High Court Quashes Reassessment Based Solely on Tax Evasion Petition Without Supporting Material

Shah Nanchandbhai Ranchhoddas Choksi challenged reassessment proceedings initiated for AY 2019-20 based on a Tax Evasion Petition (TEP) alleging that he had purchased gold worth Rs 2 crores using unaccounted money. The Assessing Officer issued a show cause notice dated 23.03.2025 under Section 148A(1) of the Income Tax Act, 1961. The petitioner denied the allegations and requested the department to furnish the material relied upon in the notice.

However, the department passed an order dated 30.06.2025 under Section 148A(3) concluding that income of Rs. 2 crores had escaped assessment and issued a notice under Section 148 on the same date. Aggrieved by the action, the petitioner approached the High Court challenging the reassessment proceedings.

Main Issue: Whether reassessment proceedings can be initiated solely on the basis of allegations in a tax evasion petition without supporting material or evidence.

HC’s Ruling: The High Court allowed the writ petition and quashed the reassessment proceedings. The Court observed that the action of the AO was based solely on allegations contained in the Tax Evasion Petition and that no supporting material was provided to substantiate the claim that the petitioner had purchased gold worth Rs. 2 crores using unaccounted money.

The Court held that vague allegations in a Tax Evasion Petition, without verification or supporting evidence, cannot constitute tangible material for reopening an assessment. Since the Assessing Officer had acted mechanically without any credible material, the order under Section 148A(3) and the notice issued under Section 148 were held to be legally unsustainable and were accordingly set aside.

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