Gujarat HC Quashed Section 148 Notice as Seized Material Had No Link With Assessee

Sagar Mukesh Sheth Vs ITO (Gujarat High Court)

The writ petition before the Gujarat High Court challenged a notice dated 27.03.2026 issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment of the petitioner for Assessment Year 2022-23. The reopening proceedings arose after a search and seizure operation under Section 132A was conducted on Bsafal Group and City Estate Groups, during which certain material relating to alleged cash transactions in real estate dealings around Ahmedabad was seized. The revenue relied upon documents recovered from City Estate Management India, a real estate broker allegedly connected with land transactions involving cash components. A statement of Shri Pravin Nagjibhai Bavadiya recorded under Section 131 was also relied upon in the impugned notice.

The revenue alleged that a loose paper seized during the search referred to Survey No.101 at Moje Shela and mentioned a rate of Rs.17,000 per square yard. Based on this rate, the Assessing Officer calculated the total value of the land at Rs.16,00,11,502 and compared it with the consideration of Rs.2,00,00,000 reflected in the sale deed executed by the petitioner on 12.10.2021. The differential amount was treated as alleged “on-money” paid in cash, forming the basis for reopening the assessment.

The petitioner argued that the seized material had no nexus with the transaction undertaken by him. It was submitted that the petitioner purchased non-agricultural land on 12.10.2021 entirely through banking channels and had no connection with any transaction dated 11.08.2017 mentioned in the loose paper. According to the petitioner, the seized material was wholly unrelated, vague, and incapable of establishing any live link between the petitioner and the alleged cash transaction. It was also submitted that the petitioner had no dealings with Bsafal Group, City Estate Management India, or City Procon Realtors Private Limited. The petitioner contended that the land was purchased for Rs.2 crore and that all payments were duly recorded and routed through legitimate banking channels.

The petitioner further relied upon the judgment of the Gujarat High Court in Naliniben Jagdishkumar Gandhi v. Income Tax Officer to support the argument that reopening could not be sustained in the absence of a live link between the seized material and the assessee.

Opposing the petition, the revenue argued that Explanation 2(iv) to Section 148 used the broad expressions “pertains to” and “relates to,” and therefore it was not necessary that the seized information should directly belong to the assessee. Reliance was placed on Supreme Court decisions in Raymond Woollen Mills Ltd. v. Income-tax Officer and Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. to contend that at the stage of reopening, the only requirement was existence of prima facie material on which a reasonable person could form a belief that income had escaped assessment. The revenue also relied upon the Supreme Court decision in Anshul Jain v. Principal Commissioner of Income-tax, contending that the seized documents were not “dumb documents” and contained material revealing a link between the petitioner and land dealings involving alleged on-money payments.

After hearing both sides, the High Court examined the seized material and the statement of Shri Bavadiya. The Court noted that the loose paper relied upon by the revenue was dated 11.08.2017, whereas the petitioner purchased the land only on 12.10.2021, nearly four years later. The Court observed that the chit did not contain the petitioner’s name or any identifiable details directly connecting him with the alleged cash transaction. The linkage sought to be established by the revenue was based only on information collected from the government website “Any RoR,” which reflected sale deed details corresponding to the survey number mentioned in the loose paper.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

1. RULE returnable forthwith. Learned Senior Standing Counsel Mr.Maunil Yajnik, waives service of notice of rule for respondents.

2. The present writ petition has been filed challenging the notice issued under Section 148 of the Income Tax Act, 1961 (for short, “the Act”) dated 27.03.2026.

3. The petitioner filed his return of income for Assessment Year 2022-23. It appears that a search and seizure was conducted on Bsafal Group and City Estate Groups under 132A of the Act and some material was collected in such search and during the course of search, it was found that M/s.City Estate Management India, a Real Estate Broker, is providing broking service to Bsafal Group.

