The Madras High Court has held that an Income-Tax reassessment proceeding cannot simply “ride piggyback” on an adjudication order passed under GST law.
However, the bench of Justice Senthilkumar Ramamoorthy declined to quash a notice issued under Section 148 of the Income-Tax Act, 1961, at the notice stage, observing that the Income-Tax authorities are required to independently comply with the provisions governing reassessment.
The petitioner/assessee approached the Madras High Court under Article 226 of the Constitution challenging the Section 148 notice issued by the Deputy Commissioner of Income Tax, Circle 1(1), Salem.
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The impugned notice was issued on May 27, 2026, under Section 148 of the Income-Tax Act in relation to AY 2023-24. The petitioner sought a writ of certiorari for quashing the reassessment notice.
The principal dispute arose because the Income-Tax proceedings were initiated on the basis of an adjudication order passed under the applicable GST enactments.
According to the petitioner, a GST adjudication order dated February 3, 2025, had already been challenged in appeal and a deemed stay of the adjudication was operating. The petitioner argued that the pendency of the GST appeal was significant because the very basis relied upon for initiating the Income-Tax reassessment remained under challenge.
The petitioner relied upon Section 148A(3) and contended that reassessment could be initiated on the basis of specified information, including an order of a Tribunal or Court, but that an adjudication order passed by a proper officer under GST legislation could not, by itself, constitute the basis contemplated by the statutory framework.
A further argument was that allowing the Income-Tax Department to proceed with reassessment while the GST adjudication order was under appeal could potentially result in conflicting conclusions under the two tax statutes.
The argument therefore raised an important cross-tax question: to what extent can an adjudication under GST law constitute information suggesting escapement of income for the purpose of initiating reassessment under the Income-Tax Act?
The Income-Tax Department defended the reassessment proceedings.
The department pointed out that the petitioner’s objection had already been considered in the order passed under Section 148A(3). It further submitted that Income-Tax authorities were required to undertake reassessment independently and that the reassessment was not necessarily dependent upon or conclusively determined by the GST adjudication.
This distinction ultimately became central to the High Court’s reasoning.
The Court noted that Section 148A(1) makes the existence of information suggesting that income chargeable to tax has escaped assessment a prerequisite for initiating reassessment proceedings.
The Court further noted that the expression “information” is exhaustively defined in Section 148, including information received in accordance with the risk management strategy formulated by the CBDT from time to time.
Significantly, the Court observed that there was nothing on record demonstrating the nature of the CBDT’s risk management strategy or establishing whether such strategy included information in the form of an adjudication order under GST legislation.
The Madras High Court made an important distinction between using information arising from GST proceedings and treating the GST adjudication as determinative of the Income-Tax reassessment.
The Court held that reassessment must be carried out in compliance with the applicable provisions of the Income-Tax Act. The Income-Tax authorities cannot simply rely upon the GST adjudication as a substitute for satisfying the independent statutory requirements under Income-Tax law.
The Court expressed the principle in particularly clear terms by observing that the Income-Tax authorities “cannot ride piggyback on the adjudication under GST law.”
Thus, even if the GST appeal ultimately failed, such rejection could not by itself become the sole basis for conclusions reached during Income-Tax reassessment proceedings. The Court also made clear that the converse would equally apply.
In other words, the outcome of the GST proceedings cannot mechanically dictate the outcome of the Income-Tax proceedings.
Despite making these observations, the Court did not quash the Section 148 notice.
The Court noted that the matter was still at a preliminary stage, where only a notice under Section 148 had been issued. At that stage, the Court was not inclined to interfere with the reassessment proceedings.
The writ petition was therefore disposed of by declining the relief sought by the petitioner.
However, the Court expressly preserved the petitioner’s right to challenge the reassessment order in accordance with law once the reassessment proceedings culminated in an order. The connected miscellaneous petitions were also closed, with no order as to costs.
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