The Madras High Court has dismissed writ petitions filed by AIADMK legislator SP Velumani challenging a ₹7 crore income tax assessment and the consequential penalty imposed by the Income Tax Department in SP Velumani v. Assistant Commissioner of Income Tax.
A single-judge Bench of Justice C Saravanan upheld proceedings initiated under Sections 153C and 271AAC(1) of the Income Tax Act. The Court found no procedural infirmity or breach of natural justice in the assessment process.
The Court observed that no perversity existed in the impugned orders. It further held that the proceedings did not suffer from any procedural irregularity or violation of principles of natural justice that would justify judicial interference.
Background of the Case
The matter stemmed from a search conducted in December 2016 at the premises of SRS Mining, a firm associated with businessman J Sekar Reddy. During the operation, authorities recovered loose sheets. These documents allegedly reflected a sum of ₹7 crore intended for distribution during the 2016 Tamil Nadu Assembly elections.
Relying on this material, the Income Tax Department issued a notice to Velumani under Section 153C in February 2022. In response, he filed a return maintaining his earlier disclosures. For the assessment year 2017–18, he reported a total income of ₹4.92 lakh, which included ₹4.44 lakh as salary from his position as an MLA.
Subsequently, the assessing officer passed an order on December 29, 2022, making additions based on the seized documents. Thereafter, a penalty order under Section 271AAC(1) followed on June 29, 2023.
Challenge Before the High Court
Velumani contested both the assessment and penalty orders before the High Court. He argued that the proceedings stood vitiated due to the denial of an opportunity to cross-examine K Srinivasulu, a director of a company linked to the entity subjected to search.
According to the petitioner, the Income Tax Department had relied on Srinivasulu’s statement. Therefore, denial of cross-examination, he contended, amounted to a violation of natural justice.
Court’s Findings
The Court rejected this contention. It clarified that the Department had based its conclusions on the seized documents rather than on any statement made by Srinivasulu.
“The Petitioner cannot scuttle the assessment proceeding by seeking cross-examination of the person whose statement has not been relied upon,” the Court held.
Additionally, the Court expressed reservations regarding the income declared by Velumani. It noted that the disclosure of ₹4.44 lakh as annual salary for a sitting MLA did not appear credible.
The Court observed that, although this aspect was not directly relevant to the adjudication, the declared income did not inspire confidence and may warrant reconsideration.
Liberty to Pursue Appellate Remedy
Importantly, the Court clarified that it had not examined the merits of the additions or the penalty imposed. It left the issue open for adjudication before the appropriate appellate authority.
Accordingly, the petitions were dismissed. However, the Court granted liberty to Velumani to file appeals within 30 days. It further directed that any such appeals be decided independently, without being influenced by its observations.
Appearance
Advocate AS Sriraman appeared for the petitioner SP Velumani.
Senior Standing Counsel AP Srinivas, along with Junior Standing Counsel ANR Jayaprathap, represented the Income Tax Department.
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