In a significant ruling, the Gujarat High Court has quashed a tax demand issued against Grasim Industries Ltd., citing lack of due diligence and improper application of mind by the income tax department. The judgment came in the matter titled Grasim Industries Ltd. vs. Union of India & Ors., under R/Special Civil Application No. 10441 of 2024.
The court observed that the tax authorities later admitted—via a compliance report and affidavit—that the discrepancy in financial figures was due to a data entry error, not any form of tax evasion or illegality by the company. This crucial fact, however, was overlooked while issuing the original tax demand and also during the rectification proceedings.
The High Court strongly criticized the department for acting against the documentary evidence available on record, thereby creating an unwarranted financial burden on the petitioner. It declared the original assessment order and the subsequent rejection of rectification as invalid and devoid of legal merit.
Taking a stern view of the department’s conduct, the court ordered the Income Tax Department to pay a token cost of ₹1 lakh to the Gujarat State Legal Services Authority. This cost was imposed to acknowledge the inconvenience and litigation burden unfairly imposed on the taxpayer.
The writ petition was accordingly disposed of, with a clear message that arbitrary or careless actions by revenue authorities will not be tolerated by the judiciary.