Gujarat HC: Income Tax Dept Cannot Issue 148A Notices Solely on GST Dept Inputs



Quick Summary
The Gujarat High Court has ruled that the Income Tax Department cannot issue notices under Section 148A of the Income Tax Act based solely on information received from the GST Department. In a case involving Vasuki Global Industrial Limited, the Income Tax Department issued notices based on GST fraud allegations, which were later found to be incorrect, leading to the withdrawal of the notices. The court emphasised that the Income Tax Department must conduct its own independent inquiry and verification before taking action.

The Income Tax Department and the GST Department share information on the basis of which the other department acts. However, this act should not be done in haste but on one's own inquiry. A hasty action on the GST Department's information has caused some embarrassment for the Income Tax Dept. in the case of VASUKI GLOBAL INDUSTRIAL LIMITED vs. PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX [2025-VIL-293-GUJ-DT], where it had received information from the GST Department that the petitioner was involved in GST invoice fraud and was availing or passing on fraudulent Input Tax Credit on fake invoices. Based on this information, the Income Tax Department had issued notices under Section 148A(b) of the Income Tax Act, 1961, to various buyers and sellers who had transacted with the petitioner. This resulted in the suppliers of the petitioner stopping their business transactions with the petitioner. To add salt to injury, the information received from the GST Department was found to be incorrect, and the Income Tax Department had to withdraw the notices.

Gujarat HC: Income Tax Notices Need Own Inquiry, Not Just GST Data

Hence, the Income Tax Department was directed by the High Court that in the future, the Income Tax Department will not take any such action on the basis of the information made available on the Insight Portal without proper verification as per the provisions of the Act.

Before issuing a notice under Section 148A(1) of the Income Tax Act, 1961, it is the responsibility and liability of the Jurisdictional Assessing Officer to verify the information made available on the Insight Portal, which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant Assessment Year. If necessary, the Assessing Officer must conduct an inquiry with prior approval of the specified authority with respect to such information, and only after verification of the information made available to the Assessing Officer, the provisions of Section 148A(1) of the Act shall be invoked.

 

Similarly, the Bombay High Court in the case of PR. COMMISSIONER OF INCOME TAX-3, PUNE vs. RAMELEX PRIVATE LTD [2025-VIL-286-BOM-DT] held that the Assessing Officer cannot make additions solely based on general information received from the Sales Tax Department, without proper proof of the transactions being bogus. The AO has to take into account all documents produced by the assessee, like purchase bills, ledger accounts, bank payment proofs, etc., to justify the genuineness of the purchases, and also a certificate from its VAT auditor regarding the correct amount of purchases from one of the alleged Hawala dealers, which was duly considered by the CIT(A) and ITAT.

 

FAQ :

No, the Gujarat High Court has ruled that the Income Tax Department cannot issue notices under Section 148A solely on information provided by the GST Department. They must conduct their own inquiry and verification.

The Income Tax Department issued notices to buyers and sellers based on information from the GST Department alleging invoice fraud. However, the GST information was incorrect, and the notices had to be withdrawn, causing business disruption for the petitioner.

Before issuing a notice under Section 148A(1), the Jurisdictional Assessing Officer must verify the information suggesting escaped income and conduct an inquiry if necessary, with prior approval from the specified authority.

Yes, the Bombay High Court ruled that an Assessing Officer cannot make additions solely based on general information from the Sales Tax Department without proof of bogus transactions, and must consider documents provided by the assessee.




About the Author

DESIGNATED PARTNER

Mr. Vivek Jalan is a FCA, Qualified LL.M (Constitutional Law) and LL.B. He is the Chairman of The Fiscal Affairs and Taxation Committee of The Bengal Chamber of Commerce and Industry. He is the Convenor on Indirect Taxes of the CII- Economic Affairs and Taxation Committee (ER); He is also a visiting faculty for Indirec ... Read more

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