Additions under Sections 69 and 69C set aside as digital evidence lacked valid chain of custody and legal sanctity under Section 65B of the Evidence Act
Meetu Kumari | Jan 19, 2026 |
ITAT Rejects WhatsApp Image Evidence; Rs. 2 Cr Cash Addition in Property Deal Quashed
The appeals arose from the sale of Property No. 52, Shankar Vihar, New Delhi, sold by Naresh Arora and purchased by Arti Garg through a registered sale deed dated 30.12.2020 for Rs. 3.5 crore. Naresh Arora declared long-term capital gains of Rs. 2 crore, while Arti Garg declared returned income of Rs. 9.30 lakh for AY 2021-22. After search on a third-party property dealer, Praveen Kumar Jain, the Department relied on a digital image of a slip allegedly recovered from WhatsApp chats showing a total consideration of Rs. 5.5 crore, alleging Rs. 2 crore cash payment.
The Assessing Officer made additions of Rs. 2 crore under Section 69 in the hands of Arti Garg and corresponding additions under Section 69C/commission income in the hands of Naresh Arora. The additions were confirmed by the CIT(A).
Main Issue: Whether additions for alleged cash consideration in a property transaction can be sustained solely based on a digital image recovered from a third party’s mobile phone, without proper compliance with Section 65B of the Indian Evidence Act and without establishing a valid chain of custody.
Tribunal Decided: The ITAT allowed both appeals and deleted the additions. The Tribunal held that although a Section 65B certificate was produced, it did not establish the integrity, authenticity, and chain of custody of the electronic evidence as mandated by law and CBDT’s Digital Evidence Manual. The certificate failed to demonstrate how the seized data was preserved, transferred, analysed, and made available to the AO without risk of tampering.
There was no evidence showing confrontation of the WhatsApp image to the alleged sender or recovery of corresponding data from the assessee’s device. The statements relied upon had been retracted, further weakening the Department’s case. In the absence of legally admissible electronic evidence and proper procedural safeguards, the digital image lacked probative value and could not form the sole basis for additions.
To Read Full Judgment, Download PDF Given Below
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