In a notable development, the Delhi High Court on 3 November 2025 set aside an order issued by the Assistant Commissioner of Income Tax (Circle 25(1), Delhi) against Vedanta Limited, concerning alleged wrongful availment of Input Tax Credit (ITC) worth over ₹424 crore. The court directed the department to reconsider the matter in light of the subsequent GST authority’s order that had already closed the proceedings on similar issues.
The bench of Justice Prathiba M. Singh and Justice Shail Jain heard the matter through hybrid mode, marking yet another instance where the High Court has emphasized procedural fairness under the amended Section 148A of the Income Tax Act, 1961.
Background
The case revolved around transactions during the period when Vedanta’s Tuticorin copper plant was shut due to environmental concerns. Vedanta had entered into four agreements with M/s Xango Trading (India) Pvt. Ltd. for the sale and subsequent repurchase of about 55,000 metric tonnes of copper concentrate.
The Directorate General of GST Intelligence (DGGI), Coimbatore, alleged that the ITC was availed without actual movement of goods. Based on this intelligence, the Income Tax Department issued a notice under Section 148A(1) in March 2025, claiming that more than ₹424 crore had escaped assessment.
Vedanta responded to the notice in April 2025, but the department went ahead and passed an order on 23 June 2025 under Section 148A(3), concluding that it was a fit case for reassessment.
However, in July 2025, the Additional Commissioner of GST and Central Excise, Madurai, closed the proceedings on the same issue - effectively weakening the very foundation of the Income Tax Department’s reassessment order.
Court's Observations
Senior Advocate Pragyan Pradip Sharma, representing Vedanta, argued that since the GST Department had already closed the investigation, the Income Tax reassessment could not be sustained. She further contended that the revised Section 148A, effective from 1 September 2024, required an independent application of mind by the tax officer before issuing any reassessment notice - not a mere mechanical reliance on external reports.
Citing the precedent in Divya Capital One Pvt. Ltd. v. Assistant Commissioner of Income Tax (2022), Sharma pointed out that a reassessment notice without proper reasoning violates procedural safeguards.
On the other side, Standing Counsel Ruchir Bhatia for the Income Tax Department countered that the impugned order was passed before the GST findings came out, and thus the officer could not have considered them. He maintained that the proceedings were in accordance with the law as it stood on the date of issuance.
After hearing both sides, Justice Singh observed,
“The closing of the proceedings by the GST Department would have an impact and bearing on the Section 148A proceedings. Therefore, the matter deserves to be reconsidered.”
The court further clarified that while setting aside the impugned order, it was not ruling on the legality of the reassessment notice itself. That issue, the bench said, may be argued at a later stage if necessary.
Decision
The Delhi High Court set aside the Income Tax order dated 23 June 2025 and remanded the matter back to the assessing officer for fresh consideration, explicitly directing the officer to take into account the GST Department’s order of 11 July 2025.
Vedanta has been given four weeks to submit the GST order and a short note of arguments before the Assistant Commissioner of Income Tax, Circle 25(1), Delhi. The officer, if needed, may call the company for clarifications. A fresh order under Section 148A(3) must now be passed within three months.
The bench concluded by leaving all rights and contentions of both parties open, emphasizing that a reasoned and fair order must follow after due consideration.
Case Title: Vedanta Limited vs. Assistant Commissioner of Income Tax Circle 25(1), Delhi & Ors.
Case Number: W.P.(C) 16378/2025 with CM Applications 67135/2025 & 67136/2025
Date of Decision: 3rd November, 2025
