Back
2025 Supreme(Online)(Guj) 11659
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, Pranav Trivedi, JJ
Vasuki Global Industrial Limited – Appellant
Versus
Principal Chief Commissioner of Income Tax – Respondent
C/SCA/13472/2024|SPECIAL CIVIL APPLICATION NO. 13472 of 2024
For the Appellants/Petitioners: B.S. Soparkar
For the Respondents: Varun K. Patel
Before initiating reassessment proceedings, an Assessing Officer must independently verify information suggesting escaped income, conduct inquiries if necessary, and strictly comply with the procedural requirement of providing the assessee an opportunity to be heard under the relevant statutory provisions.
Headnote:(A) Income Tax Act, 1961 - Sections 131(1A), 147, 148, 148A(1), 148A(a), 148A(b) - Central Goods and Services Tax Act, 2017 - Section 70 - Reassessment proceedings - Verification of information - Before issuing notice under Section 148A, it is the responsibility of the Assessing Officer to verify information available on portal - Assessing Officer must conduct inquiry with prior approval of specified authority where necessary - Investigation reports based solely on secondary data without independent verification by Assessing Officer are insufficient - Assessee must be provided an opportunity of being heard by serving show-cause notice accompanied by information suggesting escaped income. (Paras 5, 8)
Facts of the case:
The litigation arose from the actions of tax authorities in generating reassessment reports on a digital portal based on unverified allegations of tax fraud received from another department. These reports led to the initiation of reassessment proceedings against numerous taxpayers who had transacted with the petitioner. The petitioner contended that the reports incorrectly identified it as a fraudulent entity due to a name confusion, which subsequently affected its business relationships and led to unfair reassessment notices against its clients. The authorities eventually performed corrective actions, including updating the portal and dropping proceedings in many cases.
Findings of Court:
The court noted that mechanical reliance on data available on the digital portal without verification violates the statutory duty of the Assessing Officer under the tax code. It was observed that while remedial steps were taken during the pendency of the petition, the procedure for reassessment must strictly adhere to the requirement of verification and providing an opportunity for the assessee to respond before triggering proceedings.
Issues: Whether the Assessing Officer is obligated to independently verify information received on the portal before initiating reassessment proceedings and whether an opportunity to be heard is mandatory prior to the issuance of notice for escaped income.
Ratio Decidendi: The court ruled that the statutory scheme requires the Assessing Officer to perform due diligence and verify information suggesting income has escaped assessment. The invocation of reassessment powers is conditional upon such verification and the provision of a fair hearing, ensuring that administrative actions are not based on erroneous or unverified information.
Result: Petition disposed of with observations and directions.
| Table of Content |
|---|
| 1. errors in insight portal data lead to wrongful reassessment proceedings. (Para 1 , 2 , 3 , 4) |
| 2. assessing officers must verify insight portal information under section 148a before issuing notices. (Para 5 , 6 , 7 , 8) |
| 3. disposal of petition upon resolution of the grievance. (Para 9) |
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
Heard learned advocate Mr.B.S.Soprakar for the petitioner and learned Senior Standing Counsel Mr.Varun K. Patel for the respondent.
1. This matter is unique as the respondent Income Tax Department has relied upon the information available on Insight Portal by sending notices to the suppliers of the petitioner for re-opening considering the report received from the GST Department which was later on corrected by the GST Department exonerating the petitioner from any lapses under the provisions of the GST Act. However, the Income Tax Department continued the re-assessment proceedings of various assessee who are suppliers of the petitioner on the basis of the information which was available on the Insight Portal.
2. The petitioner therefore received the feedback from the suppliers, and the suppliers have stopped transacting the business with the petitioner. The petitioner therefore drew the attention of the respondent-Income Tax Department and corrective steps have been taken by the respondent-Income Tax Department to see that no re-assessment is made in the case of the suppliers of the petitioner on the basis of the information relating to the petitioner which was made available on the Insight Portal.
3. This petition is pending since 2024 and since last one and half years, the respondent Income Tax Department has placed on record the details by filing various affidavits to demonstrate that the necessary actions are taken at its end to resolve the issue of re-assessment in case of the suppliers of the petitioner on the basis of the information which was made available on the Insight Portal.
4. It would be therefore necessary to refer to the facts in brief emanating from the record so that in future, such actions are not taken by the respondent-Department on the basis of the information available on the Insight Portal by the respective Assessing Officer without verification with the assessee as provided either under Section 148A(a) of the Income Tax Act, 1961 (for short ‘the Act’) which was prevalent till 1st September, 2024 and thereafter, under Section 148A(1) of the Income Tax Act,1961.
4.1. The petitioner is engaged in the business of trading of coal. On 15th January, 2021, summons was issued by the Director General of GST Intelligence, Gandhidham under Section 70 of the Central Goods and Services Tax Act, 2017 (for short 'the CGST Act').
4.2. The statement of the Director of the petitioner was recorded on 2nd February, 2021 and by order dated 06.09.2021, the inquiry against the petitioner was concluded by the competent authority on payment of total tax, applicable interest and penalty as per the provisions of the GST Act.
4.3. The petitioner thereafter received the summons dated 06.06.2022 issued by the respondent No.4-Deputy Director of Income Tax (Investigation-I), Rajkot under Section 131(1A) of the Act.
4.4. The petitioner appeared before the respondent No.4 and filed reply dated 04.07.2022 by Email and supplied the details which were called for.
4.5. The petitioner thereafter received summons on 27.10.2023 and 26.11.2023. The petitioner did not provide any further details as the details were already provided on 04.07.2022.
4.6. It is the case of the petitioner that thereafter, the notices under Section 148A(b) of the Act were issued to the various buyers and sellers who transacted with the petitioner on the premise that as per the information shared by the Director General of GST Intelligence (for short ‘the DGGI’), the petitioner is involved in GST invoice fraud and that the petitioner was found to be availing or passing on fraudulent Input Tax Credit on fake invoic
