Gujarat High Court Quashes Reopening Where Disclosed Loan and Interest Were Already Taxed

The petitioner, Hitarg Agritrade Commodities Pvt. Ltd., filed its return of income for Assessment Year 2021-22 on 10.02.2022, declaringa  total income of Rs. 3,35,780/-, which was processed and accepted under Section 143(1) of the Income Tax Act, 1961. Thereafter, based on information flagged on the Insight Portal, the Assessing Officer issued a show cause notice under Section 148A(1) alleging escapement of income amounting to Rs. 58,626,100,000/- on account of transactions with M/s. Astro Gems & Jewellery Pvt. Ltd.

The petitioner submitted that the interest income of Rs. 1,91,85,520/- was duly credited to the Profit and Loss Account and offered to tax in the return for the Financial Year 2020-21. Still, the Assessing Officer passed an order under Section 148A(3) holding that income had escaped assessment and issued a notice under Section 148 dated 28.06.2025, leading to the present writ petition.

Main Issue: Whether reassessment proceedings under Sections 148A and 148 of the Income Tax Act can be sustained when the alleged transaction and related interest income were fully disclosed and already offered to tax in the return of income.

HC’s Ruling: The Gujarat High Court allowed the writ petition and quashed both the impugned order passed under Section 148A(3) and the notice issued under Section 148 of the Act. The Court observed that the petitioner had clearly disclosed the loan transaction as well as the interest income received thereon, which had been duly credited and offered to tax, and these facts were not disputed by the Revenue.

The Court held that the Assessing Officer proceeded on vague and arbitrary assumptions merely because the borrower entity did not cooperate with the inquiry, without appreciating the factual disclosures already made in the return. It was held that a transaction already disclosed and assessed cannot be treated as income escaping assessment. Thus, the reassessment proceedings were held to be without jurisdiction, and the Rule was made absolute.

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