Use of Loose Papers and WhatsApp Chats in GST Search and Seizure Proceedings: Legal Perspective in Light of Supreme Court Judgment0 comments Tuesday, August 5, 2025Introduction In
recent times, the GST Department in Punjab has intensified its enforcement
activities by conducting frequent raids under Section 67 of the Central Goods
and Services Tax Act, 2017 (CGST Act) and the Punjab Goods and Services Tax Act,
2017 (Punjab GST Act). During such raids, it has become commonplace for the
authorities to seize loose sheets, WhatsApp chats, and digital data, and
subsequently initiate coercive action alleging unaccounted supplies of goods or
services. However,
a pertinent question arises — can loose papers and uncorroborated digital
messages be treated as conclusive evidence of undisclosed transactions under
the law? The
answer lies in the landmark decision of the Hon’ble Supreme Court in Common
Cause (A Registered Society) v. Union of India, [2017] 394 ITR 220 (SC),
wherein the apex court elaborated on the evidentiary value of such materials. Factual Background of the Supreme
Court Case In
this case, searches were conducted on the Sahara and Birla groups by
investigating agencies. Materials seized included random sheets, loose papers,
computer printouts, pen drives, and hard disks which allegedly contained
incriminating entries pointing to possible pay-offs to high-ranking public
officials.
The
Petitioners prayed for investigation against various individuals based on such
material. However, the Supreme Court refused to order any investigation and
laid down important principles that are equally applicable in the context of
tax laws such as GST. Key
Legal Principles Laid Down 1. Loose Papers Not Admissible Under
Section 34 of the Indian Evidence Act The
Court held that loose sheets of paper have no evidentiary value unless they are
shown to be part of regularly maintained books of account. As per Section 34 of
the Indian Evidence Act, entries in books of account are relevant only if they
are maintained in the regular course of business. “Loose
sheets of papers are wholly irrelevant as evidence being not admissible under
Section 34… being of no evidentiary value.” — Para 20, Common Cause Judgment This
reasoning was based on the earlier decision in C.B.I. v. V.C. Shukla (1998) 3 SCC 410, where the Court had drawn a
clear distinction between books of account and scraps of paper or personal
notes.
2. Requirement of Corroborative
Evidence Even
if entries are made in proper books of account, they cannot alone be used to
fasten liability. There must be independent corroborative evidence to support
those entries. This
aligns with the Supreme Court’s observation: “The statement made therein shall not
alone be sufficient evidence to charge any person with liability… independent
evidence is necessary as to the trustworthiness of those entries.” — V.C.
Shukla Case Thus,
merely finding a WhatsApp message or handwritten note indicating a sale or
payment cannot be taken as conclusive evidence of a supply of goods or services
under GST law. 3. Investigation Cannot Be Based on
Inadmissible Material The
Court cautioned against initiating investigations or criminal proceedings based
solely on inadmissible, unauthenticated material, such as loose papers or
unverified digital records. “There has to be some relevant and
admissible evidence and some cogent reason… supported by other circumstances.”
— Para 21, Common Cause Judgment
This
protects taxpayers from arbitrary action based on unverified, possibly
fabricated entries. 4. Loose Papers and WhatsApp Chats Not
Maintained in the Course of Business In
the GST context, WhatsApp chats or notes scribbled during day-to-day activities
may represent casual calculations, discussions, or projections, and unless they
are backed by invoices, e-way bills, ledger entries, or bank records, they
cannot be used to infer actual taxable supplies. The
Income Tax Settlement Commission, whose observations were accepted by the
Supreme Court, held in the Sahara case that: “The department has no evidence to
prove that entries in these loose papers and electronic data were kept
regularly during the course of business…” — Para 22, Common Cause Judgment ⸻ Implications for GST Raids in Punjab
and Beyond Given
the ruling of the Supreme Court, certain legal safeguards must be respected by
GST officers during search and seizure operations:
Due Diligence Before Drawing Conclusions Officers
must not treat every scribbled figure or informal communication as proof of
undisclosed supply. They must examine whether: • The
document was maintained regularly. • There
is any corroborative evidence (e.g., stock movement, cash trail, invoice,
recipient statement).
❌ No Blind Reliance on WhatsApp or
Personal Notes WhatsApp
chats, Excel files, or calculations found on devices during a raid must be
linked with actual business transactions before forming a basis for tax
liability. Protection from Arbitrary Action In
the absence of credible, corroborated evidence, initiating proceedings or
making tax demands solely based on loose documents may violate the taxpayer’s
right to fair investigation and due process under Articles 14 and 21 of the
Constitution. ⸻ Relevant Case Law • Common Cause v. Union of India (2017) 394
ITR 220 (SC) • C.B.I. v. V.C. Shukla (1998) 3 SCC 410 • State of Haryana v. Bhajan Lal 1992 Supp
(1) SCC 335 – Laid down the test for quashing FIRs filed on the basis of
legally insufficient material. ⸻ Conclusion The
Supreme Court’s verdict in Common Cause v. Union of India serves as a crucial
judicial precedent to prevent the misuse of unverified and inadmissible
material during tax enforcement actions. For
businesses in Punjab and across India, this ruling reinforces the principle
that substance must prevail over form, and truth must be established through
legally admissible and corroborated evidence — not mere conjectures or random
entries. As
GST enforcement continues to evolve, it is essential for both taxpayers and
authorities to act within the framework of law and
constitutional safeguards.
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