Case Law Details
Shardaben Hashmukhbhai Patel Vs ITO (Gujarat High Court)
Section 148 Notice Set Aside as Seized Documents Had No Direct Link With Assessee; Gujarat HC Cancels Reopening Because Agricultural Land Sale Was Linked to Later NA Conversion; Reassessment Invalid Where Revenue Relied on Hypothetical Escapement of Income; Gujarat HC Quashes Section 271DA Penalty After Setting Aside Reopening Proceedings.
In the case of Shardaben Hashmukhbhai Patel Vs ITO, the Gujarat High Court examined the validity of a reassessment notice issued under Section 148 of the Income Tax Act for Assessment Year 2020–21, a reassessment order passed under Section 147, and a penalty notice issued under Section 271DA of the Act.
The petitioner challenged the reopening proceedings on the ground that the issue had already been decided by the High Court in the case of a co-owner of the same land, namely Muktaben Patel, whose reopening proceedings on identical facts had been quashed earlier. The petitioner argued that both cases arose from the same sale deed dated 15.06.2019 relating to agricultural land situated at Village Medha, Taluka Kadi, District Mehsana.
The Revenue opposed the petition by contending that, although the reassessment resulted in nil income and no addition was made, separate penalty proceedings under Section 271DA had been initiated and therefore the notice and order should not be interfered with at that stage.
The Court noted that the petitioner and Muktaben Patel were co-owners and co-purchasers of the land in question. It further observed that the reopening proceedings against the co-owner had already been quashed by the Court in Special Civil Application No.1125 of 2026 on identical facts.
In the earlier decision, the Court had examined the basis for reopening and found that the Revenue relied upon a loose paper recovered during search proceedings. The loose paper referred to a date of 01.08.2020 and mentioned Survey No.131 situated at Village Medha, Taluka-District Kadi-Mehsana. However, the agricultural land had already been sold through a registered sale deed dated 15.06.2019.
The Court further recorded that the purchaser had subsequently converted the land from agricultural to non-agricultural use on 05.08.2019. Therefore, the loose paper referring to “NA” land rates appeared to relate to non-agricultural rates proposed by the purchaser and not to the value of the agricultural land at the time of sale by the petitioner.
The High Court relied upon its earlier judgment in another similar case involving reopening proceedings based on vague and unconnected seized documents. In that case, the Court had held that reopening based on conjectures and surmises without any direct or indirect link between the seized document and the assessee was unsustainable. It had also noted discrepancies relating to dates, land status, and seller details.
Applying the same reasoning, the Court observed that the reopening in the present case was also based on similarly worded loose papers mentioning non-agricultural land, whereas the petitioner had sold agricultural land. According to the Court, the Revenue’s assumption regarding escapement of income was merely hypothetical.
The Court further held that the only distinguishing feature in the present matter was that, although the income was assessed at nil and no addition had been made, penalty proceedings under Section 271DA had been initiated separately. However, since the reopening itself had already been found unsustainable in the co-owner’s case, the subsequent penalty proceedings and show cause notice were also liable to be quashed.
Accordingly, the Gujarat High Court allowed the writ petition and quashed the jurisdictional notice issued under Section 148, the reassessment order passed under Section 147, and the penalty notice issued under Section 271DA.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. RULE returnable forthwith. Learned Senior Standing Counsel Mr. Maunil G. Yajnik, waives service of notice of Rule on behalf of the respondent.
2. By way of the present petition, the petitioner seeks to challenge the impugned jurisdictional notice dated 31.03.2025 issued under Section 148 of the Income Tax Act, 1961 (for short, “the Act”) for Assessment Year 2020–21, as well as the impugned reassessment order passed under Section 147 of the Act, bearing DIN and Order No. ITBA/AST/S/147/2025-26/1086578924(1) dated 25.02.2026, and the impugned penalty notice issued under Section 271DA of the Act, bearing DIN and Order No. ITBA/PNL/S/271DA/2025-26/1086589552(1) dated 26.02.2026.
3. At the outset, learned advocate Mr. Darshan B. Gandhi, appearing for the petitioner has submitted that the case concerns a co-owner, namely Smt. Patel Muktaben Jadavbhai, whose name appears in the sale deed dated 15.06.2019. It is further pointed out by the learned advocate Mr. Gandhi that this Court, vide order dated 30.03.2026 passed in Special Civil Application No.1125 of 2026, has quashed and set aside the reopening of assessment on identical facts. It is thus urged that a similar order be passed in the present case.
4. On the other hand, learned Senior Standing Counsel Mr .Maulik Yajnik, opposing the petition and the submissions advanced by learned advocate Mr. Gandhi, has submitted that in the present case, although the assessment is nil, proceedings have been initiated under the provisions of Section 271DA of the Act, calling upon the petitioner to pay a penalty. It is submitted that since the assessment order has already been passed, at this stage, neither the notice nor the order deserves to be set aside.
