Income Tax Reassessment based on DGGI Information Set Aside after GST Proceedings Closure on Same Issue

The Income Tax Department received information from the Directorate General of GST Intelligence (DGGI), Coimbatore, that alleged the petitioner, Vedanta Limited, of being involved in wrongful availment of Input Tax Credit (ITC) worth over Rs 424 crore without actually supplying the goods at the petitioner’s place of business. The petitioner has made a transaction with M/s Xango Trading (India) Pvt. Ltd., for the sale of copper concentrate, during the closure of the petitioner’s Tuticorin copper plant.

Based on this, the Income Tax Department issued a notice under Section 148A(1) and then an order under Section 148A(3) to start reassessment proceedings against the company. The petitioner challenged these before the Delhi High Court.

The petitioner contended that the entire basis of the order was a transaction for which the GST Department had closed the proceedings related to the wrongful ITC, so the notice and the impugned order are invalid. The petitioner also argued that the language of section 148A has been revised from September 1, 2024, as per the Finance Act, 2025. The assessee said that the information must be independently analysed by the Income Tax Department, and the notice could not be issued in a mechanical manner.

The Delhi High Court observed that the order was passed before the GST order, and the concerned officer could not have considered it. The court also believed that proceedings were closed by the GST department, which would affect section 148A proceedings. Therefore, the court set aside the order and remanded the matter to the assessing officer for fresh consideration. The validity of the notice under Section 148A(1) was left open for being canvassed at a later stage, if needed.