Gujarat High Court

Gayatri Cotton Private Limited (Pan ... vs Ito Ward 1(2) on 16 September, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                           C/SCA/5854/2024                                   JUDGMENT DATED: 16/09/2025

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                                   IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                     R/SPECIAL CIVIL APPLICATION NO. 5854 of 2024


                      FOR APPROVAL AND SIGNATURE:


                      HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                      and
                      HONOURABLE MR. JUSTICE PRANAV TRIVEDI
                      ==========================================================

                                   Approved for Reporting                  Yes             No
                                                                                       ✔
                      ==========================================================
                         GAYATRI COTTON PRIVATE LIMITED (PAN AADCG0019P) THRO ITS
                                                DIRECTOR
                                                  Versus
                                              ITO WARD 1(2)
                      ==========================================================
                      Appearance:
                      MR SN DIVATIA(1378) for the Petitioner(s) No. 1
                      MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
                      NOTICE SERVED for the Respondent(s) No. 1
                      ==========================================================

                         CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                               and
                               HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                                                       Date : 16/09/2025

                                            ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)

1. Heard learned advocate Mr. S.N. Divatia

for the petitioner and learned Senior Standing

Counsel Mr. Varun Patel for the respondent.

2. Rule, returnable forthwith. Learned Senior

Standing Counsel Mr. Varun Patel waives

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service of notice of rule for and on behalf of

the respondent.

3. Having regard to the controversy involved

in this petition, with the consent of the

learned advocates for the respective parties,

the matter is taken up for final hearing.

4. By way of present petition under Article

226 of the Constitution of India, the

petitioner challenges the validity of the

Assessment Order passed by the respondent

under Section 143(3) read with Section 144B of

the Income Tax Act, 1961 (For short 'the Act')

on 22.3.2024 for the Assessment Year 2022-23

whereby the respondent has assessed the total

income of the petitioner at Rs.49,54,76,100/-.

5. Brief facts giving rise to present

petition are as under:

5.1 The Petitioner is a duly incorporated

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limited liability company and engaged in the

business of cotton ginning and pressing unit.

The Petitioner maintains regular books of

accounts & other records which is subject to

statutory as well as tax audit. The petitioner

had filed its return of income for A.Y. 2022-

23 on 04.11.2022 declaring total income of Rs.

16,87,700/-. The return of income was

processed u/s.143(1) of the Act. Thereafter,

the case of the petitioner was selected for

scrutiny on issues of substantial payment to

non-GST entities, high liabilities compared to

low income/receipts and directors in the

company whose registration has been cancelled

by MCA.

5.2 It is the case of the petitioner that

during the course of assessment proceedings,

the respondent issued notices for hearing and

asking for the details/explanation from time

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to time. The respondent issued notice under

Section 143(2) of the Act on 1.6.2023 stating

that the case of the petitioner was selected

for scrutiny under Computer Assisted Scrutiny

Selection (CASS). The petitioner states that

it was a formal notice of jurisdiction. The

respondent, thereafter, issued notice under

Section 142(1) of the Act on 16.10.2023 and

the petitioner sought adjournment vide

response uploaded on 30.10.2023. The details

were filed on 11.11.2023 and the case was

adjourned to 14.11.2023. Thereafter, the

respondent issued another Notice under Section

142(1) of the Act on 30.1.2024 and the

petitioner again sought adjournment vide

response uploaded on 24.2.2024. Another notice

under Section 142(1) was issued by the

respondent on 14.2.2024 and the petitioner

uploaded the response on 24.2.2024. The

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respondent issued another notice under Section

142(1) of the Act on 26.2.2024 and the

petitioner uploaded the response on 4.3.2024.

Thereafter, show-cause notice-cum-draft

Assessment Order was issued on 5.3.2024

seeking response on or before 11.3.2024

wherein the petitioner was asked to show cause

as to why addition in income should not be

made. However, the petitioner in reply to the

aforesaid show-cause notice filed reply dated

11.3.2024 and sought adjournment. The final

impugned order of assessment was passed by the

respondent on 22.03.2024 determining the total

income at Rs.49,54,76,100/- wherein the

Assessment Officer made addition of

Rs.49,37,88,400/- towards alleged bogus

purchases and disallowance under Section

40A(3) of the Act.

