Gujarat High Court Quashes Reassessment Based On Broker's Register Without Live Nexus On-Money Payment
The Gujarat High Court on 8 October quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961, against Sanjaykumar Amrutlal Patel for Assessment Year 2022-23, holding that a seized broker's register entry, without a live nexus to the taxpayer, could not justify reopening the assessment.
A Division Bench comprising Justices A.S. Supehia and Vaibhavi D. Nanavati held that the entry dated 16 January 2020, at best, reflected the asking rate for land in the Bhadaj area and did not establish a concluded transaction involving Patel. It observed:
“The entry in the register, therefore, predates the actual purchase transaction of the petitioner by a considerable period. In this background, the entry dated 16.01.2020 can, at best, be viewed as a market survey reflecting the asking rate for land available for sale in the area of Moje Bhadaj as on that date.”
Patel, along with twelve other co-purchasers, purchased 8,182 square metres of non-agricultural land bearing Survey No. 509/A at Moje Bhadaj, Ahmedabad, through a registered sale deed dated 1 June 2021 for Rs. 6,13,65,000.
During a search conducted on 28 September 2021 at the premises of B Safal Group and real estate broker City Estate Management India, the department seized inquiry registers containing details of land parcels and their asking rates. An entry dated 16 January 2020 referred to multiple survey numbers in Bhadaj, an area of 71,000 square yards and a rate of Rs. 40,000 per square yard.
Relying on the entry, the Assessing Officer alleged that Patel had paid on-money of Rs. 1,87,14,508, representing his 5.67% share of the alleged difference between the recorded sale consideration and the amount reflected in the register. The officer issued a reassessment notice under Section 148 on 18 March 2026.
Patel argued that the register recorded properties available for sale rather than concluded transactions. Real estate broker Pravin Nagjibhai Bavadiya had stated during proceedings under Section 131 that the registers contained details of properties available for sale.
He also pointed out that the entry referred to six survey numbers and a much larger area than the land purchased. Neither the register nor the broker's statement mentioned Patel or the co-purchasers.
The Revenue contended that the survey number appearing in the register matched the land purchased by Patel and was sufficient to suggest escapement of income under Explanation 2(iv) to Section 148. It also relied on the presumptions under Sections 132(4A) and 292C, arguing that the seized register was a structured business record and not a “dumb document”.
The Court noted that the entry referred to persons unconnected with Patel or the sellers and that the department had not placed on record any inquiry into the persons named in the register. The broker's statement did not mention Patel or the co-purchasers, while discrepancies in the survey numbers and land area further weakened the alleged connection.
Further, the Bench held that the statutory presumptions attached to seized material could not, in the circumstances, establish that the entry represented an actual on-money transaction involving Patel. Relying on earlier decisions concerning similar entries seized during the same search, it reiterated that reassessment required a live and direct nexus between the seized material and the taxpayer. It observed:
“Thus, we do not find any direct or indirect link between the petitioner and the seized document. The revenue has attempted to reopen the assessment year 2022-23 only on the basis of some vague information allegedly connected from the seized document, which does not in any manner relate to the present petitioner.”
Accordingly, the High Court quashed the reassessment notice issued under Section 148 for Assessment Year 2022-23 and allowed the writ petition.
Counsel for Petitioner: Udayan P. Vyas, Advocate
Counsel for Respondent: Aaditya D. Bhatt, Senior Standing Counsel