The Gujarat High Court has stepped in to stop what it described as an overreach by the Income Tax Department, setting aside reassessment proceedings initiated against an Ahmedabad-based businessman for the Assessment Year 2019–20. The court held that mere high-value bank transactions, without concrete material showing income escaping tax, cannot justify reopening an assessment.
Background of the Case
The case arose from a writ petition filed by Mukesh Manubhai Shah, who had challenged a notice issued under Section 148A(1) of the Income Tax Act, along with the consequential reassessment notice dated June 19, 2025.
Shah had filed his return for AY 2019–20 declaring an income of ₹33.98 lakh. Years later, the tax department received information from State Bank of India indicating debit and credit transactions totalling ₹37.40 crore during the relevant financial year. Based solely on this data, the Assessing Officer initiated proceedings to reopen the completed assessment.
During earlier summons and replies, Shah had consistently maintained that all transactions were routed through banking channels and involved loans and repayments between identified parties.
What the Tax Department Argued
The revenue authorities defended the reopening by stating that the information flagged by the bank formed part of a risk management strategy. They argued that the magnitude of the transactions required deeper scrutiny to verify whether income had escaped assessment.
The department also claimed that since Shah did not maintain personal books of account, further verification was necessary. It suggested that the reassessment stage was the appropriate forum to examine the genuineness of the transactions.
Court’s Observations
A division bench comprising Justice A.S. Supehia and Justice Pranav Trivedi was not persuaded.
After examining the record, the bench noted that the entire basis for reopening rested only on aggregated debit and credit figures supplied by the bank. There was no allegation of cash deposits, bogus entries, or unaccounted income.
“The genesis of the notice lies only in the debit and credit entries supplied by the bank,” the court observed, adding that the petitioner had already furnished party-wise details, PAN numbers, and explanations for each transaction.
The judges stressed that Section 148A permits reopening only when there is information suggesting income chargeable to tax has escaped assessment, not for conducting fishing or roving inquiries.
Relying on earlier precedent, the bench remarked that the Assessing Officer is duty-bound to verify the information before invoking reassessment provisions and cannot mechanically proceed on raw data.
Final Decision
Concluding that the Assessing Officer had travelled beyond the scope of Section 148A(1), the Gujarat High Court allowed the writ petition. The court quashed the notice dated March 30, 2025, the order dated June 19, 2025, and the consequential reassessment proceedings for AY 2019–20, bringing the matter to a close without imposing costs
Case Title: Mukesh Manubhai Shah v. Assistant Commissioner of Income Tax, Circle-1(1)(1), Ahmedabad
Case Number: R/Special Civil Application No. 11102 of 2025