4. It is alleged that the cash transactions in real estate was being done by selling various lands/plots etc. in and around Ahmedabad city. The details of address, name of person, survey numbers of the land in question and the market rate of property were unearthed during such proceedings. Post search, the statement of one Shri Pravin Nagjibhai Bavadiya was recorded by the revenue, the relevant extract of the statement recorded under Section 131 of the Act dated 27.12.2021 is incorporated in the impugned notice. Based on such material, the revenue has reopened the assessment by issuing the notice under Section 148 of the Act.

5. Learned Senior Advocate Mr.Soparkar, appearing with learned advocate Mr.Manya Anjaria, for the petitioner has submitted that the seized material has no nexus with the transaction carried out by the petitioner. It is submitted that the respondent has relied upon seized material referring to a sale deed dated 12.10.2021 and has adopted a rate of Rs.17,000/- per sq. yard solely from the loose paper and on that basis to concluded the property rate at Rs.16,00,11,502/-, hence a huge amount of on-money was paid in cash.

6. It is further submitted that the petitioner purchased the land on 12.10.2021, which was non-agricultural land, and that the respondent- authority has relied upon wholly irrelevant and incorrect facts, as the petitioner had no transaction dated 11.08.2017. Hence, the seized material has no nexus with the petitioner, and the entire payment for the land purchased on 12.10.2021 was made through banking channels.

7. It is submitted that the petitioner had not entered into any transaction with Bsafal Group, City Estate Management India, or City Procon Realtors Private Limited. The petitioner had purchased the parcel of agricultural land situated at Shela during the year under consideration. The said land was purchased for a total consideration of Rs.2,00,00,000/-.

8. It is further submitted that the seized material is dated 11.08.2017, whereas the petitioner purcahsed the non­agricultural land on 12.10.2021, which is subsequent to the date reflected in the seized material. Thus, the petitioner has no connection whatsoever with the said material, and there is no live link between the seized material and the petitioner.

9. In support of his submissions, learned Senior Advocate Mr.Soparkar, has placed reliance on the judgment of this Court in the case of Naliniben Jagdishkumar Gandhi vs. Income Tax Officer, (2026) 183 com 126 (Gujarat).

10. Vehemently opposing the present writ petition, the submissions advanced as recorded here-in-above, the learned Senior Standing Counsel Mr. Maunil Yajnik has submitted that as per the provisions of Section 148 of the Act, more particularly Clause 4 below Explanation 2, it cannot be said that the information, which is unearthed during the search proceedings from the concerned broker, does not pertain or pertains to any information contained therein relates to the assessee.

11. It is submitted that the legislature has deliberately used the expansive phrases “pertains to” and “relate to”. Unlike the stringent requirement of “belongs to” under the erstwhile Section 153C of the Act regime and hence, as per the decision of the Supreme Court in the case of Raymond Woollen Mills Limited Vs. Income-tax Officer, [1999] 236 ITR page 34 (SC), the revenue has only to see whether there was a prima facie some material on the basis of which the department could reopen the case and the sufficiency or correctness of the material is not a thing to be considered at the stage of issuance of notice.

12. Further reliance is also placed by learned Senior Standing Counsel Mr.Maunil Yajnik on the decision of the Supreme Court in the case of Assistant Commissioner of Income-tax vs. Rajesh Jhaveri Stock Brokers (P.) Ltd., [2007] 291 ITR 500 (SC) and it is submitted that the only question which is required to be examined at the stage of issuance of notice is whether there was relevant material on which a reasonable person could have formed a requisite belief.

13. Reliance is also placed on the decision of the Supreme Court in the case of Anshul Jain vs. Principal Commissioner of Income-tax,[2022] 143 com 38 (SC). It is submitted that in the present case, the documents / incriminating material which have been recovered during the search proceeding, cannot be said to be dumb documents, devoid of any evidential value. It is submitted that the material which was seized specifically mentions the names of the brokers or third parties and the same reveal the link between the petitioner and the land dealing, by paying the on- money. Thus, it is urged that, at this stage, the Court may not interfere with the reopening of the assessment.

