Madras High Court admits income tax appeal against K.N. Nehru

The Madras High Court on Friday (August 7, 2026) admitted a Tax Case Appeal (TCA) filed by a Principal Commissioner of Income Tax against an order passed by the Income Tax Appellate Tribunal (ITAT) in favour of former DMK Minister and incumbent Tiruchi (West) MLA K.N. Nehru in connection with alleged discrepancies in the returns filed by him for the assessment years 2013-14 to 2015-16.

The First Division Bench of Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan ordered notice to the assessee after being prima facie convinced by the grounds raised in the appeal. The issue relates to the I-T Department’s claim of Mr. Nehru having had unexplained income of around ₹17 crore rupees and making unexplained investments of ₹11.98 crore during the three financial years.

The department had conducted a survey on January 30, 2018, on the business premises of GSNR Rice Industries Private Limited and Sri Narayan Reddiar Modern Rice Mill under Section 133A of the Income Tax Act, 1961. The former Minister’s brother K.N. Manivannan was the managing director and proprietor of both firms from where the I-T sleuths had impounded several materials.

The impounded materials included a diary, a notebook, a few loose sheets, a computer, a CPU, a laptop, and some pen drives. The officials retrieved the data from the electronic equipment and compared them with the I-T returns filed by Mr. Nehru to find that he had reportedly not disclosed certain transactions. Subsequently, the Assessment Officer passed a re-assessment order in 2019 by adding the unexplained income and investments.

Aggrieved by it, Mr. Nehru filed three statutory appeals before the Commissioner of Income Tax (Appeals) who ruled in favour of the appellant on March 11, 2025. Though the Revenue took the matter on further appeal to the ITAT, the latter dismissed those appeals on December 3, 2025, by relying upon similar orders passed in favour of Mr. Manivannan and GSNR Rice Industries in connected proceedings initiated against them.

“The entries in the impounded materials were incomplete, contained duplication, and could not be treated as reliable evidence to justify additions under Sections 68 or 69 of the Act… In the absence of corroborative evidence establishing the nexus between such entries and any undisclosed income, the documents were to be treated as ‘dumb documents,’ incapable of supporting any adverse inference against the assessee,” the ITAT had held. Hence, the department had chosen to file the present tax case appeals before the High Court.