Reassessment Order And Penalty Notice Quashed As Identical

Reassessment Order And Penalty Notice Quashed As Identical Reopening In Co-Owner’s Case Was Already Set Aside

Issue

Whether a jurisdictional notice under Section 148, a subsequent reassessment order under Section 147, and a penalty notice under Section 271DA issued to an individual co-owner can be sustained when the reopening of assessment on identical facts in the case of the other co-owner has already been quashed and set aside by the High Court.

Facts

The assessee is an individual who jointly purchased a piece of land with her mother under a registered sale deed executed in June 2019.
For the assessment year 2020-21, the Income Tax Department initiated reassessment proceedings against the assessee.
The department issued a jurisdictional notice under Section 148, subsequently passed a reassessment order under Section 147, and issued a penalty notice under Section 271DA for alleged non-compliance with Section 269ST (cash transaction limits).
The assessee’s mother, who was the co-owner of the exact same land transaction, had also been subjected to reassessment proceedings by the department on identical facts.
Prior to the finalization of the assessee’s challenge, the High Court had already quashed and set aside the reopening of assessment and identical proceedings in the case of the mother.
The assessee approached the Court to challenge the validity of her own reassessment notice, order, and consequential penalty notice based on the precedence of her mother’s case.

Decision

Held, yes: Since the reopening of the assessment in the case of the assessee’s mother (the co-owner of the land in question) had already been judicially quashed and set aside on identical facts, the same legal infirmity applies to the assessee.
Held, yes: Consequently, the impugned jurisdictional notice issued under Section 148, the consequential reassessment order passed under Section 147, and the connected penalty notice issued under Section 271DA against the assessee are also liable to be quashed and set aside [Paras 7 and 8].
The ruling was fully decided in favor of the assessee.

Key Takeaways

Rule of Consistency on Identical Facts: The tax department cannot take conflicting positions on an identical set of facts for different co-owners of the same property; if the foundation of proceedings is quashed for one co-owner, it cannot be sustained for the other.
Consequential Demise of Penalty Proceedings: Once the underlying jurisdictional notice and reassessment orders are quashed as invalid, any derivative penalty notices (such as those under Section 271DA) automatically lose their legal standing and fail to survive.
Binding Precedent of Co-owner Judgments: High Court rulings quashing reassessments for a primary co-owner serve as an absolute defense for other joint owners facing identical action from the revenue authority.

HIGH COURT OF GUJARAT

Shardaben Hashmukhbhai Patel

Income-tax officer^*

A.S. Supehia and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 4153 of 2026

APRIL 29, 2026

Darshan B Gandhi and Jimi S Patel for the Petitioner. Maunil G Yajnik for the Respondent.

JUDGMENT

A.S. Supehia, J.- 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 passed in Muktaben Jadavjibhai Patel v. ITO [Special Civil Application No.1125 of 2026, dated 30-3-2026] 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 non-agricultural 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.