Facts of the Case

The petitioner, Deepak Kumar Yadav, trades in arecanut and betel-nut products through his proprietary concern, S.K.L. Enterprises, and had filed his return for Assessment Year 2019-20 disclosing income of Rs. 6,81,630/-. He was issued a notice dated 16.03.2023 under Section 148A(b) of the Income Tax Act, 1961, on the basis of information received from the DDIT (Investigation), Nagpur, sourced from the Directorate General of GST Intelligence (DGGI) and GST authorities. That information indicated that two of the petitioner's purported suppliers — M/s Kuhoje K Achumi and M/s Om Traders — had been availing and passing on fraudulent Input Tax Credit through fake invoices without any actual movement of goods, and that the petitioner's purchases from them (aggregating over Rs. 1.79 crore) were correspondingly treated as fictitious. Combined with other third-party financial information (large cash deposits and withdrawals), the total income alleged to have escaped assessment was about Rs. 6.90 crore. The petitioner objected, denying the allegations and seeking cross-examination of the suppliers, but the Assessing Officer passed an order under Section 148A(d) rejecting the objections and issued a consequential notice under Section 148 for reassessment.

Issues Involved

  1. Whether the reassessment order under Section 148A(d) of the Income Tax Act, 1961 was invalid for having been passed without examining the petitioner's reply on merits or granting an opportunity of cross-examination.
  2. Whether the scope of judicial review under Article 226 at the Section 148A(d) stage extends to testing the sufficiency or correctness of the underlying information.

Petitioner's Arguments

  • The impugned order was passed in a routine and mechanical manner without genuinely examining the petitioner's reply, which would defeat the very purpose of the Section 148A procedure.
  • Reliance was placed on the Supreme Court's decision in Red Chilli International Sales v. Income-tax Officer, and a Bombay High Court order, to argue that courts must scrutinise the Section 148A(d) order in depth.

Respondent's Arguments

  • The scope of Section 148A is limited to ascertaining whether information exists suggesting escapement of income; questions of sufficiency, correctness, or ultimate merits are not ordinarily examined at the writ stage and can be raised in the reassessment proceedings themselves.
  • Reliance was placed on the Punjab and Haryana High Court's ruling in Anshul Jain v. Pr. CIT (affirmed by the Supreme Court), holding that no writ-court interference is warranted at the Section 148A(d) stage, as full remedies remain available during reassessment.

Court Order / Findings

  • The Court held that the information received from DDIT (Investigation), Nagpur — itself sourced from DGGI and GST authorities regarding fake-invoice ITC fraud by the petitioner's alleged suppliers — squarely fell within the categories of "information" specified in Explanation 1 to the second proviso of Section 148, and there was no challenge that it fell outside that Explanation.
  • Distinguishing Red Chilli International Sales (which concerned whether a writ petition was maintainable at all, not the merits) and following Anshul Jain, the Court held that the limited scope of judicial review at the Section 148A(d) stage is confined to the existence of information, not its correctness — which remains open to be tested in the reassessment proceedings under Section 148.
  • Finding no merit in the challenge, the writ petition was dismissed.

Important Clarification

This is an Income Tax Act ruling, not a GST-law decision — but it illustrates an important cross-statute reality for GST-registered businesses: information generated by DGGI and GST field formations during fake-ITC investigations regularly flows to the Income Tax Department and can independently trigger income-tax reassessment of the purchasing entity, even before any GST proceedings against that entity conclude. Businesses under GST investigation for alleged fake-invoice purchases should anticipate parallel income-tax scrutiny on the same transactions.

Sections Involved

  • Sections 147, 148, 148A, Income Tax Act, 1961
  • Central Goods and Services Tax Act, 2017 — referenced only as the source of the underlying fraudulent-ITC investigation information

Decision – In Favour of

Decided in favour of the Revenue; the writ petition challenging the Section 148A(d) order and the consequential Section 148 notice was dismissed.

Case Details

  • Court: High Court of Judicature at Allahabad
  • Case No.: Writ Tax No. 561 of 2023
  • Neutral Citation: 2023:AHC:102834-DB
  • Coram: Hon'ble Ashwani Kumar Mishra, J. and Hon'ble Shiv Shanker Prasad, J.
  • Date of Judgment: 5 May 2023

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