Case Law Details
Naveenchandra Prahladbhai Patel Vs ITO (Gujarat High Court)
Gujarat High Court Quashes Section 148 Reopening Because Loose Paper Had No Nexus With Assessee; Reassessment Invalid Because Seized Document Referred to NA Land While Assessee Sold Agricultural Land; Gujarat HC Sets Aside Section 148 Notice Because Escapement Allegations Were Based on Conjectures; Gujarat HC Quashes Reassessment Because Third-Party Documents Did Not Identify Assessee or Purchaser.
Summary: The Gujarat High Court considered the validity of a notice issued under Section 148 and the consequent reassessment order passed under Sections 147 read with 143(3) of the Income-tax Act for AY 2018-19. The reopening was based on a loose paper allegedly indicating higher consideration received in connection with the sale of land. The Court noted that the document was neither authored nor signed by the petitioner, did not mention the petitioner’s name, the names of co-owners or purchasers, and contained only the name of a third party unconnected with the transaction. The seized document referred to the land as non-agricultural (NA), whereas the undisputed sale deed established that the petitioner had sold agricultural land. Relying on its earlier decision involving identical facts and similarly worded loose papers, the Court held that the reassessment proceedings were founded on conjectures and surmises without any direct nexus to the petitioner. Consequently, the notice under Section 148 and the consequent assessment order were quashed and set aside.
Core Issue. Whether reassessment can be sustained solely on the basis of an uncorroborated loose paper seized from a third party, without any nexus between the document and the assessee.
Facts The assessee sold agricultural land bearing Survey No. 581 through a registered sale deed dated 03.03.2018. Subsequently, the Assessing Officer issued a notice under section 148 dated 27.03.2025 for AY 2018-19 based on a loose paper seized during search proceedings conducted on third parties connected with the B Safal Group. The seized document described Survey No. 581 as non-agricultural (NA) land and mentioned a rate of ₹17,000 per sq. yard. The document neither contained the assessee’s name nor was authored or signed by him. The only name appearing therein belonged to an unrelated person. On the basis of this loose paper, the Revenue alleged understatement of sale consideration and subsequently passed a reassessment order under section 147 read with section 143(3) on 30.03.2026.
High Court Findings. The Court found that the satisfaction note failed to establish any direct or indirect connection between the assessee and the searched entities or the seized document. The loose paper was vague, illegible and originated from an unrelated third party. Further, the document referred to NA land, whereas the land actually sold by the assessee was agricultural land. The Revenue’s valuation and allegation of escaped income were therefore purely hypothetical and unsupported by evidence.
Following the earlier decision in Deepak Chinubhai Shah v. DCIT, the Court held that vague and uncorroborated third-party documents lacking nexus with the assessee cannot form the basis for reopening an assessment.
Held. Since the reopening was founded solely on conjectures arising from an unrelated loose paper and there was no material linking the assessee with the alleged transaction, the notice dated 27.03.2025 issued under section 148 and the consequent reassessment order dated 30.03.2026 were quashed.
Cases Relied Upon
Deepak Chinubhai Shah v. DCIT-2026 (1) TMI 1131 (Guj.) | AY 2021-22 | Judgment dated 13.01.2026. Reopening based on third-party seized material was quashed where the document did not match the assessee’s transaction, the land status differed (NA vs agricultural land), and there was no nexus between the assessee and the seized material. The Court held that reassessment cannot be based on vague, unverified and unconnected documents
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. RULE. Learned Senior Standing Counsel waive service of notice of rule for and on behalf of the respondent.
2. Registry shall accept appearance note of learned Senior Standing Counsel Mr. Aaditya Bhatt on behalf of the respondent authority, as and when it is filed.
3. The short issue is involved in the present writ petition hence, the same is taken up for final hearing with consent of the learned advocates appearing for the respective parties.
4. The petitioner has challenged the impugned notice dated 27.03.2025 issued under section 148 of the Income Tax Act, 1961 (for short “the Act”) for the Assessment Year (AY) 2018-19 and consequent assessment order u/s 147 r.w.s. 143(3) of the Act dated 30.03.2026.
5. Learned advocate Mr. Vora appearing for the petitioner has submitted that the loose paper reliance upon which is placed is neither authored nor signed by the petitioner or any of the co-owners of the land and it does not mention the name of the petitioner or any of the co-owners or purchaser. He has submitted that the only name appearing on the page is Rajubhai Thakkar Dev, who is neither the co-owner nor the purchaser and with whom petitioner has no connection and in fact, the petitioner has no knowledge of the origin or contents of the said document. It is submitted that mere reference to the land survey number without any corroborative evidence is insufficient to establish any nexus with the petitioner.
