Reassessment Based on Investigation Wing Report Without Fresh Tangible Material Amounts to Change of Opinion: Gujarat High Court

Case Overview

Case Name: Hiramoti Texchem Pvt. Ltd. Vs ITO (Gujarat High Court)
Appeal Number: R/Special Civil Application No. 22517 of 2019
Date of Order: 27/07/2026
Court: Gujarat High Court

Background of the Case

The Gujarat High Court, in the matter of Hiramoti Texchem Pvt. Ltd. Vs ITO, dealt with a significant question concerning the validity of reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961. The writ petition challenged a reassessment notice dated 28.03.2019, which sought to reopen the assessment for Assessment Year 2012-13.

The assessee had originally filed its return of income on 28.09.2012, declaring a total income of Rs. 20,15,440/-. The said return was taken up for scrutiny, and an assessment order under Section 143(3) of the Income Tax Act, 1961 was passed on 09.12.2014, which confirmed the returned income at Rs. 20,15,440/- — the same figure as declared by the assessee. No additions or modifications were made at the time of original scrutiny assessment.

Trigger for Reassessment

Several years after the completion of the original scrutiny assessment, the Assessing Officer issued the impugned notice under Section 148 of the Income Tax Act, 1961 on 28.03.2019, seeking to reopen the assessment. The reasons for reopening were formally communicated to the assessee vide a letter dated 02.05.2019.

The basis for reopening was an investigation report received from the ADIT (Investigation), which raised concerns regarding the assessee's transactions with M/s. Manibhadra Textile Company, a proprietorship concern owned by Shri Bhavesh Sureshchandra Shah. The investigation had revealed that the bank account of M/s. Manibhadra Textile Company had received credits from three entities, including the petitioner-assessee. Following these credits, the proprietor had allegedly withdrawn amounts through self-cheques and cash.

The assessee had deposited Rs. 95,26,354/- in the bank account of M/s. Manibhadra Textile Company. The Department treated this as a high-value transaction that was allegedly disproportionate to the assessee's returned income, forming the primary basis for triggering reassessment.

Objections Filed by the Assessee

Upon receipt of the reasons for reopening, the assessee filed detailed objections on 04.12.2019 and 06.12.2019, requesting the Assessing Officer to drop the reassessment proceedings. These objections were disposed of by the respondent vide letter dated 11.12.2019.

The assessee raised the following grounds in its objections: