Section 148 Reassessment Quashed After GST Relief | HC

Case Details: Piyush Mafatlal Shah vs. Income-tax Officer [2026] 184 taxmann.com 641 (Gujarat)

Judiciary and Counsel Details

• A.S. Supehia & Pranav Trivedi, JJ.
• Dhinal A Shah for the Petitioner.
• Karan G Sanghani, Senior Standing Counsel for the Respondent.

Facts of the Case

The assessee was a trader in gold, silver, diamonds, and bullion, and filed its return for the relevant assessment year. The Assessing Officer (AO) issued a show cause notice under Section 148A(1) alleging income escapement based on flagged high-risk transactions and a GST show cause notice proposing registration cancellation for ineligible ITC.

GST registration was cancelled, but on appeal, the Appellate Authority restored it, citing denial of hearing, non-consideration of the assessee’s reply, lack of adjudication to prove fraudulent ITC, and supporting returns and banking records. AO issued a notice under Section 148. The aggrieved assessee filed a writ petition with the Gujarat High Court.

High Court Held

The High Court held that the reopening of the assessment was based on the cancellation order passed by the GST Authorities, which the Appellate Authority had set aside in the petitioner’s favour. The petitioner was subjected to scrutiny by the GST department, alleging that it had availed ITC from non-genuine suppliers and issued or received invoices without the actual supply of goods. Accordingly, the registration was cancelled. The Appellate Order specifically holds that the petitioner had not claimed any fraudulent ITC, nor had it violated the GST Law under Section 73 or Section 74 of the CGST Act. Thus, this was a very vital aspect that the AO was required to consider while passing the impugned order under Section 148A(3).

Apart from this, the AO had no other material to prove that income had escaped. Therefore, reopening the assessment was unjustified, and the notice under section 148 was quashed and set aside.