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

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.

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.