Reopening based on a vague loose paper chit lacking a live link to the assessee is invalid.
Issue
Whether the Revenue can validly initiate reassessment proceedings under Section 148 based on a vague loose paper chit seized from a third party that lacks identifiable names or figures, without establishing a direct, live link between the seized material and the assessee.
Facts
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A search operation was conducted by the Income Tax department on an unrelated third party.
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During the search, authorities seized a loose paper chit dated August 11, 2017, which referenced “Survey No. 101 at Moje Shela”.
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The assessee subsequently purchased the referenced land through a registered sale deed on October 12, 2021, for Assessment Year 2022-23.
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Relying on the rates scribbled on the loose paper and a broker’s statement, the Assessing Officer issued a reopening notice under Section 148.
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The Assessing Officer inferred that the difference between the land value calculated from the loose paper and the actual registered sale consideration represented unexplained cash “on-money” paid by the assessee under Section 69.
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Upon closer inspection, it was revealed that the seized loose paper contained no names of the parties, no identifiable financial figures, and the calculations were merely based on data collected from ‘Any RoR’ (a public Government land records website).
Decision
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Live Link Mandated: Held, yes. The court ruled that the Revenue must establish a clear, direct, and live link between the specific assessee and the incriminating material seized from a third party before reopening an assessment.
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Information Vague and Unspecific: Held, yes. Since the loose paper chit contained no specific names or definitive figures linking it to the transaction or the assessee, the information used by the Assessing Officer was deemed entirely vague and speculative.
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Reopening Quashed: Held, yes. Because the incriminating material failed to establish any connection with the assessee, the impugned reopening notice and the resulting proceedings were quashed and set aside in favor of the assessee.
Key Takeaways
Strict Material Nexus: The Income Tax department cannot initiate reassessment actions based on random documents or rough jottings found at a third party’s premises unless they have corroborating evidence that directly ties the taxpayer to those recordings.
Public Records vs. Incriminating Evidence: Rough calculations or notes derived from public government websites (like ‘Any RoR’) do not automatically constitute incriminating evidence of hidden cash or “on-money” exchanges unless actual under-the-table cash flow can be factually proven.
HIGH COURT OF GUJARAT
Sagar Mukesh Sheth
v.
A.S. Supehia and Maulik J. Shelat, JJ.
R/SPECIAL CIVIL APPLICATION NO. 7026 of 2026
MAY 8, 2026
A.S. Supehia, J.- RULE returnable forthwith. Learned Senior Standing Counsel Mr.Maunil Yajnik, waives service of notice of rule for respondents.
2. The present writ petition has been filed challenging the notice issued under Section 148 of the Income Tax Act, 1961 (for short, “the Act”) dated 27.03.2026.
3. The petitioner filed his return of income for Assessment Year 2022-23. 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.
4. 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.
5. Learned Senior Advocate Mr.Soparkar, appearing with learned advocate Mr.Manya Anjaria, for the petitioner has submitted that the seized material has no nexus with the transaction carried out by the petitioner. It is submitted that the respondent has relied upon seized material referring to a sale deed dated 12.10.2021 and has adopted a rate of Rs.17,000/- per sq. yard solely from the loose paper and on that basis to concluded the property rate at Rs.16,00,11,502/-, hence a huge amount of on-money was paid in cash.
6. It is further submitted that the petitioner purchased the land on 12.10.2021, which was non-agricultural land, and that the respondent- authority has relied upon wholly irrelevant and incorrect facts, as the petitioner had no transaction dated 11.08.2017. Hence, the seized material has no nexus with the petitioner, and the entire payment for the land purchased on 12.10.2021 was made through banking channels.
7. It is submitted that the petitioner had not entered into any transaction with Bsafal Group, City Estate Management India, or City Procon Realtors Private Limited. The petitioner had purchased the parcel of agricultural land situated at Shela during the year under consideration. The said land was purchased for a total consideration of Rs.2,00,00,000/-.
8. It is further submitted that the seized material is dated 11.08.2017, whereas the petitioner purcahsed the non-agricultural land on 12.10.2021, which is subsequent to the date reflected in the seized material. Thus, the petitioner has no connection whatsoever with the said material, and there is no live link between the seized material and the petitioner.
9. In support of his submissions, learned Senior Advocate Mr.Soparkar, has placed reliance on the judgment of this Court in the case of Naliniben Jagdishkumar Gandhi v. ITO (Gujarat).
10. Vehemently opposing the present writ petition, the submissions advanced as recorded here-in-above, the learned Senior Standing Counsel Mr. Maunil Yajnik 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.
11. 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 regime and hence, as per the decision of the Supreme Court in the case of Raymond Woollen Mills Limited v. ITO [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 the stage of issuance of notice.
12. Further reliance is also placed by learned Senior Standing Counsel Mr.Maunil Yajnik on the decision of the Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. 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.
13. Reliance is also placed on the decision of the Supreme Court in the case of Anshul Jain v. Pr. CIT 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.
14. We have heard the learned advocates appearing for the respective parties at length.
15. A search under Section 132 of the Act 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 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. From the seized material, a loose paper chit was found, which makes reference to Survey No.101 situated at Moje Shela, which was purchased by the petitioner on 12.10.2021. The relevant contents of the said chit are as under:
| 11.08.17 102 | Moje:- Shela | TP 3 S.No.39, 6000 s.y Rate:19,500/- ” 64/B 14352 s.y Rate: 17,000/- ” 101, 7395 s.y Rate: 17,000/- ” 465,20449 s.y Rate: 17,000/- P.N. Bavadiya |
16. Thus, the Assessing Officer, after calculating the amount per square yard on the basis of the figures referred to in the chit, concluded that the total value was Rs.16,00,11,502/-. By comparing the said amount with the sale consideration of Rs.2,00,00,000/- reflected in the sale deed dated 12.10.2021, it was further concluded that the differential amount had been paid in cash as “on-money”. The respondent has, however, not established any connection.
17. A bare perusal of the chit reveals that it does not contain any names or identifiable figures, and the same is dated 11.08.2017. After a gap of almost four years, the petitioner purchased the land vide sale deed dated 12.10.2021. We fail to understand how the Assessing Officer has alleged payment of “on-money” by the petitioner after four years, by arriving at a rate of Rs.17,000/- per square yard. The entire calculation appears to have been made on the basis of data collected from “Any RoR”, a Government website reflecting details of sale deeds. The respondents have also not disputed that the transaction undertaken by the petitioner was in accordance with his share. The survey number mentioned in the loose paper is linked with the petitioner by the revenue by gathering information from the government Website “Any RoR”, 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 after a period of four years on the basis of sale deed registered on 12.10.2021. The statement of Shri Bavadiya does not mention the name of the petitioner. There is no link, even remotely, found with Bsafal Group or City Estate Management India or City Procon Realtors Private Limited. All these aspects are very relevant, and are required to be examined before roping the petitioner in re-assessment. Thus, in our considered opinion, the provisions of Section 148 of the Act are not attracted, hence the action of the respondents in re-opening of the assessment requires to be quashed.
18. We are conscious about the legal precedent as set out by the Supreme Court in the decisions which are cited by the revenue. At the stage of notice of re-opening of the assessment, 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.
19. The writ petition, accordingly, succeeds. The impugned notice under Section 148 of the Act dated 27.03.2026 is quashed and set aside. Rule made absolute.