Section 153C Validly Invoked on Basis of WhatsApp Chats Corroborated by Evidence: Rajasthan High Court

Introduction

In the case of Giriraj Pugalia V. Assistant Commissioner of Income Tax[i], the Rajasthan High Court, while adjudicating upon a writ petition filed under a. 226 of the Constitution of India, which sought quashing a notice issued under s. 153C of the Income-tax Act 1961 (‘Act’), by which, the Income Tax Department (‘Department’) had initiated fresh assessment qua the Petitioner, Mr. Giriraj Pugalia, subsequent upon having allegedly found certain incriminating WhatsApp chats during a search operation on a third party, dismissed the petition and upheld the notice issued by the Department since the it has sufficient evidence to initiate assessment under s. 153C of the Act.

Brief Facts

• The Petitioner was the proprietor of M/s Ratan Industries, Bikaner and had filed his regular income tax return for the A.Y. 2019–20, declaring a total income of Rs. 41,89,700. Notably, the Department accepted such a return, and there was no dispute regarding it.

• Subsequently, the Department conducted a search and seizure operation under s. 132 of the Act,  at the premises of Om Kothari Group, a third-party entity, in 2020, during which certain WhatsApp chats and digital data were recovered from the mobile phones and devices seized during the aforementioned search.

• The seized material revealed that the Petitioner had purchased two specific industrial plots in Jaipur, from Om Metal Infotech Pvt. Ltd., a group concern of Om Kothari Group, wherein it was alleged that the Petitioner had made substantial unaccounted cash payments, amounting to approximately Rs. 4.52 crore to acquire the properties mentioned above.

• On the basis of such information, the Assessing Officer (‘AO’) issued a notice under s. 153C of the Act in 2023, warranting the Petitioner to file fresh returns for A.Y. 2019–20, with which the Petitioner complied and accordingly filed a revised return on 03.07.2023.

• The Petitioner, in the meanwhile, also sought a copy of the satisfaction note filed by the Department. Subsequent to having perused the said note, the Petitioner proceeded to challenge the issuance of notice under s. 153C of the Act on the basis that:

  • The WhatsApp chats were vague. The chats did not identify the Petitioner directly, and only his generic surname was mentioned.

  • There was no seizure of books, documents, or assets belonging to or relating to him during the search, a compulsory requisite required to issue notice under s. 153C of the Act, i.e., only when incriminating material related to the ‘other person’ (i.e., Petitioner) exists, could the Department have initiated requisitioning proceedings under the   Act.

  • The Petitioner relied on several judgments, including CIT & Anr. v. Sunil Kumar Sharma[ii], Ishita Varshney Jain v. ACIT[iii], and Vetrivel Minerals v. Asst. CIT[iv], to emphasize and state that initiation of proceedings solely on the basis of WhatsApp chats, backed by no other corroborative piece of evidence, was impermissible under law.

Held

• The High Court dismissed the writ petition filed by the Petitioner and upheld the validity of the notice issued under s. 153C of the Act. The High Court held that the WhatsApp chats discovered during the search on the Om Kothari Group, though digital in nature, were specific in content and clearly referred to the Petitioner, the identified plots, and substantial cash transactions.

• The High Court found that these chats were not isolated or vague, but corroborated by other documentary evidence, including digital images of unaccounted cash books and statements recorded under s. 131 of the Act. The satisfaction notes prepared by the AO were also found to be detailed and adequate, clearly outlining the basis for initiating proceedings against the Petitioner.

• In distinguishing earlier judgments cited by the Petitioner, such as Sunil Kumar Sharma (Supra), Ishita Varshney Jain (Supra) and Vetrivel Minerals (Supra), the High court noted that those cases lacked concrete and corroborative evidence, unlike the present matter where specific properties, dates, and cash amounts were clearly established.

• The High Court concluded that the conditions mentioned under s. 153C of the Act was duly satisfied, and any challenge to the facts and evidence should be addressed during the assessment stage, not through writ proceedings. Accordingly, the petition was dismissed, and the notice under s. 153C was held to be valid and legally sustainable.

Our Analysis

This ruling marks a pivotal moment in the interpretation of s. 153C of the Act. The High Court has recognised that digitally sourced evidence, such as WhatsApp chats, when corroborated by additional material such as unaccounted cash books, digital records, and witness statements, can be treated as valid ‘documents’ for initiating proceedings under s. 153C.

Unlike earlier rulings (e.g., Sunil Kumar Sharma or Ishita Varshney Jain), where loose or vague documents lacked corroboration, this case involved specific properties, dates, and transaction amounts tied to the Petitioner. The satisfaction note was not generic; it clearly outlined a pattern of high-value cash payments totalling Rs. 4.52 crore and their connection to the Petitioner’s undisclosed income.

This reflects the High Court’s evolving stance toward digital evidence, emphasizing substance over form. While the Evidence Act (e.g., s. 65B) remains important, strict compliance with it is not always required at the stage of notice issuance under s. 153C, especially where supporting material exists.

Notably, the judgment reaffirms that assessment proceedings, not writ jurisdiction, are the correct forum to challenge the factual basis of such notices. The High Court rightly limited itself to testing the legal validity of the AO’s satisfaction.

In essence, the ruling balances procedural safeguards with the Revenue’s duty to act on credible evidence. For taxpayers and practitioners, it underscores the growing significance of digital trails and the necessity for transparent, defensible financial documentation, particularly in real estate transactions.

End Notes

[i] 2025 SCC OnLine Raj 423 dated 04.03.2025.

[ii] (2024)469 ITR 271.

[iii] 2024 SCC OnLine Del 8519.

[iv] (2021)437 ITR 178.

Authored by Pranav Dabas, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.