Delhi High Court Calls Taxpayer's Absence From Cross-Examination Despite 10-Day Notice “Indolent And Negligent”

The Delhi High Court has observed that an assessee's failure to remain available for cross-examination of a witness despite receiving at least 10 days' prior notice reflects an indolent and negligent approach towards the proceedings.

The Division Bench of Justices Dinesh Mehta and Aditi Choudhary made the observation while setting aside an income tax assessment order passed against Petitioner and directing the Assessing Officer to provide a fresh opportunity to cross-examine two witnesses.

The Court, however, directed Petitioner to pay ₹25,000 to each witness towards costs before their cross-examination.

The dispute arose from an assessment order passed on March 31, 2026, under Section 143(3) of the Income Tax Act, 1961, whereby the Assessing Officer had added ₹1 crore to Petitioner's income based on a slip recovered from one Pradeep Kumar Sehgal.

The slip allegedly mentioned an amount of ₹10,000, which the AO claimed represented ₹1 crore, with three zeros intentionally omitted. The addition was made on the basis of the slip and the statement attributed to Sehgal.

Petitioner had challenged the assessment order before the High Court, arguing that he had been denied an opportunity to cross-examine Sehgal. On April 30, 2026, the Court set aside the assessment order and directed the Assessing Officer to provide such an opportunity.

Pursuant to the directions, the Assessing Officer scheduled the cross-examination for May 19, 2026, and issued notice to Petitioner at least 10 days in advance.

However, Petitioner reached the AO's office at 12:20 pm, whereas the witness had left at 12:10 pm. Petitioner subsequently requested that the witness be called again, but the request was initially declined.

Following a representation to the Additional Commissioner, the AO fixed another date, May 26, 2026. On that date, Petitioner and his counsel appeared, but the witnesses did not.

The AO thereafter passed a fresh assessment order on September 22, 2026, raising an identical demand, while holding that the earlier direction of the High Court had been complied with.

Before the High Court, Petitioner argued that the AO had failed to comply with the earlier directions by not ensuring that the witnesses were available for cross-examination.

The Revenue on the other hand contended that Petitioner had failed to appear at the scheduled time despite receiving advance notice and had not even informed the AO that he would be late.

At the outset acknowledging Petitioner's negligence in missing the scheduled cross-examination, the Court observed,

“When this Court had set aside the assessment order and directed the AO to grant an opportunity to cross-examine, it was imperative for the petitioner to be ready for cross-examination.”

It further observed that Petitioner's failure to keep himself or his counsel available despite at least 10 days' advance notice could not be countenanced.

“The petitioner's approach of not keeping himself or his counsel available for the purpose of cross-examination, when the AO had given him atleast 10 days notice in advance cannot be countenanced,” the Court said.

Rejecting Petitioner's explanation that he was occupied with a hearing before the High Court, the Court remarked, “His plea that he was busy attending the hearing in the High Court is a lame excuse. An assessee has to prioritise his cases.”

However, the Court held that the AO could not disregard the subsequent opportunity granted to Petitioner. It observed that by issuing the subsequent notice, the AO had condoned Petitioner's earlier negligence and could not subsequently rely on his failure to appear on May 19, 2026, to deny the opportunity of cross-examination.

The Court accordingly set aside the assessment order dated September 22, 2026, and directed the AO to fix a fresh date and inform the assessee and the witnesses.

It further directed that if the witnesses fail to appear on three occasions, the AO shall proceed to pass an order in accordance with law without waiting any further.

For Petitioner: Advocates Tushar Jarwal, Advocate with Vivek Malik, 

For Respondent: Ruchir Bhatia, SSC with Mr. Anant Mann and P. Gupta, JSCs.