Income Tax Act | Rajasthan HC Dismisses Challenge Against Proceedings Initiated U/S 153C Based On WhatsApp Chats, Says Chats Had Been Corroborated

Rajasthan High Court denied interference with initiation of proceedings under Section 153C of the Income Tax Act, 1961 (“the Act”) that were alleged to be initiated merely based on certain WhatsApp Chats, observing that the information in the chats were completely corroborated by specific transactions and hence, the said chat could be considered to be falling under the definition of “other documents” under Section 153C.

The division bench of Justice Pushpendra Singh Bhati and Justice Chandra Prakash Shrimali ruled that the ambit of Section 153C was not to restrict the proceedings in relation to 'other person' arising out of Section 153A but to enable such invocation such that in case there was any connecting evidence which was specific and corroborated by facts, no escape was possible for such 'other person'.

Section 153A of the Act provides for assessment of income for six years of a person when a search or seizure was conducted.

Section 153C of the Act allows the assessment of income of any other person based on documents seized during search.

The Court was hearing a petition challenging the proceedings under Section 153C of the Act. It was the case of the petitioner that while a search and seizure was conducted on one Om Kothari Group (“the Group”), certain WhatsApp chats were found that were between the directors and associates of the Group that indicated that certain plots were purchased by the petitioner from the Group using unaccounted cash.

Based on such chats, the petitioner was served with the notice under Section 153C of the Act, without any other incriminating document. It was argued that Section 153C mandated that the default should have been reflected in the books of account, or the documents or assets seized and could not be based on WhatsApp chats.

On the other hand, it was submitted by the State that the chats were supported by substantial material to incriminate the petitioner. It was argued that the transactions mentioned in the chats had actually taken place, reflected during search and seizure, and it was apparent that the plots mentioned in the chats were actually purchased by the petitioner from the Group.

“…it is not a case where it can be said that the satisfaction so arrived at was based only on the WhatsApp chats, as the figures appearing in the chats are also appearing in the images of pages of unaccounted cash books maintained by key persons and employees of the Group…properties can be physically verified on the ground and the exchange of such properties is also confirmed and thus, the WhatsApp chats in question stand totally corroborated and defined as far as impugned notice is concerned.”

After hearing the contentions, the Court perused Section 153C of the Act, and highlighted that the statute had to be interpreted strictly such that if the information was vague, it could not be made part of the sustaining material for the proceedings. However, that was not the case in the present matter.

It was highlighted that the search and seizure conducted on the Group clearly reflected that the petitioner had purchased the plots for which significant amount was paid in cash outside the books of account. Further, apart from recovering images in digital devices, statement of one of the employees was also recorded that included deciphering of unrecorded accounts of transaction. Such unaccounted cash component was clearly reflected in the chats.

It was highlighted that, in the present case, it was not the assumptions, but the actual plots reflected in the chats were determined and the information in the chats pertained to those specific plots, in connection with which the sale transaction took place.

The Court opined that,

“The persons having the WhatsApp chats were connected with both the companies herein and the transactions were regarding specific plots and the details of cash payment were clearly contained in the WhatsApp chat, thus with such specific inputs, the same cannot be said to be vague or hit by the strict parameters of Section 153C of the Act of 1961.”

In this background, the Court held that there was satisfactory details to initiate proceedings against the petitioner, and accordingly, the petition was dismissed.

Title: Giriraj Pugalia v Assistant Commissioner of Income Tax

Citation: 2025 LiveLaw (Raj) 136

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