No Evidence Linked Assessee to On-Money Transaction: Gujarat HC Quashes Section 148 Notice

Naliniben Jagdishkumar Gandhi Vs ITO (Gujarat High Court)

The Gujarat High Court allowed a writ petition challenging a notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2022-23 and quashed the reassessment proceedings initiated against the petitioner. The Court held that the Revenue failed to establish any independent corroborative material linking the petitioner to the alleged “on-money” transaction.

The petitioner had filed the return of income for Assessment Year 2022-23 on 25.07.2022 declaring total income of Rs.1.48 crore. During the relevant year, the petitioner sold her 30% share in a non-agricultural land situated at Survey No.465, Village Shela, to co-owner Atulkumar Gangadas Patel through a registered sale deed dated 13.08.2021 for consideration of Rs.2 crore. The capital gain arising from the transaction was disclosed in the return of income, which was processed under Section 143(1) without any variation.

Subsequently, the Assessing Officer issued a notice under Section 148 dated 30.03.2025 seeking to reopen the assessment. Along with the notice, the satisfaction note and approval recorded by the authorities were also supplied to the petitioner. The petitioner filed objections, which were rejected by the Revenue through communication dated 06.06.2025, following which the present writ petition was filed.

The reassessment proceedings were based on a search conducted at the premises of City Estate Management on 28.09.2021. During the search, a register belonging to broker Shri Pravinbhai Nagjibhai Bavadiya was seized. The seized document contained an entry dated 11.08.2017 referring to Survey No.465 of Village Shela with an area of 20,449 square yards and mentioning a rate of Rs.17,000 per square yard.

Based on this entry, the Assessing Officer formed the view that the property was valued at Rs.10.42 crore, whereas the petitioner had sold her share through a sale deed reflecting consideration of Rs.2 crore. According to the Revenue, this indicated payment of substantial “on-money” in cash.

The petitioner argued that the reopening was based only on the broker’s statement and the seized register, neither of which contained her name. It was submitted that the land was originally purchased in 2011 jointly with one Gangadasbhai in the ratio of 30% and 70%. The land was converted from agricultural to non-agricultural use in 2018. Thereafter, in July 2021, Gangadasbhai gifted his 70% share to his son Atulkumar, and subsequently the petitioner sold her 30% share to Atulkumar in August 2021. As a result, the entire land continued to remain within the same family ownership.

The Court examined the seized material and observed that the register only contained survey numbers and rates and did not mention the petitioner’s name. It also noted that during his statement, the broker had stated that he did not know the current status of the land transaction and that some documents found during the search may have belonged to clients and not to him.

The High Court further observed that the Revenue’s entire case was founded on a 2017 entry allegedly showing intention to sell the entire plot at Rs.17,000 per square yard. However, the subsequent events contradicted this assumption because the co-owner did not sell his 70% share but instead gifted it to his son in 2021. The petitioner later sold only her 30% share to the same family member.

The Court held that except for the survey number appearing in the seized document, there was no material directly connecting the petitioner with any alleged cash transaction. Although the Court acknowledged that cash transactions are generally clandestine in nature and reassessment cannot be quashed merely on that basis, it emphasized that the Revenue must establish a live link connecting the assessee with the alleged transaction.

Finding no independent corroborative material linking the petitioner with any “on-money” payment, the Gujarat High Court quashed and set aside the notice issued under Section 148 dated 30.03.2025. The writ petition was accordingly allowed and the rule was made absolute without any order as to costs.

FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT

RULE returnable forthwith. Learned Senior Standing Counsel Mr. Dev D. Patel waives service of notice of rule on behalf of the respondent.

1. Since a short issue is involved, with consent of learned advocates for the respective parties, the matter is taken up for final hearing.

2. By way of present writ petition, the petitioner is assailing the impugned notice dated 30.03.2025 passed under Section 148 of the Income Tax Act, 1961 (for short “the IT Act”) for the assessment year 2022-23.

