Reassessment Based on Third-Party Loose Papers Lacking a Live-Link and Relying on Retrospective Notional Rates Is Legally Unsustainable

JUDGMENT

A.S. Supehia, J.- Rule, returnable forthwith. Learned Senior Standing Counsel Mr. Aaditya Bhatt waives service of notice of rule for respondent.

2. In the present petition, the petitioner has assailed the notice dated 29.03.2025 issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short), seeking to reopen the Income Tax assessment of the petitioner for the assessment year 20192020.

3. Brief facts of the case are as under:

3.1 The petitioner is a salaried individual and filed a return of income for the year under consideration on 23.08.2019 declaring total income at Rs. 2,60,000/-. It appears that a search and seizure was conducted on BSafal Group and City Estate Groups under section 132/132A of the Act and some material was collected in such search and during the course of search, it was found that M/s City Estate Management India, a Real Estate Broker, is providing broking service to BSafal Group.

3.2 It is alleged that the cash transactions in real estate was being done by selling various lands/plots etc. in and around Ahmedabad city. The details of address, name of person, survey numbers of the land in question and the market rate of property were unearthed during such proceedings. Post search, the statement of one Shri Pravin Nagjibhai Bavadiya was recorded by the revenue, the relevant extract of the statement recorded under Section 131 of the Act dated 27.12.2021 is incorporated in the impugned notice. Based on such material, the revenue has reopened the assessment by issuing the notice under Section 148 of the Act.

4. Learned Senior Advocate Mr.Tushar Hemani appearing with learned advocate Ms.Vaibhavi Parikh for the petitioner, at the outset, has submitted that the provision of Section 148 of the Act would not get attracted in the present case, as the seized documents neither ‘pertains to’ the petitioner nor any information contained therein ‘relates to’ the petitioner and the entire reopening is premised on the notings in a loose paper, which only mentions the survey number and rate of Rs.35,000/- and some individual namely Shri Dhaval Patel Krish. It is submitted that Shri Dhaval Patel Krish is not at all connected to the petitioner. Further, it is submitted that the relevant notings in the seized Register refers to land situated in Survey No.211 and the notings is dated 22.04.2021, whereas the said land was already sold by the petitioner to three persons namely, Shri Pravin N. Bavadiya, Shri Prakash N. Bavadia and Shri Mukeshkumar B. Vasani, on 28.08.2018 and the said land was converted into Non-agricultural, on 24.02.2021, by its owners. It is, thus, submitted that the notings in the seized Register i.e. square-yard with NA, reflects the rate of Rs.35,000/- was with reference to NA land and as per the statement of Shri Pravin Nagjibhai Bavadia, the seized inquiry register contains the details of land available for sale at different locations at Ahmedabad and the name of the petitioner nowhere appears in the seized Register. Thus, it is submitted that the impugned notice is required to be quashed and set aside in such circumstances, as the information from the loose paper does not even remotely connect to the petitioner.

5. Vehemently opposing the present writ petition, the submissions advanced as recorded here-in-above, the learned Senior Standing Counsel Mr.Aaditya Bhatt has submitted that as per the provision of Section 148 of the Act, more particularly clause 4 below Explanation 2, it cannot be said that the information, which is unearthed during the search proceedings from the concerned broker, does not pertain or pertains to any information contained therein relates to the assessee.

5.1 It is submitted that the legislature has deliberately used the expansive phrases “pertains to” and “relate to”. Unlike the stringent requirement of “belongs to” under the erstwhile Section 153C of the Act and hence, as per the decision of the Supreme Court in the case of Raymond Woollen Mills Ltd. v. Income-tax Officer [1999] 236 ITR 34 (SC), the revenue has only to see whether there was a prima-facie some material on the basis of which the department could reopen the case and the sufficiency or correctness of the material is not a thing to be considered at this stage of issuance of notice.

5.2 Further, reliance is also placed by learned Senior Standing Counsel Mr. Bhatt on the decision of the Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd.  (SC)/[2007] 291 ITR 500 (SC) and it is submitted that the only question which is required to be examined at the stage of issuance of notice is whether there was relevant material on which a reasonable person could have formed a requisite belief.

5.3 Reliance is also placed on the decision of the Supreme Court in the case of Anshul Jain v. Pr. CIT (SC)/[2022] 449 ITR 256 (SC). It is submitted that in the present case, the documents/incriminating material which have been recovered during the search proceeding, cannot be said to be dumb documents, devoid of any evidential value. It is submitted that the material which was seized specifically mentions the names of the brokers or third parties and the same reveal the link between the petitioner and the land dealing, by paying the on- money. Thus, it is urged that, at this stage, the Court may not interfere with the reopening of the assessment.

