WhatsApp Chat Not Enough To Make Addition, Compliance Of CBDT’s Digital Evidence Investigation Manual Is Indispensable, Rules ITAT Delhi
Pranav B Prem
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that additions to income cannot be sustained solely on the basis of WhatsApp chats unless the tax authorities strictly comply with the Digital Evidence Investigation Manual issued by the Central Board of Direct Taxes (CBDT). The Tribunal made it clear that when electronic evidence forms the foundation of an addition, its authenticity, extraction process, metadata, and source must be clearly demonstrated in the assessment order to withstand judicial scrutiny.
The matter came before the bench of Anubhav Sharma (Judicial Member) and S. Rifaur Rahman (Accountant Member), where a search and seizure operation had been conducted at the premises of the LSL Tools Group and related individuals, including the appellant. During the course of the post-search investigation, the Assessing Officer relied heavily on certain WhatsApp messages exchanged between two individuals—Kashif and Vikash Singla, who handled sales for the company. The chat contained a reference to the transfer or NEFT of ₹50 lakh and another message concerning a profit-related discussion. Relying on these chats, the Assessing Officer concluded that the appellant had unaccounted “regular cash sales” and made an addition of ₹5 lakh by applying a 10% profit rate on presumed undisclosed cash transactions.
The Tribunal, however, found the reasoning speculative and unsupported by proper evidentiary standards. It noted that the WhatsApp chat itself mentioned NEFT transactions and did not establish any link to unrecorded cash sales. The ITAT criticized the Assessing Officer for assuming, without verification, that the conversations related to undisclosed turnover. The bench observed that WhatsApp chats do not constitute self-contained evidence of a financial transaction unless corroborated by supporting material. Importantly, where electronic records are relied upon, the authorities must adhere to the CBDT’s Digital Evidence Investigation Manual, which provides mandatory guidelines for collection, preservation, and presentation of digital evidence.
The Tribunal also referred to the Supreme Court’s recent judgment in Addl. Director General Adjudication v. Suresh Kumar and Co. Impex Pvt. Ltd. (2025), where the Court affirmed that electronic evidence becomes admissible only if accompanied by the certificate required under Section 138C(4) of the Customs Act—equivalent in principle to Section 65B(4) of the Evidence Act. Although the ITAT clarified that the absence of a Section 65B certificate may not automatically invalidate every piece of electronic evidence in tax proceedings, the authenticity of the evidence and the conditions of extraction must nevertheless be established.
In this case, the Tribunal noted that the assessment order did not reflect any attempt by the authorities to verify the device from which the chat was extracted, the method used for extraction, or whether the messages were part of a larger context. No forensic procedure was followed. The bench held that an electronic chat requiring interpolation cannot form the exclusive basis of an addition.
The Tribunal therefore deleted the addition of ₹5 lakh and allowed the appeal, underscoring that tax authorities cannot rely on digital snippets without ensuring compliance with statutory standards and the CBDT’s own digital evidence protocols.
Appearance
Assessee By: Shri Gautam Jain, Advocate Shri Ankit Kumar, Advocate
Revenue By: Ms. Amisha S. Gupt, CIT DR
Cause Title: M/s. LSL Tools (P) Ltd. V. ACIT, Central Circle 1, Faridabad.
Case No: ITA No.5643/DEL/2024 (Assessment Year: 2020-21), ITA No.5644/DEL/2024 (Assessment Year: 2021-22)
Coram: Anubhav Sharma (Judicial Member), S. Rifaur Rahman (Accountant Member)
