Property Owner Wins Tax Case Over Rs 3 Crore Cash Allegation

On October 27, 2025, Smt. Shah, a property owner from Pune, emerged victorious in a case at the Income Tax Appellate Tribunal (ITAT) in Mumbai. The victory came despite the income tax department's allegations that she received Rs 3 crore in cash from a property sale, in addition to the Rs 3.38 crore officially recorded in the sale deed.

The income tax department based its claim on a screenshot of an Excel sheet found in a WhatsApp chat between the property buyer’s son and his accountant. The screenshot suggested that the property's value was higher than what Smt. Shah had declared. The tax officer pointed out that the Department of Registration and Stamps, Government of Maharashtra, listed the rate in the adjacent area at Rs 4,40,680 per square meter. Applying this rate, the market value of the property sold by Smt. Shah was estimated to be Rs 6.55 crore. However, the sale deed showed the sale price as Rs 3.38 crore, leading the tax department to allege that she received the remaining Rs 3 crore in cash, which they deemed as unexplained money under Section 69.

Smt. Shah, represented by Senior Advocate Dr. K. Shivaram and Ms. Neelam Jadhav, contested these claims. Chartered Accountant Suresh Surana explained to ET Wealth Online that Smt. Shah sold a commercial shop in Pune for Rs 3.38 crore, which was higher than the stamp-duty value of Rs 2.56 crore as per Index-II records. During a search under Section 132 conducted on a connected person (the purchaser’s son), the tax department recovered a WhatsApp chat screenshot containing a rough working of property rates in the locality.

The Assessing Officer (AO) relied heavily on this screenshot to conclude that the market value of the shop was Rs 6.55 crore. Consequently, the AO treated the difference of Rs 3.16 crore as unexplained cash received by the taxpayer and made an addition under Section 69A of the Income Tax Act, 1961. Smt. Shah, however, explained that the chat was a third-party conversation unrelated to her, contained no reference to her name or the specific property sold, and that no incriminating evidence, cash, statements, or documents were found in her search or in the purchaser’s search indicating any receipt of unaccounted money. She also submitted that the shop had been sold above the stamp-duty value, and therefore, no allegation of undervaluation could stand.

The Commissioner of Income Tax (CIT)(A) deleted the addition, and the Revenue appealed before the ITAT. The ITAT upheld the CIT(A)'s deletion of the addition, finding that the AO's conclusion was based purely on conjecture and lacked any legally admissible or corroborative evidence. The Tribunal noted that the WhatsApp chat relied upon by the AO was a rough calculation exchanged between the buyer’s son and his accountant, bore no signature or authenticity, and did not mention the assessee or the shop sold. The chat was held to be nothing more than an internal discussion not linked to the assessee’s transaction.

The ITAT also observed that electronic records cannot be relied upon unless the mandatory certificate under Section 65B(4) of the Evidence Act is furnished. In this case, no 65B certificate or source device was produced, rendering the chat inadmissible as evidence. The Tribunal held that the AO had ignored the government-notified stamp-duty valuation, which was lower than the sale consideration actually declared by the assessee, and yet adopted an arbitrary market rate for adjacent shops without any supporting comparables, inquiries, or verification from the Registration Office. No cash, no document, and no admission under Section 132(4) were found in the assessee’s search to support the theory of cash receipt.

Based on these deficiencies, the Tribunal held that the addition was unsupported by evidence, was contrary to settled principles governing digital evidence, and was based on assumptions rather than facts. Therefore, the ITAT concluded that the deletion of the addition was justified and dismissed the Revenue's appeal.

Mihir Tanna, Associate Director at S.K Patodia LLP, noted that stamp duty value can be challenged. If it is contended that the stamp duty value exceeds the property's fair market value (FMV), the matter will be referred to the Departmental Valuation Officer (DVO). If the DVO determines a value lower than the stamp duty value, that lower value will be the deemed sale consideration for capital gains calculation. However, if the DVO's value is higher than the stamp duty value, the original stamp duty value will be used for the calculation of capital gain. Tanna also mentioned that certain grounds like the condition of the property, old construction, and the need for money can be considered as valid grounds for transferring any property below the stamp duty value.

The ITAT Mumbai, in its judgment (ITA No.4294/MUM/2025) dated October 27, 2025, stated that there is no authenticity of the impugned screenshot, which does not bear any signature of government authority. It appears to be a rough calculation only. The ITAT Mumbai also found that the tax officer (AO) had not brought any comparable case of the said locality to ascertain the actual rates of transactions made. The market rate adopted by the AO was contrary to the Stamp Duty rate, which is the government-fixed rate of the property under consideration and had been brushed aside by the AO without finding any infirmity in the same.

The ITAT Mumbai further stated that no investigation had been made with the Registration office/Stamp Duty authorities in this regard, but the tax officer (AO) made the addition of such a huge sum without making any effort to corroborate his findings. The WhatsApp chat/post is nothing more than rough working communication between the buyer's son and his accountant. The chat does not specifically mention either the name of the assessee (Smt. Shah) or even the impugned property transaction. The assessee was searched by the Department, but no corroborative evidence of receipt of any cash over and above the disclosed amount was brought on record by the AO.

The ITAT Mumbai also noted that the tax officer (AO) placed considerable reliance on digital evidence in the form of chats. However, the order was completely silent on whether the requirements of Section 65B of the India Evidence Act, 1972, had been satisfied. The provisions require that to be admissible, they must be accompanied by a valid certificate under Section 65B(4). Mere screenshots or forwarded chats have no evidentiary value since they are susceptible to tampering or fabrication. Unless the source device is produced or a Section 65B certificate is produced, such chats cannot be relied upon.

In view of the discussion above, the ITAT held that the addition made by the AO was based more on conjectures and surmises rather than on concrete evidence. Therefore, they found no infirmity in the appellate order deleting the addition made. Consequently, all the grounds of appeal which are interlinked to each other were dismissed. The appeal of the Revenue was dismissed. The order was pronounced in the open court on 27/10/2025.