Vetrivel Minerals Vs ACIT CC-2,Madurai
Forum- Madras High Court Madurai bench
Date -3rd August 2021

Sub-Whether assessment orders passed in pursuance of search on the basis of electronic evidences in the form of excel sheet, emails ,WhatsApp chats can be without having regard to Section 65B of the Indian Evidence Act and whether cross examination has to be allowed even if the statement relates to employee of the searched company.

The Madurai Bench of Madras High Court in this case was considering bunch of writ petitions for various assessment years where search was conducted on 25.10.2018 on VV group of companies and the assessment order was passed in disregard of the principles of natural justice and without discharging the burden of proof which lied on the Income-tax department. The writ petitioners relied interalia on decision of (2017) 395 ITR 526 – Commissioner of Income Tax vs. Meeta Gutgutia Prop. M/s.Ferns ‘N’ Petals where in the court had held that the additions cannot be made on the basis of materials not found in the course of search and contended that SLP against the said judgement has also been dismissed by the Apex Court.

The petitions also contended that even if additions are made on the basis of materials found at any other person’s search, the procedure laid down in Section 153C must be followed. The petitioner also relied on the decision of the Apex Court in the case of Anwar PV reported in (2014) 10 SCC 473(SC) and Arjun Pandit Rao reported in (2020) 7 SCC 1(SC) to the effect that reliance on electronic documents like excel sheet, WhatsApp, email communications etc cannot be made unless the provisions of Section 65B of the Indian Evidence Act was complied with. The department as usual contended the plea of alternative remedy and relied on the decision in the case of Chabbil Das Agarwal where as the assessee countered this with the decision of Jeans Knitwear.

Finally after hearing the arguments, the court influenced by the fact that the copies of panchnama, as well as seized materials having not been furnished to the writ petitioner, the same was in complete disregard of principles of natural justice. Moreover opportunity of cross examination has to be allowed even if the statement recorded is that of the employee of the writ petitioner. Allowing the writ the court held that the alternative remedy under the statute is in the case of violation of principles of natural justice should be an effective one capable of remedying the violations by providing afresh.

This judgement is a landmark judgement which will be helpful in those cases where copies of seized material is not given and the procedure laid down in Section 65B of the Indian Evidence Act is not followed while relying on electronic evidence.

Ramesh Patodia
07-08-2021