Reassessment Notice Quashed as Seized Third-Party Loose Paper Failed to Establish a Live Link

By | June 23, 2026
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Reassessment Notice Quashed as Seized Third-Party Loose Paper Failed to Establish a Live Link

Reassessment Notice Quashed as Seized Third-Party Loose Paper Failed to Establish a Live Link

Issue

Whether a reassessment notice issued under Section 148 to tax alleged “on-money” under Section 69A is valid when it is based solely on a third-party seized loose paper that post-dates the assessee’s sale transaction and a broker’s statement that fails to name the assessee.

Facts

  • The assessees sold a parcel of land via a registered sale deed dated April 29, 2019, for a recorded consideration of Rs. 75 lakhs.

  • The revenue department subsequently conducted a search operation on a third-party group and seized a loose paper dated September 28, 2019, which noted a significantly higher property rate (Rs. 2.25 crores per bigha) for the same survey numbers, alongside a broker’s statement.

  • The Assessing Officer linked the survey numbers to the assessees using the government’s “AnyROR” land records website and issued a Section 148 notice for reopening the assessment on suspicion of unrecorded cash receipts.

  • The seized loose-paper entry was dated September 28, 2019, which was exactly five months after the execution of the assessees’ registered sale deed.

  • The recorded statement of the broker obtained during the third-party search did not mention or identify the assessees.

Decision

  • Held, yes: The impugned notice of reopening under Section 148 was quashed because the revenue failed to establish a direct, live link between the assessees and the seized material.

  • Held, yes: A loose paper found with a third party cannot form the sole basis for reopening an assessment unless corroborative evidence connects it to the actual transaction date and the specific assessees.

Key Takeaways

  • Requirement of a Live Link: For a reassessment to be legally sustainable, there must be a direct and live nexus between the material found during a search and the specific income escaping assessment for that particular assessee.

  • Third-Party Loose Papers: Uncorroborated documents found in the possession of a third party have weak evidentiary value and cannot automatically trigger reassessment, especially if they do not name the taxpayer.

  • Timeline Mismatch: Material that relates to a period subsequent to the execution of a registered sale deed cannot blindly be applied retroactively to determine the market value or consideration exchanged on an earlier date.

HIGH COURT OF GUJARAT
Kantilal Parsotamdas Patel
v.
Income-tax Officer
A.S. Supehia and Pranav Trivedi, JJ.
R/SPECIAL CIVIL APPLICATION Nos.3676 and 3677 of 2026
APRIL  8, 2026
Hardik V. Vora for the Petitioner. Aaditya D. Bhatt for the Respondent.
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 petitioners have assailed the notice dated 31.03.2025 issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short) for the Assessment Year 2020-2021.
3. For convenience, SCA No.3676 of 2026 is considered as a lead matter and the facts of the case are incorporated from SCA No.3676 of 2026:
3.1 The petitioners filed the return of income on Assessment Year: 2020-21 on 29.01.2021, declaring the total income of Rs. 17,50,220/-. A notice under Section 148 of the Act was issued on 31.03.2025, alleging escapement of income on the ground that a search under Section 132 of the Act was conducted in the case of BSafal Real Estate and City Estate Management Group, during which certain documents purportedly pertaining to the petitioners were found. 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 were 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.
3.3 It is the case of the Revenue that for Survey Nos.347 and 351 were sold by the petitioners vide sale deed dated 29.04.2019 to one Shri Natwarlal Hiralal Shah and from the seized document, it was found that the rate prescribed was Rs.2.25 crores per vigha, whereas the property of Survey No.347 was sold at Rs.72,36,056/- as per the sale deed dated 29.04.2019 (Final Plot area of 20671 square meters, which is equivalent to 8.69 Vigha) and (the Final Plot area of the same Survey No.351 i.e. 754 square meters, which is equal to 0.32 Bigha), was sold at Rs.2,63,944/- through the same sale deed dated 29.04.2019. Thus, as per the sale deed, the land was sold for a total of 75 lakhs for Survey Nos.347 and 351, situated at Sitapur whereas, as per the seized document, the value of the immovable property under consideration, the rate is mentioned as 2.25 crores per vigha and hence, it is alleged by the revenue that a huge amount was paid in cash as on-money.
4. Learned advocate Mr.Hardik Vora appearing for the petitioners has submitted that the petitioners, who have already sold their land on 29.04.2019 are sought to be roped in the reassessment proceedings on an entry made in a loose paper in the inquiry Registered on 28.09.2019, which is subsequent and hence the petitioners cannot be held responsible by alleging that he has paid some on-money by cash. It is thus submitted that the entire reopening is premised on an incorrect fact and there is no live link to the alleged rates mentioned in the inquiry Register on a loose paper directly linking to the petitioners and hence the provision of Section 148(4) of the Act would not get attracted.
4.1 Learned advocate Mr.Vora has further submitted that out of these two petitioners (who have sold the land to Natwarlal Hiralal Shah), the third seller Mukesh Prahladbhai Patel was also subjected to reopening proceedings on the basis of the same search ultimately by the assessment order dated 25.03.2026. The Assessing Officer has computed the income as NIL and hence it is submitted that the impugned reopening may be quashed and set aside.
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 provisions 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 regime and hence, as per the decisions 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 which are 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 petitioners 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 of the Act dated 31.03.2025 are as under:
6.1 The entire case of the revenue hinges on the search proceedings as mentioned hereinabove conducted at BSafal group and the statement of Shri Pravinbhai Naghjibhai Bavadiya, who was confronted with the documents found and seized from the office premises of City Assist Management post search. 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 annexure contained the details of lands/plots available for sale at different locations of Ahmedabad and each entry contains 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. The entry made on the loose paper falls from search proceedings, refers to the Survey number of the present petitioners and the rate quoted is 2.25 crores per Vigha and the name is referred as Natwarkaka Shah (pg-35), the same is as under: 28.9.19 Moje- Sitapur
opp. Maruti Suzuki Plant __
S.No. 347, 351
25625__(9 bigha)
Rate- 2.25 Cr per Bigha
Natvarkaka Shah
6.2 It is apparent that the date mentioned in the loose paper is 28.09.2019 whereas, the present petitioners have sold the land on 29.04.2019 to one Natwarlal Hiralal Shah. The petitioners along with Mukesh Prahladbhai Patel vide sale deed dated 29.04.2019 had sold the land. Thus, the petitioners are roped in for reassessment only on the entry which is subsequently made after selling of land to Natwarlal Hiralal Shah. It is not in dispute that Mukeshbhai Prahladbhai Patel, who is also the co-owner of the land and his name figures in the sale deed, was subjected to reassessment and by the assessment order dated 25.03.2026, the income is assessed as NIL.
6.3 . 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 mentioned in the loose-paper is attempted to be imposed upon the petitioner retrospectively to the sale deed registered on 29.04.2019. The statement of Shri Bavadiya does not mention the name of the petitioner. There is no link, even remotely found with Safal Group or City Estate Group. All these aspects are very relevant, and are required to be examined before roping the petitioner in re-assessment. Thus, on these facts, it can be said that the reopening is on vague material and is sought to be applied to the petitioners on the basis of the rate prescribed on a chit which is subsequent to the selling of the land to Natwarlal Hiralal Shah and hence the impugned notice of reopening dated 31.03.2025 issued by the respondent under section 148 of the Act, is required to be quashed and set aside. Subsequently, it is not denied that in case of one of the seller the assessment has resulted into NIL.
7. 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 petitioners.
8. Hence, the writ petition succeeds. The impugned notices issued are quashed and set aside. Rule made absolute.