CHENNAI: The Madras High Court had set aside the assessment orders by the Income Tax department against industrialist J Sekar Reddy rejecting his claim of income to the tune of Rs.384.55 crore from the financial years 2014-2015 to 2017-2018.
However, the I-T assessed income of Reddy during the period as Rs 4,442.13 crore and the income tax for that period is Rs.2,682 crore.
The first bench comprising Chief Justice Munishwar Nath Bhandari and Justice N Mala passed the orders after hearing the submissions of a private company, Reddy, and two others.
The petitioners sought direction to quash the assessment order submitting that the tax department had assessed the income tax without any proof or evidence.
The judges, while rejecting the submissions of the I-T, ordered the department to assess afresh based on the materials available with the petitioner.
According to I-T, the department conducted a search operation on the premises of the private firm and other petitioners' premises in December 2016. During the raid, demonetised cash and new 2,000 rupees denominations, loose sheets, and other evidence were seized. With the evidence, the witnesses in connection with the evidence were inquired about. Based on the statements of the witnesses, the I-T had concluded that the income of the petitioners was around Rs.4,442.13 crore from 2014 to 2017," the I-T argued.
The I-T department assessed that the petitioners have to pay a tax of Rs 2,682 crore for this period.
The judges rejected that submission saying that when the assessment orders were passed by the I-T, the statements of witnesses were not cross-examined by the petitioner's firm.
When the department informed the judges that the witnesses' statements were used only for corroboration, the bench did not accept the submission.
"The use of the statement even for corroboration could not be done without an opportunity of cross-examination. Otherwise, it cannot be termed to be admissible evidence. "The department has played the game of hide and seek with the court and with the assessee, " the judges held, adding, "the loose sheets seized from the private company and petitioners' premises could not have been relied upon as there is no evidence to substantiate the charge made by the I-T."