Cash payment for a home cannot be added to homebuyer's income based on WhatsApp chats: ITAT

The Tribunal found that the Income Tax Department's entire case rested on a WhatsApp chat between two employees of the developer and a statement recorded during a search, without any corroborative evidence linking the buyer to the alleged cash payment.

The ITAT order dated September 4, 2026 has significant implications for property buyers who may face tax additions based on material recovered during searches at developers' offices.

The ITAT order came in the case of Deepika Sanjay Patil, a Mumbai resident who filed her return for Assessment Year 2022-23 declaring a total income of ₹25,59,290. Her return was selected for scrutiny under Computer-Assisted Scrutiny Selection (CASS) over the alleged cash payment of₹ Rs 81.40 lakh for the purchase of an immovable property at Transcon Triumph Project, Andheri, Mumbai, from Transcon Developers Pvt Ltd.

The assessing officer (AO) had information from search proceedings conducted at Transcon Developers on September 23, 2021.

During the search, the developer's General Manager (Sales) stated that on September 29, 2021, Patil and one Laksh Rastogi purchased a flat for an agreement amount of ₹2,21,00,000 against a deal value of ₹3,02,40,000, implying the difference of ₹81,40,000 was paid in cash. As per the order, the manager's admission came after examination of WhatsApp chats dated June 28 and 29, 2021 between Makhija and Lalit Birla, an accountant at the developer's head office, which discussed the ₹81.40 lakh cash collected from the flat sale.

The assessing officer (AO) made an addition of ₹81.40 lakh under Section 69, treating it as unexplained investment. However, the CIT(A) deleted the addition "for the reason that such addition has been made by A.O. solely on the basis of statement of third party, whatsapp chat between two employees of searched person are unauthenticated and failed to adduce any corroborated evidence to substantiate allegation of cash payment of ₹81.40 lac by assessee."

The tribunal observed that the "the digital data without accompanying certificate under section 65B of the India Evidence Act, 1872, are not admissible as an evidence,

The requirement of certificate under Section 65B for the digital data has been uphold by the Supreme Court's ruling in Anvar P.V. vs. P.K. Basheer case of 2014.

The assessee's representative pointed out that neither the statement of the third party was shared with the assessee nor was any cross-examination provided. He relied upon the coordinate bench ruling in Amit Shanta Ram Bagade vs. ITO, which held that no addition can be made for on-money payment "in absence of any corroborative evidence".

The tribunal concluded that "no addition can be made purely on the basis of third-party statements, without discharging onus by A.O. placing corroborative evidence to substantiate its prime allegation of payment of on-money in cash by the assessee". It also dismissed the revenue's appeal.

For homebuyers, this receent ITAT, Mumbai ruling establishes that the tax department cannot add cash payment allegations to your income based solely on chats between the developer's employees or statements recorded during a search at the developer's premises.

The AO must independently corroborate the allegation and provide the assessee an opportunity to cross-examine the person whose statement is relied upon.