BRIEF FACTS:

3. The petitioner has filed the return of A.Y 2022-23 on 25.07.2022 declaring total income at Rs.1,48,71,670/-. During the year under consideration the petitioner has sold her 30% share of immovable property being non-agricultural land located at Survey No. 465, Village Shela to the co-owner Shri Atulkumar Gangadas Patel (who was holding 70% share of the said land) through a registered sale deed dated 1308.2021 for a consideration of Rs.2,00,00,000/-. The petitioner has disclosed the said capital gain in the return of income. This return was processed under Section 143(1) of the IT Act, without any variation in the returned income. Thereafter, impugned notices under Section 148 of the IT Act dated 30.03.2025 was issued to the petitioner. Along with the said notice, satisfaction note recorded on 19.03.2025 as well as approval of the satisfaction note dated 23.03.2025 were also supplied to the petitioner. The petitioner filed detailed objections against the said notice on 23.04.2025. The respondent has vide letter dated 06.06.2025 disposed of the objections. Hence, the petitioner has approached this Court by way of the present writ petition.

SUBMISSIONS ON BEHALF OF THE PETITIONER :

4. Learned advocate Mr. B.S Soparkar, while pointing out the impugned notice has submitted that the Assessing Officer has tried to reopen the assessment only on the basis of the statement of the searched person i.e. the broker and a register found from him which only mentions the survey no. 465 situated at Village Shela and the rate of “Rs.17,000/-” mentioned therein. It is submitted that initially the petitioner had brought the land in question on 21.01.2011, which was an agricultural land, along with one Gangadas, who had purchased 70% share of the said land for Rs.54 lakhs from one Bharvad family. It is submitted that the share of the petitioner was 30 % and the said agricultural land was converted to non-agricultural land on 10.09.2015. Subsequently, on 23.07.2021, Gangadas gifts his share to his son – Atulkumar and the petitioner sells her 30 % share to co-owner Atulkumar on 13.08.2021 and as on today the 100% share of the land continues to be held by Atulkumar. It is submitted that on 25.07.2022, the petitioner filed return of income for the Assessment Year 2022-23, offering the income from the sale of land and accordingly, the return is processed.

4.1 It is submitted that in fact, the statement of the broker under Section 131 of the IT Act, and as incorporated in the impugned notice, does not in any manner connects to the petitioner. It is submitted that the Assessing Officer upon an information collected from the revenue records has formed an opinion that a huge amount was paid in cash “on money” for the sale consideration from the sale deed no. 12329 dated 13.08.2021. It is submitted that the procedure which is adopted by the assessing officer runs contrary to the decision of this Court dated 24.11.2025 passed in Special Civil Application No. 4162 of 2023. Thus, it is urged that the impugned notice for reopening the assessment may be quashed and set aside.

SUBMISSIONS ON BEHALF OF THE RESPONDENT :

5. While opposing the aforesaid submissions, learned Senior Standing Counsel Mr. Dev D. Patel appearing for respondent-revenue has contended that from the search conducted on B Safal Group and the statements recorded of Shri Pravinbhai Npravinagjibhai Bavadiya who was the broker of City Estate Management and on the basis of the register seized during the search it was found that the land bearing Survey No.465 situated at Shela was proposed to be sold for Rs.17,000/- per sq.yd in the year 2017. It is submitted that the register which was maintained by Shri Bavadiya – the broker, mentions the entry dated 11.08.2017 and the rates mentioned about the land in question. Hence, as per the aforesaid note, the said property was sold at the rate of sale deed consideration of Rs. 2 crores and it is valued at Rs.10,42,90,961/- as per the seized document.

ANALYSIS AND OPINION :

6. We have heard the learned advocates appearing for the respective parties at length. The action of reopening of assessment against the petitioner is premised on a search conducted at the office premise of City Estate Management on 28.09.2021. During the search, a register was seized of one broker Shri Pravinbhai Nagjibhai Bavadiya. The extract of seized document which consist the information regarding the transaction of immovable property entered into by the assessee as follows:

7. The aforementioned notings in the the register refers to the Survey No. 465 of Village Shela and it mentions the rate of Rs.17,000/- per square yard. Accordingly, the Assessing Officer is of the opinion that as per the said unit price the land bearing Survey No. 465 of 20449 square yards would be valued at Rs.10,42,90,961/- whereas as per the sale deed, the said property was sold at Rs.2 crores vide sale deed no. 12329 dated 13.08.2021. Hence, the assessment is sought to be re-opened by issuing the impugned notice under section 148 of the IT Act.

