Gujarat High Court rejects Section 148 reopening where seized broker register showed no live link with assessee’s transaction

Background of the dispute

The Gujarat High Court, in Mrunal Santramdas Varma Vs ACIT (Gujarat High Court), examined the validity of a reassessment notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2021-22.

The assessee had:

  • Filed a return of income for AY 2021-22 on 10.03.2022
  • Declared total income of Rs. 99,65,040/-
  • Jointly purchased agricultural land at Moje Adalaj, bearing Survey Nos. 184 and 182, along with co-purchasers Shri Gauravbhai Santarambhai and Shri Tarunbhai Santarambhai
  • Paid consideration through registered sale deeds dated 01.03.2021 for:
    • Survey No. 184 – Rs. 93,00,000/-
    • Survey No. 182 – Rs. 63,00,000/-

Prior to this purchase, a search under Section 132 was carried out on 28.09.2021 at the premises of B Safal Group and City Estate Management India, a real estate brokerage concern associated with that group. During this search, the department seized “inquiry registers” maintained by broker Shri Pravin Nagjibhai Bavadiya, proprietor of City Estate Management India. These registers contained notings relating to various pieces of land/plots in and around Ahmedabad, giving survey numbers, area and quoted rates.

One particular entry dated 18.06.2020, relatable to Moje Adalaj lands, became the foundation for initiating reassessment proceedings against the assessee.

Basis for issuance of Section 148 notice

Relying on the seized inquiry register, the Assessing Officer recorded a satisfaction note on 18.03.2025, which was approved by the Principal Commissioner of Income Tax-3, Ahmedabad on 22.03.2025. On that basis, a notice under Section 148 was issued on 30.03.2025 for AY 2021-22.

The key seized entry in the broker’s register read:

“18.6.20 | Moje:- Adalaj | B/H, Suramya -1 | S. No. 182,183,184,189,190 | 8.34 – bigha | Rate – 2.70 Q | Krupeshbhai Gajipara”

Treating this as evidence of higher unaccounted value, the Assessing Officer alleged that the assessee had paid on-money of Rs. 3,73,56,434/- in connection with the purchase of Survey No. 182 at Moje Adalaj, computed as the difference between:

  • The consideration declared in the registered sale deed, and
  • The rate mentioned in the above inquiry-register entry.

The assessee lodged detailed objections on 28.01.2026, contesting the reopening and requesting that the reassessment proceedings be dropped. No order was passed on these objections. Consequently, the assessee approached the Gujarat High Court by way of a writ petition challenging the Section 148 notice.

Assessee’s contentions before the High Court

1. Time gap and nature of seized entry

Counsel for the assessee emphasized that the notings in the seized inquiry register were dated 18.06.2020, whereas the actual purchase by the assessee and co-purchasers was concluded much later, on 01.03.2021. The assessee argued:

  • The entry predated the registered sale deeds by around nine months.
  • As per the statement of broker Shri Pravin Nagjibhai Bavadiya under Section 131 recorded on 27.12.2021 and 28.12.2021, these registers merely reflected “land/plots available for sale at different locations near Ahmedabad”.
  • The registers did not document concluded transactions, nor did they identify the ultimate purchaser or seller.

Hence, the assessee contended that the 18.06.2020 noting could not be treated as evidence of any actual on-money transaction involving the assessee in March 2021.

2. Mismatch in survey numbers and land area

The assessee pointed out that:

  • The seized entry covered Survey Nos. 182, 183, 184, 189 and 190, aggregating to 8.34 bigha.
  • By contrast, the assessee and co-purchasers acquired only Survey Nos. 184 and 182, measuring:
    • 2.38 bigha, and
    • 1.62 bigha,
      totalling around 4 bigha.

The presence of three additional survey numbers and double the land area in the register entry, compared with the land actually purchased, was highlighted as a crucial inconsistency. This discrepancy, according to the assessee, demolished the alleged linkage between the seized entry and the impugned purchase.

3. Name in the register unrelated to assessee

The seized entry mentioned “Krupeshbhai Gajipara”. The assessee asserted that:

  • He had no relationship, business or otherwise, with “Krupeshbhai Gajipara”.
  • The department had not conducted any inquiry with that named person, despite his name being the only specific identifier in the register entry.
  • Neither the seized note nor the broker’s statement under Section 131 contained any reference to the assessee or his co-purchasers.

On this basis, it was argued that the jurisdictional requirement that the seized material must “pertain to” or “relate to” the assessee, as contemplated in Explanation 2(iv) to Section 148, was not satisfied.

4. Reliance on earlier Gujarat High Court decisions

To buttress the challenge, the assessee relied on: