IEA Inapplicable to Income Tax Proceedings: ITAT Rejects Challenge to Electronic Data Lacking S.65B Certification [Read Order]

The tribunal observed that the Indian Evidence Act (IEA) did not strictly apply to Income Tax proceedings, and the absence of a certificate under Section 65B did not render seized electronic data inadmissible when its authenticity is otherwise established.

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) heard a batch of seven appeals and ruled that Indian Evidence Act did not apply to the Income Tax Proceedings and held that it did not render seized Electronic data inadmissible even with a lack of section 65B Certificate of the Evidence Act.

Purushttam Lal Soni (assessee), a search and seizure operation conducted under Section 132 on December 16, 2016 significant electronic data was seized from multiple devices, including hard disks from "Anshu Desktop," "Radhika PC," and a "Tally old server".

Analysis of this "Tally" data revealed discrepancies between the assessee's official books of account and the recorded cash receipts and payments.

The AO observed that the assessee was maintaining parallel sets of records. Based on the seized data, the AO made the following primary additions for the lead year (AY 2011-12): Unexplained Cash Payments amounted to ₹84,91,24,660, Unexplained Cash Receipts amounted to ₹1,67,95,74,275.

The AO contended that the assessee failed to prove the identity, creditworthiness, and genuineness of the lenders and could not provide a plausible explanation for the voluminous cash transactions found in the electronic records.

Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the addition. Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT.

The assessee challenged the additions on both technical and substantive grounds that the electronic data was "non-est" and inadmissible because the AO failed to obtain or provide a certificate under Section 65B of the Indian Evidence Act, which is mandatory for the admissibility of electronic records.

The two-member bench, comprising Satbeer Singh Godara (Judicial Member) and Shri Manish Agarwal (Accountant Member) held that it is a settled position of law, supported by the Supreme Court in Chuharmal v. CIT.

The tribunal noted from the above case that the rigours of the Evidence Act do not apply to Income Tax proceedings. The tribunal noted that while the principles of the act may apply, the technical requirements like the Section 65B certificate are not strictly mandatory for tax authorities.

The tribunal upheld the validity of the evidence but modified the quantification of the additions. The appeal of the assessee was partly allowed.

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