14. We have heard the learned advocates appearing for the respective parties at length.

15. A search under Section 132 of the Act was conducted on Bsafal Group and City Estate Group on 28.09.2021 and during the search, it is the case of the revenue that incriminating documents and digital data were seized. Post search, a statement of one Shri Pravin Nagjibhai Bavadia was recorded after he was confronted with the documents found and seized from the premise of the City Estate Management, which is a broker, dealing with land deals in the city of Ahmedabad. Statement under Section 131 of the Act of Shri Pravin Nagjibhai Bavadiya are incorporated in the impugned notice. A specific question No.14, was asked to him with regard to the documents found during the search and in response, he has submitted that ‘/ confirm that the documents were found and seized from the premises of the propriety entity City Estate Management’ It is further responded by him that sometimes the clients come with their land documents or title deeds and there might be such types of documents which are also seized with the above annexures and these belonged to the clients and not to him. Question No. 26, when he was confronted with the annexures, he has referred that such annexure contained the details of lands/plots available for sale at different locations of Ahmedabad and each entry contains the details of land, location, village, taluka, survey number, area, rate, owner of the land, etc., and he doesn’t know the current status regarding the sale of the land. From the seized material, a loose paper chit was found, which makes reference to Survey No.101 situated at Moje Shela, which was purchased by the petitioner on 12.10.2021. The relevant contents of the said chit are as under:

16. Thus, the Assessing Officer, after calculating the amount per square yard on the basis of the figures referred to in the chit, concluded that the total value was Rs.16,00,11,502/-. By comparing the said amount with the sale consideration of Rs.2,00,00,000/- reflected in the sale deed dated 12.10.2021, it was further concluded that the differential amount had been paid in cash as “on-money”. The respondent has, however, not established any connection.

17. A bare perusal of the chit reveals that it does not contain any names or identifiable figures, and the same is dated 11.08.2017. After a gap of almost four years, the petitioner purchased the land vide sale deed dated 12.10.2021. We fail to understand how the Assessing Officer has alleged payment of “on-money” by the petitioner after four years, by arriving at a rate of Rs.17,000/- per square yard. The entire calculation appears to have been made on the basis of data collected from “Any RoR”, a Government website reflecting details of sale deeds. The respondents have also not disputed that the transaction undertaken by the petitioner was in accordance with his share. The survey number mentioned in the loose paper is linked with the petitioner by the revenue by gathering information from the government Website “Any RoR”, which records the details of the sale deeds. It is true that the cash transactions are done in a clandestine manner using coded script, however, the revenue, before re-opening the assessment has to establish a live link of the assessee on the basis of seized material only. The expression ” relates to” and “pertains to” used in Clause(iv) to Explanation 2 to Section 148 of the Act cannot be used in vacuum. The revenue after the seizure of incriminating material is under an obligation to analyze such material, in light of attendant circumstances and record relevancy and a prima facie opinion linking such material establishing escapement of income at the hands of the assessee. The information which is derived from the incriminating material in the instant case, does not establish live-link. The information is absolutely vague and unspecific and the rate mentioned in the loose-paper is attempted to be imposed upon the petitioner after a period of four years on the basis of sale deed registered on 12.10.2021. The statement of Shri Bavadiya does not mention the name of the petitioner. There is no link, even remotely, found with Bsafal Group or City Estate Management India or City Procon Realtors Private Limited. All these aspects are very relevant, and are required to be examined before roping the petitioner in re-assessment. Thus, in our considered opinion, the provisions of Section 148 of the Act are not attracted, hence the action of the respondents in re-opening of the assessment requires to be quashed.

18. We are conscious about the legal precedent as set out by the Supreme Court in the decisions which are cited by the revenue. At the stage of notice of re-opening of the assessment, albeit, the Court cannot go into the sufficiency of evidence, however, simultaneously the Court has to examine the aspect as to whether there is even prima facie some material, which could enable the department to reopen the assessment. In the present case, the reopening is based on a vague, irrelevant, and non-specific information.

19. The writ petition, accordingly, succeeds. The impugned notice under Section 148 of the Act dated 27.03.2026 is quashed and set aside. Rule made absolute.