Delhi High Court Remands Vedanta's Tax Reassessment Case, Citing Subsequent GST Order

New Delhi: The Delhi High Court, in a significant ruling, has set aside an income tax reassessment order against Vedanta Limited and remanded the matter back to the tax authorities for fresh consideration. A division bench of Justice Prathiba M. Singh and Justice Shail Jain held that the subsequent closure of related proceedings by the GST department, which formed the very basis of the income tax notice, must be taken into account.

Background of the Case

The case originated from a notice issued to Vedanta Limited by the Assistant Commissioner of Income Tax under Section 148A(1) of the Income Tax Act, 1961 , for the Assessment Year 2019-20. The Income Tax Department initiated these proceedings based on intelligence received from the Directorate General of GST Intelligence (DGGI).

The DGGI's investigation pertained to alleged wrongful availment of Input Tax Credit (ITC) of over ₹424 crore. The allegations were linked to a sale and repurchase transaction of copper concentrate between Vedanta and M/s Xango Trading (India) Pvt. Ltd., which occurred while Vedanta's Tuticorin copper plant was shut down due to environmental concerns. Based on the DGGI's report, the Income Tax Department concluded that income amounting to ₹424.58 crore had escaped assessment and passed an order on June 23, 2025, to proceed with issuing a reassessment notice under Section 148 of the Act.

Arguments from Both Sides

Vedanta's Position: Senior Counsel Ms. Pragyan Pradip Sharma, representing Vedanta, argued that the entire foundation of the income tax proceedings was the DGGI investigation. She presented a crucial subsequent development: an order dated July 11, 2025, passed by the Additional Commissioner of GST & Central Excise, Madurai, which closed the proceedings regarding the ITC availment issue. It was contended that since the primary allegation had been nullified by the competent GST authority, the consequent income tax notice and order were untenable and should be set aside.

The petitioner also argued that the Income Tax Department failed to apply its independent mind and issued the notice in a mechanical manner, which is contrary to the principles established in cases like * Divya Capital One Pvt. Ltd. v. Assistant Commissioner Income Tax*.

Income Tax Department's Stance: Mr. Bhatia, counsel for the tax department, defended the reassessment order. He argued that the order under Section 148A(3) was passed on June 23, 2025, which was before the GST department's order of July 11, 2025. Therefore, the assessing officer could not have been aware of the GST order and was justified in acting on the information available at the time.

Court's Pivotal Reasoning and Decision

The High Court observed that the subsequent GST order closing the core proceedings has a direct and significant bearing on the income tax reassessment. The bench noted that while the assessing officer was not at fault for being unaware of the GST order at the time of passing the impugned order, natural justice demands that this new, exonerating evidence be considered.

In its judgment, the Court stated: > "Moreover, the closing of the proceedings by the GST Department would have an impact and bearing on the Section 148A proceedings and, therefore, this Court is of the opinion that the impugned order deserves to be set aside, and the matter deserves to be remanded for reconsideration, in view of the GST order dated 11th July, 2025."

Final Verdict and Implications

The Delhi High Court set aside the impugned order dated June 23, 2025, and remanded the case to the Assistant Commissioner of Income Tax for a fresh decision. The Court directed Vedanta to file the GST order and any accompanying submissions with the tax authority within four weeks.

The authority has been instructed to pass a fresh, reasoned order within three months after considering the new material. The Court left the question of the initial notice's validity open, allowing it to be challenged later if necessary. This judgment underscores the importance of inter-departmental consistency and ensures that a taxpayer is not subjected to proceedings based on allegations that have already been dismissed by another competent authority.