Gujarat High Court invalidates Section 148 notice issued only on basis of broker’s inquiry register

Background of the dispute

The Gujarat High Court, in Tarun Santramdas Varma Vs ACIT, examined the validity of a reassessment initiated under Section 148 of the Income Tax Act 1961 for Assessment Year 2021-22. The assessee challenged a notice dated 30.03.2025 issued for reopening his assessment on the allegation that he had paid substantial on-money for purchase of immovable property.

The assessee had filed his return of income on 10.03.2022 declaring a total income of Rs.1,10,58,190/-. He, along with two joint purchasers, acquired agricultural land at Moje Adalaj, bearing Survey Nos. 184 and 182, through a registered sale deed dated 01.03.2021. The consideration recorded in the deed was:

  • Rs. 93,00,000/- for Survey No. 184, and
  • Rs. 63,00,000/- for Survey No. 182.

Subsequently, a search operation under Section 132 was conducted on 28.09.2021 at the premises of B Safal Group and at City Estate Management India, a real estate brokerage concern. During that search, the Revenue seized what were described as “inquiry registers” maintained by the broker. These registers contained details of various lands in and around Ahmedabad such as survey numbers, area, and indicated rates or asking prices.

In one such register, an entry dated 18.06.2020 relating to land at Moje Adalaj became the fulcrum of the reassessment proceedings against the assessee. The Revenue claimed that this entry indicated a higher rate than the price disclosed in the registered sale deed, and therefore alleged that the assessee had paid unaccounted on-money of Rs.3,73,56,434/- in connection with Survey No.182.

Basis of reopening under Section 148

Search and seized material

During the search at City Estate Management India, several pages from the broker’s inquiry registers were seized. The particular entry relied on by the Assessing Officer (AO) read as follows:

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

From this entry, the AO inferred that the land parcels including Survey Nos. 182 and 184 were being dealt with at a rate significantly higher than the consideration disclosed in the assessee’s sale deed, and that the difference represented unaccounted consideration (on-money).

Relying on this material, the AO recorded a satisfaction note on 18.03.2025. This note was approved by the Principal Commissioner of Income Tax-3, Ahmedabad on 22.03.2025. Thereafter, a notice under Section 148 dated 30.03.2025 was issued, alleging escapement of income of Rs.3,73,56,434/- in the hands of the assessee for AY 2021-22.

The assessee filed detailed objections to the reassessment proceedings on 28.01.2026, contending that the material relied upon by the Revenue did not pertain to him and that there was no live nexus between the seized document and his transaction. No order disposing of those objections was passed, prompting the assessee to approach the High Court under Article 226.

Assessee’s contentions

1. Entry predates actual purchase and reflects only market enquiry

Counsel for the assessee highlighted that the critical register entry is dated 18.06.2020, whereas the assessee’s purchase was effected by a registered sale deed on 01.03.2021—approximately nine months later.

Further reliance was placed on the statement of the broker, Shri Pravin Nagjibhai Bavadiya, recorded under Section 131 on 27.12.2021 and 28.12.2021, where he clarified that the inquiry registers merely recorded details of:

“land/plots available for sale at different locations near Ahmedabad”

and did not capture actual concluded transactions or the names of the parties to such transactions. According to the assessee, this meant the entry was nothing more than a market survey or indicative listing, and not evidence of any specific transaction involving him.

2. Mismatch in survey numbers and area

The seized entry refers to five survey numbers and total land area far exceeding what the assessee purchased:

  • Register entry: Survey Nos. 182, 183, 184, 189 and 190 totaling 8.34 bigha
  • Actual purchase: only Survey Nos. 184 (2.38 bigha) and 182 (1.62 bigha) totaling about 4 bigha.

This significant variance in both the number of plots and the extent of land, according to the assessee, destroyed any credible nexus between the seized entry and his specific purchase transaction.

3. Name in the register unrelated to assessee

The noting in the register mentioned the name “Krupeshbhai Gajipara”.