8. The land area mentioned in the seized document is 20,449 square yards of Survey No. 465 and the impugned notice dated 19.03.2025 refers to the Final Plot area of Survey No. 465 as 5,129 square meter equal to 6135 square yard. Further during the search proceedings, the statement of Shri Pravinbhai Nagjibhai Bavadiya was recorded by the competent officer. On perusal of the statement as recorded in the impugned notice, we do not find any name of the petitioner.

9. With reference to the questions put to him about the details of the land, the searched person has submitted that he doesn’t know the current status regarding the sale of the land. Shri Bavadiya, the searched person, in response to the query asked by the concerned officer has answerd that “some times the clients come with their land documents or title deeds, there might be such type of documents also seized with the above annexures and these belong to the clients and not to me”.

10. Except the seized documents as mentioned herein-above, and the statements of the searched person Shri Bavadiya, there is no material recorded by the Assessing Officer which would reveal the name of the petitioner. It is true that cash transactions operate in very clandestine manner, and the re-assessment cannot be quashed, but the revenue has to prove a live link connecting the assessee. The only link is the survey number of the petitioner. It is pertinent to note that the date of the seized document referred is of 11.08.2017 and it is the case of the Assessing Officer that the entire plot of land was sought to be sold at the rate of Rs.17,000/- per square yard in the year 2017 as per the entry made in the register (seized document).

11. Keeping in mind the aforesaid submission and the dates, it is pertinent to note that initially the land in question of Survey No. 465 was purchased by the petitioner along with Gangadasbhai in the share of 30% and 70% respectively by sale consideration of Rs.54 lakh from one Bharward family. This was an agricultural land and thereafter the said land was converted into non-agricultural land on 10.09.2018. This status has not been denied by the authorities and on 23.07.2021 Gangadasbhai gifts his share of 70% to his own son Atulkumar Gangadas Patel and thereafter on 13.08.2021 the petitioner sells her share of 30% to co-owner Atulkumar and as on today 100% land continues to be held by Atulkumar who is the son of Gangadasbhai. Thus, the entire case of the respondent revenue is premised on an entry in the seized documents of the year 2017, more particularly on 11.08.2017. As per the case of the revenue, the land of Survey No. 465 was sought to be sold at the price of Rs.17,000/- which falls flat on the subsequent happening of gifting of the share of land to the extent of 70% by Gangadasbhai to his son in the year 2021 i.e. after a period of four years. The petitioner thereafter sells her share of 30% in the year 2021.

12. At this stage it is pertinent to note that, if the case of the revenue is to be considered, the entire sale of the plot of Survey no. 465 was sought to be sold by the sellers by offering a price of Rs.17,000/- per sq.yd, however, the entire plot was never sold and Shri Gangadasbhai on the contrary has gifted the share of 70% to his son Atulkumar. The Assessing Officer in the present case has on the information derived by him from the other sources has arrived at a conclusion that the unit price of the immovable property under consideration which was sold in the year 2021, it was at a substantial difference and it is assumed that there was huge amount which was paid as on money. Further the aforesaid documents neither named co-owner Gangdasbhai nor the petitioner. Though the Assessing Officer has correctly calculated share of the petitioner as 30% of the land, however, the intention of selling the entire plot of land in the year 2017, as per the seized document does not reconcile with the subsequent fact of the co-owner of the land Shri Gangadasbhai who gifts his share to his son Atulkumar after a period of four years.

13. Hence in absence of any independent corroborative material linking the present petitioner with the alleged – on money transaction, we are inclined to quash and set aside the impugned notice dated 30.03.2025. Rule is made absolute. No order as to costs.