In a significant ruling that underscores the evidentiary limits of search-based tax assessments, the Mumbai bench of income tax appellate tribunal (ITAT) has dismissed the tax department’s appeal and upheld the deletion of an addition of ₹32.14 crore made against the legal heir of Maharashtra's late deputy chief minister Ajit Anantrao Pawar. The tribunal held that the very initiation of proceedings under Section 153C of the Income Tax (I-T) Act was invalid as the seized material did not establish any legally sustainable nexus with the assessee.
In an order last month, the bench of Amit Shukla, judicial member (JM) and Makarand Vasant Mahadeokar (accounting member), says, "In the loose papers referred to by the assessing officer (AO), there is no name of the assessee (Mr Pawar). The expression 'DD' is not even an abbreviation of the assessee’s full name. Merely because the assessee is a public figure and may be fondly known in political circles as 'Dada' in Maharashtra politics, it cannot by itself justify the inferential leap that the initials 'DD' in the diaries necessarily refer to him. Public notoriety, popularity, or colloquial identification cannot be substituted for legal proof. The WhatsApp chats discussed by the AO do not contain a reference to the specific transaction entries in the seized documents. The author of the papers, in his statement, explained 'DD' as a code used for high-value transactions. Thus, the very material relied upon by the tax department fails to establish the most foundational fact necessary to proceed against the assessee."
"On an overall consideration, therefore, we are of the clear opinion that the entire proceedings initiated against the assessee under section 153C are without the support of legally admissible and credible evidence. The papers referred to by the AO do not have such bearing on the income of the assessee as is contemplated by section 153C. The satisfaction recorded by the AO does not demonstrate a live, cogent, and legally sustainable nexus between the seized material and the assessee...Once the very jurisdictional foundation fails, the consequential assessment order cannot survive," the ITAT says in the order.
The case stemmed from a search and seizure operation carried out on 13 July 2020, in the Triton group. During the search, handwritten diaries and notebooks were recovered from the residence of one Jiten Pujari. These documents contained entries of alleged cash transactions aggregating about ₹32.14 crore, attributed to a person identified only by the initials 'DD'. Based on this, the AO invoked Section 153C, alleging that the entries represented unexplained investments of Mr Pawar.
To support this claim, the tax department attempted to link the initials 'DD' to Ajit 'dada' Pawar through a combination of digital and circumstantial evidence. This included mobile contacts saved as 'DD Personal', WhatsApp chats, SMS exchanges, and identification through the TrueCaller application. The AO treated these elements as corroborative material and proceeded to make an addition of ₹32.14 crore under provisions relating to unexplained income, despite Mr Pawar having originally declared an income of about ₹54.94 lakh.
However, the commissioner of income tax (appeals) (CIT(A)) had quashed the proceedings, holding that the jurisdictional requirements under Section 153C were not met. The appellate authority found that the seized documents neither belonged to nor were demonstrably related to Mr Pawar, and that the I-T department’s case was built largely on assumptions and indirect inferences.
Challenging this finding, the tax department argued before the tribunal that the cumulative effect of the seized diaries, digital records and mobile data established a clear link between the assessee and the alleged transactions. It contended that the repeated use of the code 'DD' across different sources, coupled with mobile number identification and digital communications, formed a coherent evidentiary chain. The department also invoked the doctrine of human probabilities, arguing that direct evidence in cases involving cash transactions is often unavailable and that surrounding circumstances must be given due weight.
The tribunal, however, was not persuaded by these submissions. It noted that the diaries and notebooks were seized from a third party and did not contain the name, address, or any identifiable particulars of the assessee. The entire case of the I-T department, it observed, rested on the presumption that the code 'DD' referred to Ajit 'dada' Pawar, a presumption that lacked evidentiary backing.
Significantly, the tribunal pointed out that even the author of the diaries, Mr Pujari, had explained during the course of the search that 'DD' was merely a code used for recording high-value transactions and did not identify Mr Pawar. This explanation, in the tribunal’s view, undermined the very foundation of the I-T department’s case.
On the evidentiary value of the seized material, the tribunal reiterated that loose sheets, private diaries and uncorroborated digital data recovered from third parties cannot be used against an assessee in the absence of independent and credible evidence. It noted that no supporting material, such as bank transactions, financial records, or statements directly implicating the assessee, had been brought on record. There was also no transactional trail linking the alleged cash entries to the assessee’s financial affairs.
The tribunal further clarified that the statutory presumptions under Sections 132(4A) and 292C apply only to the person from whose possession the documents are found. In the present case, since the material was seized from a third party, these presumptions could not be extended to the assessee.
The bench says, "...where entries or borrowings are reflected in books in the assessee’s own handwriting, a presumption can indeed be raised by the tax department. But that statutory aid has its own boundaries. In the present case, the diaries and notebooks were found from Mr Pujari and not from Mr Pawar. Therefore, whatever presumption may arise, it arises qua the person from whose possession the documents were found, and cannot automatically be transposed onto the present assessee (Mr Pawar)."
The tribunal was also critical of the reliance placed on digital tools and crowd-sourced applications such as Truecaller. It observed that such platforms lack legal authenticity and cannot be treated as reliable evidence in quasi-judicial proceedings. The attempt to connect the assessee through a contact saved as 'DD Personal' or through user-generated identification on Truecaller was described as tenuous and insufficient to establish identity.
"We may also observe that the reliance placed on Truecaller or similar private applications must be approached with considerable caution. The data on such applications is based on a crowd-sourced and user-generated editing model, which is not completely dependable from the standpoint of legal authenticity and evidentiary sanctity...Data may indeed be the new oil, but unless refined through the discipline of admissibility, authenticity, and corroboration, it cannot be poured straight into the judicial engine of fact-finding," the ITAT says.
Rejecting the tax department’s reliance on the doctrine of human probabilities, the tribunal held that such principles cannot substitute the requirement of evidence. Suspicion, however strong, cannot take the place of proof, it observed, adding that tax liability cannot be imposed on the basis of conjecture or inferential reasoning.
The tribunal emphasised that for valid invocation of Section 153C, it is essential that the seized material must either belong to or clearly relate to the assessee and must have a bearing on the determination of income. In this case, both conditions were found to be absent. The satisfaction recorded by the AO did not establish any cogent or direct nexus between the seized material and the assessee.
In view of these findings, the tribunal upheld the order of the CIT(A) and held that the proceedings initiated under Section 153C were void ab initio. Consequently, the addition of ₹32.14 crore was deleted, and the Revenue’s appeal was dismissed.
(ITA No. 2173/MUM/2025 Date: 20 April 2026)
