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Imagine if you get a tax notice of Rs 22 crore on the basis of a WhatsApp chat or a photo of your mobile? A similar shocking case happened with Kumar, a person from Delhi. The Income Tax Department has sent a notice to Kumar for “unexplained investment” of Rs 22 crore. The department made the basis for this – a WhatsApp chat found in a third person’s mobile and pictures of some envelopes.
How did the affair begin?
According to a report in The Economic Times, this matter came to light when the Income Department raided a real estate company. During the investigation, some pictures and WhatsApp chats were found from the mobile phone of a person named Praveen Jain. In these chats, there were pictures of some envelopes with names of different people written on them. The department claimed that these envelopes contained cash or cheques, which were used to give returns on investment. One of these envelopes was found with the name “Kumar” written on it. The department assumed that it was the same Kumar and that he had invested Rs 22 crore in a company.
The department imposed a tax of 22 crores
Taking action under Section 153C and 69 of the Income Act, the department accused Kumar of “Unexplained Investment” of Rs 22,50,75,000 and “Unexplained Money” of Rs 22,50,750.
The Income Tax Officer (AO) claimed that Kumar also received interest on this investment. However, the department could not prove when, how and where these investments were made. 22 crores was estimated by “reverse calculation” on the basis of interest amount.
Kumar completely denied all the allegations leveled against him. He said that neither he has any dealings with any real estate company nor any relation with a person named Praveen Jain. He said that the WhatsApp chat was received from a third person’s phone and neither the chat was in his name nor attached with any authentic document.
Despite this, the Revenue Officer (AO) dismissed his appeal and issued a tax order. CIT (Appeals) also did not grant him any relief.
Eventually Kumar took the matter to the Income Tax Appellate Court (ITAT), Delhi, where he got a major relief. The ITAT said that action cannot be taken against a perpetrator merely on the basis of WhatsApp chat or mobile data of a third party.
The tribunal found that Kumar’s name was not clearly written on any of the envelopes or documents. The interest calculation sheet found was neither certified nor signed by anyone. There was no loan agreement, no receipt, and no proof of payment. Even in the statements of Praveen Jain and his son, Kumar’s name was not mentioned.
The ITAT, referring to the earlier decisions of the Supreme Court, said that the action under Section 153C can be taken only when a solid and incriminating evidence is found during the raid. There was no such evidence in this case.
Delivering the final verdict, the ITAT Delhi rejected all the claims of the Income Tax Department and ruled in favor of Kumar. The tax demand of Rs 22 crore was completely rejected and the action of the department was termed as “story without evidence”.
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