The Madras High Court dismissed AIADMK MLA SP Velumani’s challenge to a Rs 7 crore income-tax assessment and penalty. It upheld proceedings under Sections 153C and 271AAC(1), finding no procedural irregularity or violation of natural justice in the case.
CHENNAI: The Madras High Court has rejected petitions by AIADMK legislator SP Velumani challenging a Rs 7 crore income-tax assessment and penalty.
Justice C. Saravanan upheld the Income Tax Department’s actions under Sections 153C and 271AAC(1) of the Income Tax Act, finding no procedural flaw or breach of natural justice in the assessment process.
The Court held,
“As such neither perversity is discernible in the impugned orders nor any procedural irregularity while passing the impugned orders. It cannot be, also said that there was any violation of principles of natural justice warranting an interference with the impugned orders,”
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Background
The matter stems from a December 2016 search at premises linked to SRS Mining, associated with businessman J. Sekar Reddy. During the search, loose sheets were seized that purportedly showed Rs 7 crore had been distributed during the 2016 Tamil Nadu Assembly elections. On the basis of this material, the tax authorities issued a notice to Velumani under Section 153C in February 2022.
For assessment year 2017–18, Velumani had filed a return declaring a total income of Rs 4.92 lakh, of which Rs 4.44 lakh was reported as MLA salary. The assessing officer made additions on December 29, 2022 relying on the seized documents, and a penalty under Section 271AAC(1) was imposed on June 29, 2023.
Contentions and decision
Velumani contended the proceedings were vitiated because he was not allowed to cross-examine K. Srinivasulu, a director of a company related to the searched entity, asserting that the department had relied on Srinivasulu’s statement. The High Court rejected this plea, finding that the department’s case rested on the seized documents rather than on Srinivasulu’s statement.
The Court observed,
“The Petitioner cannot scuttle the assessment proceeding by seeking cross-examination of the person whose statement has not been relied upon,”
The bench also noted that Velumani’s declaration of a Rs 4.4 lakh salary as an MLA for the relevant year was dubious.
The Court said,
“Though not relevant, at the outset it may be mentioned that prima facie, the above return declaring a salary as low as Rs 4,44,152/- for the aforesaid assessment year by a sitting MLA of the Tamil Nadu State Assembly does not inspire confidence. This would require a re-look even otherwise,”
The Court, however, clarified it was not expressing any view on the substantive correctness of the additions or the penalty and preserved the petitioner’s right to challenge the orders before the appellate authority.
The petitions were dismissed, but Velumani was granted leave to file appeals within 30 days; any timely appeals must be decided on their merits uninfluenced by the Court’s observations.
Velumani was represented by A.S. Sriraman. The Income Tax Department was represented by Senior Standing Counsel A.P. Srinivas and Junior Standing Counsel A.N.R. Jayaprathap.
Case Title: SP Velumani v. Assistant Commissioner of Income Tax.
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