6. We have heard the learned advocates appearing for the respective parties at length. The facts, which are established from the documents on record and the pleadings and also from the impugned notice issued under Section 148 dated 29.03.2025 are as under:

6.1 A search under Section 132 was conducted on BSafal Group and City Estate Group on 28.09.2021 and during the search, it is the case of the revenue that incriminating documents and digital data were seized. Post search, a statement of one Shri Pravin Nagjibhai Bavadia was recorded after he was confronted with the documents found and seized from the premise of the City Estate Management, which is a broker, dealing with land deals in the city of Ahmedabad. Statement under Section 131 of the Act of Shri Pravin Nagjibhai Bavadiya are incorporated in the impugned notice. A specific question No.14, was asked to him with regard to the documents found during the search and in response, he has submitted that ‘I confirm that the documents were found and seized from the premises of the propriety entity City Estate Management’ It is further responded by him that sometimes the clients come with their land documents or title deeds and there might be such types of documents which are also seized with the above annexures and these belonged to the clients and not to him. Question No. 26, when he was confronted with the annexures, he has referred that such annexures contained the details of lands/plots available for sale at different locations of Ahmedabad and each entry contain the details of land, location, village, taluka, survey number, area, rate, owner of the land, etc., and he doesn’t know the current status regarding the sale of the land. So far as the case of the petitioner is concerned, the reopening is premised on an entry found from a loose paper, which is extracted as below:

6.2 The Assessing Officer, thereafter, further verified the details of Survey No. 211 situated at Racharda and upon verification from AnyROR, which is a government website recording the details of sale deeds, it was found by the Assessing Officer that Survey No. 211, which is one of the various Survey numbers, it was observed that the final plot area of the land was 3345 square meters equals to 4001 square yard and as per the sale deed, the said property was sold at rupees 83 lakhs through sale deed having deed number/document No.9063 dated 28.08.2018 and as per the seized documents, the Assessing Officer calculated the unit price of the property in question at Rs.35,000/- per square yard, which values the property at Rs.14,00,20,529/-. On this material, the petitioner has been issued a show cause notice under Section 148 of the Act for reopening of the assessment.

6.3 It is interesting to note that the Assessing Officer has not recorded the status of land existed on 22.04.2021. The respondent has not disputed a categorical statement made by the petitioner in the present writ petition that the petitioner had sold the land to three persons vide registered sale deed on 28.08.2018 and thereafter the said land has been converted to NA use on 24.02.2021. Thus, the noting in the seized register was made on 22.04.2021 i.e. after almost a period of three years, after the said land was sold by the petitioner to three persons and the same was converted to NA on 24.02.2021. We fail to understand how the Assessing Officer or the revenue has tried to compare the land prices after a period of three years on the premise of rate of Rs. 35,000/- found in a loose paper dated 22.04.2021, after the same was converted to NA land. The petitioner had, way back in 2018, sold the land to three persons. The chit does not refer to any name to whom the petitioner has sold the land. It also does not refer to the name of the persons and the only connecting link is a Survey No. 211, which belonged to the petitioner in the year 2018. Thus, after the land was sold in 2018, it has changed its status to NA by three individuals and none of the names of the individuals are referred in the loose paper and there is no connection whatsoever of Shri Dhaval Patel Krish whose name is found in the loose paper to the petitioner. The survey number mentioned in the loose paper is linked with the petitioner by the revenue by gathering information from the government Website “AnyROR”, which records the details of the sale deeds. It is true that the cash transactions are done in a clandestine manner using coded script, however, the revenue, before re-opening the assessment has to establish a live link of the assessee on the basis of seized material only. The expression ” relates to” and “pertains to” used in Clause(iv) to Explanation 2 to Section 148 of the Act cannot be used in vacuum. The revenue after the seizure of incriminating material is under an obligation to analyze such material, in light of attendant circumstances and record relevancy and a prima facie opinion linking such material establishing escapement of income at the hands of the assessee. The information which is derived from the incriminating material in the instant case, does not establish live-link. The information is absolutely vague and unspecific and the rate of Rs.35,000/- is attempted to be imposed upon the petitioner retrospectively to the sale deed registered on 28.08.2018. The statement of Shri Bavadiya does not mention the name of the petitioner. There is no link of the petitioner with ‘ Dhaval Patel Krish’ whose name is found in the loose paper. There is no link, even remotely, found with Safal Group or City Estate Management. The land in question is subsequently sold by the petitioner and converted to NA. All these aspects are very relevant, and are required to be examined before roping the petitioner in re-assessment.

7. Hence, in our opinion, the provision of Section 148 of the Act will not get attracted in the present case, in such circumstances. Hence, the impugned action of re-opening of the assessment vide notice dated 29.3.2025, issued by the respondent under Section 148 of the Act is required to be quashed and set aside.

8. We are conscious about the legal precedent as set out by the Supreme Court. At the stage of notice of re-opening of the asssessment, albeit, the Court cannot go into the sufficiency of evidence, however, simultaneously the Court has to examine the aspect as to whether there is even prima-facie some material, which could enable the department to reopen the assessment. In the present case, the reopening is based on a vague, irrelevant, and non-specific information, and that too, applying the same retrospectively to the sale deed of the petitioner and also on the land which has been subsequently converted from Agriculture to Non-agriculture land by the individuals who have bought the lands from the petitioner. Hence, we are inclined to quash the action of the revenue seeking re-opening of the assessment.

9. Hence, the writ petition succeeds. The impugned notices, and subsequent action, if any are quashed and set aside. Rule made absolute.