- towards Bhisi transactions during the financial year 2019-20. The assessee denied that these WhatsApp messages were attributable to him.

The Assessing Officer was not persuaded by the assessee's denial and proceeded to treat Rs. 10,52,450/- as unexplained investment under Section 69, completing the assessment under Section 147 read with Section 144 of the Act. The Assessing Officer's reasoning rested on the following pillars:

  • The WhatsApp data recovered during the search confirmed the assessee's involvement in Bhisi transactions.
  • The presumption under Section 132(4A) enabled a shift of burden onto the assessee to rebut the adverse material.
  • Reliance was placed on the principle of preponderance of probabilities as articulated by the Supreme Court in Sumati Dayal v. CIT, (1995) AIR 2109.
  • The assessee allegedly remained non-compliant and failed to substantively rebut the material or explain the source of payments.

Penalty proceedings under Section 271AAC were also separately initiated.

First Appellate Authority — CIT(A)/NFAC's Order

The CIT(A)/NFAC, Delhi, upheld the Assessing Officer's addition through an order dated 15th January 2026. The appellate authority concluded that the assessee had not furnished any plausible explanation or supporting documentation to rebut the adverse material gathered during the search. The addition of Rs. 10,52,450/- under Section 69 was accordingly affirmed.

Before the Tribunal, the assessee contended that the first appellate order was essentially a non-speaking, cryptic order that reproduced the Assessing Officer's reasoning without independently engaging with the detailed legal submissions and judicial precedents cited by the assessee.

Grounds of Appeal Before ITAT

The assessee raised the following key grounds before the Tribunal:

  1. Reassessment proceedings were initiated solely on third-party information without independent application of mind by the Assessing Officer.
  2. Complete and verifiable electronic evidence — including the Toshiba Hard Disk and full WhatsApp chat records — was never supplied to the assessee.
  3. Denial of copies of relied-upon material and refusal to permit cross-examination of Shri Prakash Motwani rendered the addition illegal.
  4. No statement of Shri Prakash Motwani specifically named or implicated the assessee in any unexplained Bhisi transaction.
  5. The requirements of Section 69 were not satisfied since no investment was established — mere WhatsApp messages and presumptions cannot constitute "investment" within the meaning of the provision.
  6. The order of the CIT(A)/NFAC was cryptic and non-speaking.

Assessee's Submissions Before the Tribunal

On Third-Party Information and Independent Application of Mind