6. Learned advocate Mr. Vora has further submitted that perusal of the statement and loose paper indicate that they merely contain details of land/plots available for sale and do not evidence any concluded financial transaction and further it refers to Survey No.581 as NA land, whereas the land sold by the petitioner was agricultural land. It is submitted that the issue is squarely covered by the decision of this Court in the case of Deepak Chinubhai Shah vs. Deputy Commissioner of Income Tax, Circle 2(1)(1), Ahmedabad, [2026] 183 com 90 (Gujarat) (Special Civil Application No.13298 of 2025 and allied matter decided on 13.01.2026). Thus, it is urged that the present petitions may be allowed.
7. Per contra, learned Senior Standing Counsel has vehemently opposed the present writ petition and has submitted that at this stage, the impugned action of the respondent of reopening of assessment and passing of order u/s 147 r.w.s. 143(3) of the Act may not be interfered since the petitioner had ample opportunities to defend reopening of assessment in the regular assessment proceedings.
8. The facts, which are established from the record, are that reopening of assessment is premised on the loose paper, which refers to the land being Revenue Survey No. 581 with Non-agricultural (NA) having prescribed rate of Rs. 17,000/- per square yard. The data mentioned in the said paper is illegible and only name appearing in the paper is of some Rajubhai Thakkar Dev, who is neither the co-owner nor the purchaser, and with whom the petitioner has no connection. Satisfaction note also does not refer that the petitioner has any connection with B Safal Group, City Estate Group, City Estate Management India and City Procon Realtors Private Limited. The information on the loose paper is premised on non-related 3rd party. Moreover, it is not in dispute and also established from the sale deed, which is on record, that the petitioner has sold the land in question on 03.03.2018 as an agricultural land.
9. This Court, in an identical issue relating to the search proceedings conducted on B Safal Group, City Estate Group, City Estate Management India and City Procon Realtors Pvt Ltd in the case of Deepak Chinubhai Shah (supra), has held thus:
“12. The assessment in the case of the petitioner for the year 2021-22 is sought to the be reopened on the basis of the aforementioned information contained in the extract of the inquiry register. It is not in dispute that the petitioner had sold the land vide sale deed dated 07.10.2020, the registration of the same was done in the month of January 2021. It is also noticed from the sale deed that the land in said question of survey number being Block No. 1445 – Old Survey No. 1568 was an agricultural land at the time of sale in the month of October 2020. The information relating to the date in the seized document is 22.04.2021, is after the sale deed dated 07.10.2020, this is the first flaw which is noticed by us. Secondly, with regard to the status of the land mentioned in the seized document. The status of the land in question refers to “NA” i.e. a nonagricultural land and unquestionably the land which was sold by the petitioner vide sale deed dated 07.10.2020 is an agricultural land. The name of the seller appears to be Sanjay Thakkar. Thus, there are three components which do not reconcile with the petitioner (i) the date mentioned as 22.04.2021, (ii) the status of the land being shown as “NA” i.e. non-agricultural and (iii) the name of the seller – Sanjay Thakkar.
13. The questions and answers forming part of the statements recorded under the provisions of 131 of the IT Act, in the case of one Shri Nagjibhai Bhavadiya, the searched person, does not in any manner mention the name of the petitioners. Thus, we do not find any direct or indirect link with the seized document and the same does not even remotely connect the rate mentioned of the concerned question of land with the petitioner. Thus, the revenue has attempted to reopen the assessment year 2021-22 only on the basis of some vague information allegedly connected from the seized document and the same does not in any manner relates to the present petitioner. Thus, the invocation of the proceedings under Section 148 of the IT Act, itself is ill conceived and unsustainable in light of the information contained in the seized document.
FINAL ORDER
14. Hence, we are of the opinion that the assessment has been reopened on the basis of conjunctures and surmises, the same action is required to be quashed and set aside. Accordingly, the captioned writ petitions stand allowed. The impugned Notices dated 31.03.2025 issued under Section 148 of the IT Act are hereby quashed and set aside. No order as to costs. Rule is made absolute.”
10. On an identical issue this Court has quashed and set aside reopening of assessment on identical facts and similarly worded loose papers, pointing out the status of the land as ‘NA”, whereas the petitioner has sold agricultural lands. The price assumed by the revenue alleging escapement of income, can be said to be only on hypothesis, and hence, the present writ petition succeed. The impugned notice and the consequent assessment order are hereby quashed and set aside.
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