Facts of the Case

The petitioner, Vedanta Limited, filed a writ petition challenging a notice dated 24.03.2025 issued under Section 148A(1) of the Income-tax Act, 1961 and the consequent order dated 23.06.2025 passed under Section 148A(3) for Assessment Year 2019-20. The reassessment proceedings were initiated based on information received from the Directorate General of GST Intelligence, Coimbatore Zonal Unit, alleging wrongful availment of input tax credit without actual receipt of goods. The allegation stemmed from transactions involving sale and repurchase of copper concentrate through M/s Xango Trading (India) Pvt. Ltd. during the period when Vedanta’s Tuticorin copper plant was closed. The Income-tax Department alleged income escapement exceeding ₹424 crore based on the said GST intelligence.

Subsequent to the passing of the order under Section 148A(3), the GST Department, by order dated 11.07.2025, closed the proceedings relating to the alleged wrongful availment of ITC arising from the same transaction.

Issues Involved

Whether an order passed under Section 148A(3) solely on the basis of GST intelligence can survive when GST proceedings on the same transaction are subsequently closed, whether such subsequent development has a direct bearing on reassessment proceedings, and whether the matter deserved remand for fresh consideration by the Assessing Officer.

Petitioner’s Arguments

The petitioner contended that the entire basis of the reassessment proceedings was the alleged wrongful ITC transaction, which had since been examined and closed by the GST Department. It was argued that continuation of reassessment proceedings ignoring the GST closure order would be unjustified. The petitioner further submitted that even under the amended Section 148A regime, the Income-tax Department is required to independently examine the information and cannot proceed mechanically on the basis of third-party inputs.

Respondent’s Arguments

The Revenue submitted that the applicable provision was Section 148A as amended with effect from 01.09.2024 and that the impugned order was passed prior to the GST closure order, which was therefore not within the knowledge of the Assessing Officer at the relevant time. It was argued that the reassessment proceedings were initiated in accordance with law and based on material available at that stage.

Court Order / Findings

The Delhi High Court observed that the impugned order under Section 148A(3) was passed prior to the GST Department’s order dated 11.07.2025 and therefore the Assessing Officer could not have considered the subsequent development. However, the Court held that closure of GST proceedings on the very transaction forming the basis of reassessment would have a direct impact and bearing on the income-tax proceedings. In view thereof, the Court held that the impugned order deserved to be set aside and the matter required reconsideration by the Assessing Officer after taking into account the GST closure order. The Court left open the question regarding the legality and validity of the notice issued under Section 148A(1), including the requirement of independent application of mind by the Income-tax Department.

Important Clarification

The Court clarified that subsequent closure of proceedings by another statutory authority on the same factual foundation constitutes a relevant development which must be considered by the Assessing Officer. The rights and contentions of both parties, including challenges to the validity of the notice under Section 148A, were expressly left open.

Final Outcome

The writ petition was disposed of. The order dated 23.06.2025 passed under Section 148A(3) was set aside, and the matter was remanded to the Assistant Commissioner of Income Tax, Circle-25(1), Delhi for fresh consideration in light of the GST Department’s order dated 11.07.2025. The petitioner was permitted to file the GST order along with a brief note of submissions within four weeks, and the Assessing Officer was directed to pass a reasoned order within three months, with all rights and contentions kept open.

Link to Download order- https://mytaxexpert.co.in/uploads/1769503185_VEDANTALIMITEDVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLE251DELHIORS..pdf

 

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