Insight Portal Screenshots Without Underlying Material Can't Sustain Reassessment: Gujarat High Court

The Gujarat High Court on 7 September held that reassessment proceedings cannot be sustained where the Revenue relies merely on screenshots from the Insight Portal without furnishing the underlying reports and material allegedly linking the taxpayer to accommodation transactions.

A Division Bench comprising Justices A.S. Supehia and Vaibhavi D. Nanavati quashed the reassessment proceedings against Jyoti CNC Automation Ltd., finding that the notice issued under Section 148A(1) of the Income Tax Act, 1961 did not provide sufficient particulars to enable the taxpayer to effectively respond to the allegations. It observed:

“The mere reproduction of the transactions and the screenshots of the Case Related Information Detail pertaining to the three entities cannot, in our considered opinion, satisfy the statutory requirement under Section 148A(1) of the Act. The opportunity of hearing contemplated under the provision is not an empty formality. Where the Revenue proposes to reopen an assessment on the basis of information alleging fictitious or accommodation transactions, the assessee must be furnished with sufficient particulars of the material relied upon so as to enable it to effectively controvert the allegation.”

Jyoti CNC Automation Ltd., which manufactures CNC machines, had filed its return for Assessment Year 2019-20 declaring total income of Rs.45.05 crore. The return was processed under Section 143(1), determining the total income at Rs.45.20 crore. The assessment was subsequently reopened in 2023 based on information alleging that the company was a beneficiary of an accommodation entry.

Thereafter, the Revenue issued a fresh notice dated 30 March 2025 under Section 148A(1), alleging escapement of income amounting to Rs.27.46 crore. The notice was accompanied by screenshots containing Case Related Information Details from the Insight Portal.

However, the underlying documents referred to in the screenshots were not supplied. The alleged escaped income was quantified under three categories: purchases of Rs.1.18 crore, other transactions of Rs.24.15 crore and other transactions of Rs.2.11 crore.

The screenshots concerned three entities: Harshvardhan Commercials LLP, Arco Trading Est LLP and Blue Cross Commodities Pvt. Ltd. They merely contained PAN numbers and information values, while the dissemination reports referred to in the material were not furnished along with the notice. The notice also did not furnish the names of the parties involved or the basic particulars and nature of the alleged transactions.

The taxpayer submitted a detailed response, producing ledger accounts, sales invoices, bank statements and other documents relating to the transactions. It also specifically pointed out that the dissemination reports and underlying information had not been supplied.

The High Court found that the Assessing Officer, while passing the order under Section 148A(3), had not demonstrated independent application of mind to the dissemination reports or identified the specific material connecting the taxpayer with the alleged fictitious or accommodation transactions.

It held that the material relied upon by the Revenue had to be furnished at the Section 148A(1) stage so that the taxpayer could meaningfully respond to the allegations. It found that the notice lacked the material particulars and underlying documents forming the basis of the alleged escapement of income.

Further, the Bench held that the defect could not be cured by supplying the material subsequently during the writ proceedings. The Revenue had an opportunity to furnish the relevant material when the notice under Section 148A(1) was issued, and the failure to do so went to the foundation of the reassessment proceedings.

The judges therefore quashed the notice dated 30 March 2025 under Section 148A(1), the consequential order dated 28 June 2025 under Section 148A(3), and the notice issued under Section 148.

Accordingly, the High Court allowed the writ petition and made the Rule absolute.

Counsel for the Petitioner: B.S. Soparkar

Counsel for the Respondent: Maunil G. Yajnik