Vetrivel Minerals Vs ACIT (Madras High Court)
The Madras High Court recently addressed challenges brought forth by Vetrivel Minerals and associated petitioners against assessment orders issued under Section 153A of the Income Tax Act. These orders, pertaining to assessment years 2013-14 through 2019-20, followed a search operation conducted on the VV group of companies in October 2018. The petitioners contended that the assessments were arbitrary, lacked independent application of mind, and crucially, violated principles of natural justice. They argued the department failed to prove additions were based on materials seized specifically from them during the search, a requirement for Section 153A assessments as supported by precedents like CIT vs. Kabul Chawla (380 ITR 573) and CIT vs. Meeta Gutgutia (395 ITR 526).
Key arguments raised by the petitioners centered on procedural fairness and evidence admissibility. They alleged the department improperly relied on materials and statements obtained from related but distinct entities (referred to as the “estranged brother’s group”), suggesting the correct procedure, if applicable, would be Section 153C, citing MDLR Resorts (P) Ltd. Furthermore, significant reliance was placed on electronic records (Excel files, emails, WhatsApp) without the mandatory certification under Section 65B of the Indian Evidence Act, rendering them inadmissible as per Supreme Court rulings in Anwar PV (2014 10 SCC 473) and Arjun Pandit Rao (2020 7 SCC 1).
A major point of contention was the denial of the petitioners’ requests to cross-examine individuals whose statements, recorded under Section 132(4) during the search, were used to frame the assessments. The petitioners cited judgments like Kishan Chand Chellaram (125 ITR 713) and ICDS Ltd. (2020 10 SCC 529) to argue that this denial was a critical violation of natural justice. Compounding these issues was the department’s failure to provide copies of all panchanamas from the numerous locations searched, which the petitioners claimed prevented them from effectively understanding the basis of the seized materials and defending against the proposed additions. They also pointed to the similarity between show-cause notices and final orders as evidence of pre-determination, citing Siemens Ltd. (2006 12 SCC 33).
The Income Tax Department countered that an alternative statutory remedy (appeal) was available, citing CIT vs. Chhabil Dass Agarwal ([2013] 36 taxmann.com 36), and that panchanamas were provided to authorized persons. They justified denying cross-examination because the statements were from the petitioners’ own employees. The High Court, however, rejected these arguments. It held that the existence of an alternative remedy does not bar writ jurisdiction when clear violations of natural justice occur, referencing Maharashtra Chess Assn. vs. Union of India ((2020) 13 SCC 285). The court found the non-furnishing of all requested panchanamas and the denial of cross-examination to be significant breaches of natural justice. It also affirmed that reliance on electronic evidence without Section 65B compliance rendered it inadmissible. The court dismissed the department’s justification for denying cross-examination, stating the right exists regardless of the statement provider’s employment status.
Concluding that the assessment proceedings were vitiated by multiple violations of natural justice and non-compliance with statutory requirements (like S.65B), the Madras High Court set aside the impugned assessment orders. It remanded the matters back to the Assessing Officer for fresh (de novo) assessment, providing specific directions. These include affording the opportunity for cross-examination if statements are relied upon, providing copies of all demanded seized materials, strictly complying with Section 65B for electronic evidence, and correctly applying Section 153C if materials or statements from other searched entities are used against the petitioners.
Analysis on use of Whatsapp conversation as Evidence
