Company can’t cross-examine statement of its own directors or employees

Statement of directors or employees of company not subject to cross-examination by the company as these persons are not a third party.

In a recent judgment, Hon’ble Kerala High Court has held that statement of the directors or employees of company need not be subjected to cross-examination by the company as these persons are not a third party.

ABCAUS Case Law Citation:
4487 (2025) (03) abcaus.in HC

In the instant case, the Petitioner company had filed a Wit Petition before the Hon’ble High Court inter alia seeking for a declaration that it is entitled to cross-examine the witnesses which were its own director and the employees.

The Petitioner was a company registered under the Indian Companies Act, 2013 and engaged in contract works. It was converted into a Public Limited Company. Pursuant to a search under Section 132 of the Income Tax Act, 1961 (the Act) conducted by the Income Tax Department, proceedings had been initiated against the company and notices were issued under Section 142(1) of the Act for seven assessment years.

The Petitioner filed its objection. In the meantime, petitioner filed an application requesting to cross-examine four persons mentioned therein which included its own directors and employees. However, the said request was declined by the Income Tax Department pointing out that the persons sought to be cross-examined were the Directors and employees of the petitioner itself and not a third party warranting cross-examination.

The Hon’ble High Court observed that notices had been issued under Section 142(1) of the Act in respect of two assessment years for which the proceedings had been initiated. Petitioner could not point out any specific reason warranting an interference by the Court under Article 226 of the Constitution of India at this stage with the said notices. The Hon’ble High Court opined that those were statutory notices initiating proceedings, and hence interference was warranted in writ petition.

With respect to the cross examination, the Petitioner had relied upon a judgment of the Hon’ble Supreme Court. However, the Hon’ble High Court observed that no proposition had been laid down in the said decision that in all instances, opportunity to cross-examine must be granted and it depends on the facts of each case.

The Hon’ble High Court further observed that one of the persons who was requested to be cross-examined had, according to the petitioner, retracted his statement, and therefore, cross-examination was essential.

The Hon’ble High Court further observed that the request for cross-examination was rejected by the Income Tax Department pointing out that two of the persons were Directors themselves and the remaining two persons were employees of the Petitioner company.

The Hon’ble High Court opined that in view of the Hon’ble Supreme Court observation that the statement of the Directors or employees of company need not be subjected to cross-examination, the impugned order does not warrant any interference at this stage.

The Hon’ble High Court pointed out that the decision relied upon by the petitioner stands on a

different footing. Further, it was too premature to conclude that the denial of request for cross-examination should warrant any interference with the order proposed to be passed.

Accordingly, the writ petition was dismissed with liberty to Petitioner to raise these contentions subsequently, in case any adverse orders are issued against it.

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