Revenue Challenges Gujarat HC Order on Reopening Income Tax Assessment Based on External Trading Data Before Supreme Court [Read Order]

The Revenue approached the Supreme Court challenging a Gujarat High Court judgment that quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961, on the ground that the Assessing Officer relied only on external trading data from the National Spot Exchange Limited and ignored the taxpayer’s objections.

The case arose from a notice dated 20 March 2020 reopening the Chandrika Dhansukhlal Gandhi’s assessment for the year 2013-14. The Assessing Officer relied on information received from the Directorate of Investigation, Surat, which stated that the petitioner had traded with Euro Asia Infracon Pvt. Ltd. through broker Twenty20 Commodities Pvt. Ltd. on the National Spot Exchange Limited, with transactions worth over Rs. 34 crore.

The Officer formed the belief that such turnover did not match the income declared by the petitioner, which was Rs. 5,98,540, and treated the difference as unexplained investment.

The petitioner’s counsel denied the allegation and explained that she never traded through Twenty20 Commodities. Instead, her trades were conducted through K.R. Choksey Commodity Brokers Pvt. Ltd. and its sub-broker, Babulal Hiralal & Company.

The petitioner’s counsel submitted that all profits were accounted for in her books of accounts and already offered to tax in her return of income. They argued that the Assessing Officer brushed aside these objections without any proper examination and simply repeated the information received from outside sources.

The Revenue’s counsel argued that the Assessing Officer had credible information from NSEL records and the Directorate of Investigation and that the petitioner would have full opportunity to place her case during the reassessment proceedings. They also argued that the reopening was valid and based on tangible material.

The Division Bench of Justice Bhargav D. Karia and Justice Mauna M. Bhatt observed that the objections raised by the petitioner were not considered in detail and were dismissed routinely. The court explained that the purpose of filing objections under GKN Driveshafts India Ltd. was to ensure that taxpayers are given a fair hearing and that reassessment proceedings are not initiated without proper justification.

It pointed out that in this case, the Assessing Officer had merely relied on external information without independently verifying the petitioner’s explanation. The High Court held that the notice issued under Section 148 could not be sustained as it was based only on external trading data and the objections of the taxpayer were ignored.

The Court quashed and set aside the notice dated 20 March 2020. The petition was accordingly allowed.

The Revenue has approached the Supreme Court of India in Special Leave Petition (Civil) Diary No. 40313/2025, where a Bench of Justice Manoj Misra and Justice Ujjal Bhuyan issued notice on the petition as well as on the application for condonation of delay, returnable in six weeks.

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