Rajasthan High Court upholds Income Tax Notice based on WhatsApp Chats as valid evidence [Read Judgment]

Rajasthan: The Rajasthan High Court has dismissed a writ petition challenging a notice issued under Section 153C of the Income Tax Act, 1961, upholding the validity of using WhatsApp chats as incriminating evidence when corroborated by specific transactions.

Hon’ble Dr. Justice Pushpendra Singh Bhati and Hon’ble Mr. Justice Chandra Prakash Shrimali made significant observations on the scope and application of Section 153C proceedings in cases where digital evidence is discovered during search operations.

WhatsApp Chats as Evidence: Rajasthan HC Sets Legal Precedent in Income Tax Case

The case involved Giriraj Pugalia, who challenged a notice dated 16.06.2023 issued under Section 153C of the Income Tax Act following search operations conducted on the Om Kothari Group. The court noted:
“The WhatsApp chat is completely corroborated, and the said chat, which could be considered to fall within the definition of ‘other documents’, is totally corroborated by the specific transactions that have taken place regarding the assessee.”

Addressing the specific evidence discovered during the search, the court observed:
“The persons having the WhatsApp chats were connected with both the companies herein, and the transactions were regarding specific plots. 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.”

The court highlighted that the digital evidence revealed unaccounted cash transactions, stating:
“The big-size plots in VKI, Jaipur, i.e., plots No. SP 818-(II)-3 and 818-(II)-4, were purchased by the petitioner. The unaccounted money paid is reflected in the chats. The purchase of the said plots was also found from the extracted digital data.”

Section 153C Explained: Digital Evidence Accepted in IT Proceedings by High Court

On the legal standard for invoking Section 153C, the court emphasized:
“The law and statute, however, require strict interpretation—as if the information is vague, then the same cannot be made part of the sustaining material for such proceedings—which is not so in the present case.”

The court detailed the transactions revealed through digital evidence, which showed cash payments totaling Rs. 4,52,62,000 made on various dates in February 2019 for the purchase of plots.

It rejected the petitioner’s argument that WhatsApp chats cannot be considered “books of account or documents” under Section 153C, finding that when corroborated by actual transactions, such digital evidence can form the basis for initiating proceedings against an “other person” not directly subjected to the search.

Consequently, the court dismissed the petition.

Mr. Aditya Vijay and Mr. Pankaj Arora appeared for the petitioner, and Mr. K.K. Bissa appeared for the respondent.

Case Title: Giriraj Pugalia vs. Assistant Commissioner of Income Tax, Circle-1, Income Tax Department, Bikaner

 [Read Judgment]