Clipped from: https://taxguru.in/income-tax/sc-examine-verification-requirement-survives-section-148a-amendment.html
Principal Chief Commissioner of Income Tax & Ors. Vs Vasuki Global Industries Limited (Supreme Court of India)
The matter before the Court arose from reassessment proceedings initiated by the Income Tax Department based on information available on the Insight Portal, which was derived from GST authorities. The petitioner contended that such information was incorrect and had already been clarified by the GST authorities, yet reassessment proceedings continued against various assessees who had transacted with the petitioner.
The Supreme Court condoned the delay and issued notice, observing that the petitioner had raised a substantial issue regarding the interpretation of Section 148A(1) of the Income Tax Act. Specifically, it was argued that the High Court’s observations effectively reintroduced a requirement of inquiry prior to issuing notice under Section 148A(1), which had been consciously removed by legislative amendment.
As reflected from the record and the High Court proceedings, the case involved a situation where the Income Tax Department relied on GST-based information uploaded on the Insight Portal and issued notices to multiple suppliers and buyers of the petitioner for reopening assessments. However, the GST Department later clarified that the petitioner was not involved in the alleged fraud, and the inquiry against it had already been concluded.
Despite such clarification, reassessment proceedings continued, causing business disruption to the petitioner, as suppliers stopped transactions. The petitioner approached authorities highlighting that the information on the Insight Portal was incorrect and sought its correction and withdrawal of consequential proceedings.
During the pendency of the proceedings, the Income Tax Department undertook corrective measures. These included seeking clarification from GST authorities, forwarding such clarifications to jurisdictional officers, uploading updated information on the Insight Portal, and communicating with assessing officers to ensure that reassessment proceedings were not pursued on incorrect grounds.
Data placed on record indicated that a large number of cases were impacted by the initial information. Out of 512 cases, many saw no action or were dropped following clarification. In total, 83 reassessment cases were initiated, but several resulted in no additions, and 50 proceedings under Section 148A were dropped after receiving clarificatory communication from GST authorities.
The High Court examined the statutory framework of Section 148A, both prior to and after its amendment effective 1 September 2024. Earlier, Section 148A(a) explicitly required the Assessing Officer to conduct inquiry, if necessary, before issuing notice. Post-amendment, Section 148A(1) mandates providing an opportunity of hearing based on information suggesting escapement of income, without expressly mentioning inquiry.
However, the High Court held that even under the amended provision, it remains the responsibility of the Jurisdictional Assessing Officer to verify the information available on the Insight Portal before issuing notice. The Court observed that reliance on unverified data led to erroneous reopening of assessments affecting numerous assessees. It emphasized that verification of information, and where necessary, inquiry with prior approval, is essential before invoking Section 148A(1).
The High Court further noted that the statutory scheme itself provides safeguards to prevent arbitrary reassessment and that the Assessing Officer must apply independent judgment rather than treating portal-based data as conclusive.
In view of the corrective steps taken by the department during the pendency of the proceedings, including withdrawal and modification of information and communication with assessing authorities, the High Court disposed of the petition. It expressed an expectation that such instances of reliance on unverified information would not recur.
The Supreme Court, while issuing notice, has kept open the question of whether the High Court’s interpretation effectively adds a requirement not present in the amended Section 148A(1), thereby raising an issue requiring further consideration.
Read Also High Court Judiciary: Vasuki Global Industrial Limited Vs Principal Chief Commissioner of Income Tax & Ors (Gujarat High Court)
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. The petitioner’s submission is that the observations in paragraph 8 of the impugned order has the effect of adding a provision in sub-section(1) of Section 148A of the Income Tax Act, 1961 which was deliberately removed by amendment, therefore, the matter requires consideration.
3. Issue notice, returnable in six weeks.
aniltikotekar4sme.com 