Gujarat High Court on STR-Triggered Reassessment: Suspicion Without Supporting Material Is Not Enough

Background of the Dispute

In Rajesh Sunderdas Vaswani Vs DCIT (Gujarat High Court), decided on 27/07/2026 in R/Special Civil Application No. 15090 of 2025, the Gujarat High Court examined the legality of a reassessment initiated solely on the basis of a Suspicious Transaction Report (STR) flagged on the Insight portal.

Two writ petitions involving identical legal issues were heard together. Special Civil Application No. 15090 of 2025 was treated as the lead matter. The controversy centred around the reopening of assessment for Assessment Year 2020-21 under the scheme of Section 147, Section 148, and Section 148A of the Income Tax Act, 1961.

The petitioner was:

  • A partner in M/s. Sundaram Landscape LLP; and
  • The sole proprietor of M/s. Sundardeep Builders.

The assessee assailed:

  • Show cause notice dated 26.06.2025 issued under Section 148; and
  • Order dated 26.06.2025 passed under Section 148A(3) for A.Y. 2020–21.

These impugned actions followed an earlier show cause notice dated 15.03.2025 issued under Section 148A(1) based on STR information routed through the Insight portal.

Origin of the Proceedings: STR and Insight Portal

The Revenue authorities initiated proceedings after an STR, flagged on the Insight portal, highlighted transactions in the ICICI Bank accounts of:

  • M/s. Sundaram Landscape LLP (partnership firm in which the petitioner was a partner), and
  • M/s. Sundardeep Builders (proprietorship concern of the petitioner).

As per the material referred to in the judgment:

  • The ICICI Bank account of M/s. Sundaram Landscape LLP showed transactions aggregating Rs.45.50 crores.
  • The account of M/s. Sundardeep Builders reflected transactions totalling Rs.499.65 crores.

On this basis, a show cause notice under Section 148A(1) dated 15.03.2025 was issued, calling upon the assessee to explain why notice under Section 148 for reassessment should not be issued for A.Y. 2020-21.

Assessee’s Responses and Compliance

Prior to the Section 148A(1) proceedings, the Investigation Wing had invoked Section 131(1A) and issued a summon to the petitioner. In response, on 05.02.2025, the assessee furnished a comprehensive reply along with supporting financial documentation, including:

  • Audit reports;
  • Balance sheets;
  • Profit and loss accounts; and
  • Other financial and supporting records.

Subsequently, in response to the show cause notice dated 15.03.2025 under Section 148A(1), the assessee submitted detailed replies on:

  • 09.04.2025;
  • 18.04.2025; and
  • 10.06.2025.

The material placed before the authorities, as recorded in the judgment, included:

  • Audit report and financial statements of the assessee;
  • Bank book for all bank accounts;
  • Cash book;
  • Ledgers of all relevant parties with whom transactions had been undertaken through the bank accounts under scrutiny; and
  • Books of account of M/s. Sundardeep Builders such as cash book, bank book, and financial statements.

The assessee’s stand was that all transactions were genuine, duly disclosed, and properly reflected in the regular books of account of the partnership firm and the proprietorship concern.

Revenue’s Findings and Reassessment Proposal

By order dated 26.06.2025 passed under Section 148A(3), the Revenue concluded that:

“There is escapement of income chargeable to tax to the tune of Rs. 499,65,23,000/-.”

This figure, as recorded in the judgment, was pegged entirely with reference to the bank transactions of M/s. Sundardeep Builders, the assessee’s proprietorship concern. It did not relate to transactions specifically with M/s. Sundaram Landscape LLP.

In the impugned order under Section 148A(3), the Revenue observed that the assessee had not produced any material or documentary evidence to substantiate the nature and genuineness of the transactions appearing in the bank account.