5.3 It is the case of the petitioner that the

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Respondent had uploaded SCN cum draft

assessment order on 05.03.2024 at 19:22 IST

asking the response to be submitted by 11:00

hours of 11/03/2024. The respondent in the SCN

had proposed that the total purchases from

unregistered persons amounted to Rs.

49,37,88,400/- and by applying GST rate at 5%

on such purchases, the ITC claim of Rs.

2,46,89,420/- on the supplies received from

unregistered parties was not genuine. The

respondent further observed that since the

total purchases from unregistered persons as

per detail of purchases in cash and through

banking channels was Rs. 51,19,98,599/-, the

balance purchases of Rs. 1,82,10,199/-were

cash purchases from farmers which was to be

treated as bogus. The respondent further

observed that the purchases to the extent of

Rs. 47,55,78,201/- (reducing the bogus

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purchases of Rs. 1,82,10,199/- from the total

purchases of Rs. 49,37,88,400/-) were paid in

cash in contravention of Sec.40A(3) of the

Act.

5.4 It is the case of the petitioner that

since the response to be given to the show

cause notice required many details, documents

and evidence to be gathered and furnished

which would take considerable time, the

petitioner had sought adjournment upto

24.03.2024.



                      5.5         Thereafter,                the           petitioner                received

                      message                        by             email                  from                    ID

[email protected] on the Tax

Consultant Shri JH Godani, that the request

seeking adjournment was successfully

submitted.

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5.6 The Petitioner states that before any

response could be given to the show cause

notice, the respondent completed the

assessment proceedings by passing the impugned

order dated 22.03.2024 during the period of

adjournment.

6. Learned advocate Mr. S.N. Divatia for the

petitioner submitted that an adjournment was

sought on 11.3.2024 to file reply to the show-

cause notice, however, the Assessing Officer

granted time of only two days i.e. upto

13.3.2024 for filing the reply and such

extension was never informed to the

petitioner. Therefore, the impugned order is

without jurisdiction and in gross violation of

principles of natural justice.

7. Per contra, learned Senior Standing

Counsel Mr. Varun Patel has conceded to the

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fact that 'e-proceedings' downloaded from

Income-tax Portal indicated that in response

to the adjournment request on 11.3.2024, no

communication has been made to the petitioner

and the respondent has passed finalised

Assessment Order on 22.3.2024 as stated in

affidavit-in-rejoinder. For perusal, para-3.4

of the rejoinder is reproduced hereinbelow:

"3.4 I say and submit that the contents of para-8 of the said affidavit are denied in toto. The Petitioner denies the contention of the Respondent that the adjournment was granted through e- proceedings from 11.03.2024 to 13.03.2024. The petitioner submits that the perusal of "view notices for e- proceedings" as downloaded from income- tax portal of the petitioner company clearly indicates that after issuance of notice on 05.03.2024 fixing the response on 11.03.2024, no communication has been made to the petitioner and the respondent has finalized the assessment by order u/s 143(3) on 22.03.2024. Annexed hereto and Marked as "G" is the "view notices for e-proceedings" as downloaded from income-tax portal of the petitioner company. The petitioner submits that even on perusal of the extract annexed with the said affidavit at page-45 also indicate that the

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chronology of the alleged notices are not in consonance with the claim of the respondent."

8. In view of the same, it cannot be disputed

that the impugned order is passed in clear

breach and violation of principles of natural

justice and, therefore, is de hors the settled

principles of law. Therefore, without entering

into merits only on this ground, the impugned

order dated 22.3.2024 for the Assessment Year

2022-23 passed under Section 143(3) read with

Section 144B of the Act is hereby quashed and

set-aside and the matter is remanded to

respondent-Assessing Officer to pass a fresh

de-nova order, in accordance with law after