5. It is not in dispute and is evident from the pleadings that the petitioner is a co-owner, who purchased the land along with Muktaben Patel, the mother of the assessee, vide sale deed dated 15.06.2019. The case of the said co-owner, being the mother of the assessee and a co-purchaser of land bearing Revenue Survey No.131 situated at Village Medha, Taluka: Kadi, District: Mehsana, was also subjected to reopening of assessment. The same was challenged before this Court by way of Special Civil Application No. 1125 of 2026, which came to be allowed by judgment dated 30.03.2026. The relevant observations in the said judgment read as under : –
“8. It is the case of the petitioner that the impugned notice was issued without the necessary satisfaction note or seized material from the searched party. Accordingly, vide letter dated 26.06.2025, the petitioner requested the respondent Assessing Officer to supply the same. However, without supplying such documents, the respondent Assessing Officer, vide letters dated 19.08.2025 and 25.09.2025, informed the petitioner that she had failed to comply with the statutory notice by not filing the return of income.
9. Thereafter, vide letter dated 07.11.2025, the respondent – Assessing Officer provided the reasons/satisfaction note for issuance of notice under Section 148 of the Act.
10. Upon receipt of the detailed satisfaction note, the petitioner raised objections to the assumption of jurisdiction and issuance of notice under Section 148 of the Act on 02.12.2025. The petitioner contended that: (i) neither the name of the seller (assessee – Muktaben) nor the name of the buyer (Mr.Mahendrabhai Chimanbhai Patel) was mentioned in the loose document; (ii) the sale deed was executed on 14.06.2019, whereas the loose noting mentions the date 01.08.2020, i.e., almost 1.25 years later; and (iii) the actual transaction pertains to the sale of 2.55 vigha of land, whereas the loose document does not mention any such transaction details.
11. Learned advocate Mr. Gandhi, at the outset, submitted that after the sale of the agricultural land vide sale deed dated 15.06.2019, the purchaser – Shri Mahendrabhai C. Patel, converted the said land from agricultural to non-agricultural use. Thereafter, the impugned notice has been issued to the petitioner for reopening of the assessment on an incorrect premise. Hence, it is urged that, since the issue is squarely covered by the decision of this Court in the case of Deepak Chinubhai Shah (supra), the action of reopening deserves to be quashed and set aside.
12. Learned Senior Standing Counsel Mr. Bhatt, at this stage, has submitted that it is always open for the petitioner to raise all contentions and defend her case during the assessment proceedings before the Assessing Officer. It is submitted that, at this stage, the revenue is only required to examine prima facie material and therefore, the present petition ought not to be entertained.
13. From the pleadings and the documentary evidence on record, it emerges that the petitioner had sold the agricultural land vide sale deed dated 15.06.2019. The entire reopening is premised on a loose paper indicating the date 01.08.2020 and referring to Survey No.131 situated at Village – Medha, Taluka – District : Kadi-Mehsana. The Assessing Officer thereafter relied upon a verification in the nature of “Any ROR” with respect to the sale deed.
14. However, the fact remains that the petitioner sold the land when it had agricultural status, whereas the subsequent purchaser, on 05.08.2019, converted the said land from agricultural to non-agricultural use.
15. Thus, the loose paper found during the search proceedings dated 01.08.2020 appears to refer to the nonagricultural rates proposed by the purchaser and does not represent the market value of the agricultural land at the time of the agricultural sale.
16. At this stage, we may refer to the observations of this Court in the case of Deepak Chinubhai Shah (supra) on an identical issue, wherein in a search conducted against the very same entities, the Court has held as under:
“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 non-agricultural 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.”
17. 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(s) have 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 succeeds. The impugned notice(s) is / are hereby quashed and set aside. “
6. The only distinguishing feature in the present case is that although the Assessing Officer has assessed the income at nil and no addition has been made, separate penalty proceedings under Section 271DA of the Act have been initiated, for which a notice has been issued to the petitioner.
7. Since we are of the opinion that, in the case of the mother of the assessee, who is the co-owner of the land in question, the reopening of assessment has already been quashed and set aside, the subsequent proceedings for initiation of penalty, along with the show cause notice, are also liable to be quashed and set aside.
8. Accordingly, the present writ petition succeeds. The impugned jurisdictional notice dated 31.03.2025 issued under Section 148 of the Act for Assessment Year 2020–21, as well as the impugned reassessment order passed under Section 147 of the Act, bearing DIN and Order No. ITBA/AST/S/147/2025-26/1086578924(1) dated 25.02.2026 and the impugned penalty notice issued under Section 271DA of the Act, bearing DIN and Order No. ITBA/PNL/S/271DA/2025-26/1086589552(1) dated 26.02.2026, are hereby quashed and set aside. Rule is made absolute.
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