Delhi High Court Quashes ₹424-Crore Reassessment Against Vedanta; Orders Fresh Review After GST Department Drops ITC Fraud Case
Pranav B Prem
The Delhi High Court has set aside the reassessment order passed by the Assistant Commissioner of Income Tax, Circle 25(1), Delhi, against Vedanta Limited, in connection with alleged fraudulent availment of Input Tax Credit (ITC) worth over ₹424 crore. The Court directed that the matter be reconsidered by the tax authorities, taking into account the subsequent closure of related proceedings by the Goods and Services Tax (GST) Department.
A Division Bench of Justice Prathiba M. Singh and Justice Shail Jain delivered the order on November 3, 2025, while hearing W.P.(C) 16378/2025, a writ petition filed by Vedanta under Articles 226 and 227 of the Constitution of India challenging the Income Tax Department’s actions under Section 148A of the Income Tax Act, 1961, for the Assessment Year 2019–2020.
The Income Tax Department had received intelligence from the Directorate General of GST Intelligence (DGGI), Coimbatore Zonal Unit, alleging that Vedanta had wrongfully availed ITC without the actual receipt of goods at its declared business premises. The department’s case revolved around transactions made by Vedanta with M/s Xango Trading (India) Pvt. Ltd., involving the sale and repurchase of approximately 55,000 metric tonnes of copper concentrate during the period when Vedanta’s copper plant at Tuticorin remained closed due to environmental concerns.
It was alleged that the said transaction resulted in bogus ITC of over ₹424 crore. On this basis, the Income Tax Department issued a notice under Section 148A(1) on March 24, 2025, followed by a reassessment order under Section 148A(3) on June 23, 2025, holding that income of ₹424.58 crore had escaped assessment. The order stated that this was a fit case for issuance of notice under Section 148, being covered under Section 149(1)(b) of the Act, as the escaped income exceeded ₹50 lakh.
Vedanta’s counsel, Senior Advocate Ms. Pragyan Pradip Sharma, argued that the very foundation of the reassessment proceedings was the alleged wrongful ITC transaction, which had already been adjudicated by the Additional Commissioner, GST and Central Excise, Madurai, through an order dated July 11, 2025, whereby the proceedings regarding ITC availment were closed. It was contended that since the GST Department had concluded that no fraudulent ITC claim was established, the Income Tax Department’s reliance on the same allegations was untenable in law.
In response, Senior Standing Counsel Mr. Ruchir Bhatia, appearing for the Income Tax Department, submitted that the reassessment order preceded the GST Department’s decision and that the concerned officer was unaware of the subsequent closure of the GST proceedings. The department further argued that the reassessment action was in accordance with the amended provisions of Section 148A, which came into effect on September 1, 2024, under the Finance Act, 2025, and that procedural requirements were duly followed.
After examining the record, the High Court noted that the impugned reassessment order had been passed before the GST Department’s closure order. However, the Court held that the subsequent closure of the GST proceedings would have a direct bearing on the validity of the reassessment action, since both proceedings arose from the same factual basis. The Bench observed: “The closing of the proceedings by the GST Department would have an impact and bearing on the Section 148A proceedings and, therefore, this Court is of the opinion that the impugned order deserves to be set aside, and the matter deserves to be remanded for reconsideration, in view of the GST order dated 11th July, 2025.”
Consequently, the Court set aside the impugned order dated June 23, 2025, and remanded the matter to the Assistant Commissioner of Income Tax, Circle 25(1), for fresh consideration in light of the GST Department’s findings. The Bench directed Vedanta to submit a copy of the GST order, along with a brief note of submissions, to the assessing officer within four weeks, and instructed the officer to pass a fresh reasoned order under Section 148A(3) within three months thereafter.
While leaving all rights and contentions of both parties open, the Court clarified that Vedanta would be entitled to raise any additional objections regarding the legality of the reassessment notice at a later stage, should the need arise.
In its closing remarks, the Bench emphasized the need for inter-departmental coordination between revenue authorities, observing that parallel proceedings based on identical allegations may lead to duplicative or inconsistent outcomes. The judgment underscores that findings of one statutory authority, such as the GST Department, cannot be ignored when forming the basis for reassessment under the Income Tax Act. The petition was accordingly disposed of with the above directions, granting Vedanta relief from the impugned reassessment order while allowing the Income Tax Department an opportunity to reconsider the issue in light of the GST adjudication.
Cause Title: M/s Vedanta Ltd v. ACIT Delhi
Case No: W.P.(C) 16378/2025
Citation: 2025:DHC:9714-DB
Coram: Justice Prathiba M. Singh, Justice Shail Jain
