The Income Tax Appellate Tribunal nullified a ₹2 crore tax demand linked to a Delhi property deal, emphasising the need for properly authenticated electronic evidence and clear chain of custody in high-value transactions.
The Income Tax Appellate Tribunal has set aside a ₹2 crore tax addition arising from a New Delhi property deal after questioning whether a digital image said to show an off-the-books cash payment could be relied upon as proof. According to the tribunal’s ruling, the tax department had alleged that Arti Garg paid ₹5.5 crore for a residential property in Shankar Vihar, even though the registered sale deed dated December 30, 2020, recorded consideration of ₹3.5 crore. The dispute centred on whether the gap represented undisclosed “on-money” paid outside the formal paperwork.
The department’s case rested largely on material gathered during a search linked to a third-party property dealer. Officials relied on a digital image of a slip recovered from a mobile phone and treated it as evidence that the buyer had paid an additional ₹2 crore in cash. But the tribunal found that the WhatsApp trail was missing from the assessment record, that the alleged image was not adequately tied to the specific transaction, and that the document itself carried the seller’s signature but not the buyer’s. That left serious doubts about whether the material could support an addition under Section 69 of the Income-tax Act.
The ruling is in line with other recent tribunal orders stressing that documents seized from third parties cannot, on their own, justify a tax demand against a buyer. In a separate case reported by Livemint, the Mumbai bench said the tax department needs independent and corroborative evidence linking the taxpayer to any alleged cash component. Similar reasoning also appeared in another tribunal decision involving third-party WhatsApp images and loose notes, where the addition was rejected because the material was not backed by direct proof connecting the assessee to the claimed payment.
In Garg’s case, the Delhi bench also focused on the chain of custody for the electronic evidence. It said the tax department had not clearly shown how the image was extracted, preserved and carried into the assessment process. The certification relied upon was also found wanting, with the tribunal noting gaps such as the absence of the iPhone’s IMEI number and insufficient detail on how master and working copies of the data were handled. On that basis, the tribunal concluded that the digital material lacked the reliability needed to sustain the addition.
The decision does not rule out the use of screenshots, WhatsApp messages or other electronic records in tax proceedings. Rather, it underlines that such evidence must be properly authenticated and linked to the taxpayer before it can support a large addition. For property buyers and sellers, the case is a reminder that payment trails, bank records and sale documents matter, especially in high-value transactions where authorities may later scrutinise whether the registered price reflects the full deal.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
