Gujarat High Court Quashes Section 148 Reassessment: Broker's Asking-Rate Entry in Inquiry Register Cannot Establish On-Money Payment Without Direct Nexus to Assessee

1. Background and Context

A common judgment delivered by the Gujarat High Court in Sanjaykumar Amrutlal Patel Vs ITO (Gujarat High Court), arising from R/Special Civil Application No. 13210 of 2026 and two companion petitions, addressed a critical question about the jurisdictional threshold for reopening assessments under Section 148 of the Income Tax Act, 1961. The decision, dated 08.10.2026, examined whether a pre-transaction entry in a broker's seized inquiry register — recording merely an asking rate for properties available for sale — could serve as a valid basis to allege undisclosed on-money payment and trigger reassessment proceedings.

The Court quashed the impugned Section 148 notices issued on 18.03.2026 for Assessment Year 2022–23, holding that reopening grounded entirely on a seized register entry, without a live and direct nexus connecting that entry to the assessee's actual transaction, amounts to nothing more than conjecture and surmise.

2. The Transaction and the Assessees Involved

Three assessees filed the present writ petitions under Article 226 of the Constitution of India. All three, along with twelve other joint purchasers, had acquired non-agricultural land at Moje Bhadaj, Survey No. 509/A, Ahmedabad, admeasuring 8,182 square metres (equivalent to 9,786 square yards). The sellers were (i) Gordhandbhai Ranchhodbhai HUF, (ii) Chandubhai Jadavbhai Korat, and (iii) Shaileshbhai Babubhai Shah, and the registered sale deed was executed on 01.06.2021 at Index No. 10519, recording a consideration of ₹6,13,65,000/–.

The lead petitioner, Sanjaykumar Amrutlal Patel, had filed his Return of Income for AY 2022–23 on 23.09.2022, declaring total taxable income of ₹34,93,910/–. The second petition was filed by the widow of a deceased assessee who had filed his return on 08.09.2022 reflecting taxable income of ₹45,71,260/–, while the third assessee filed his return on 11.10.2022 declaring total income of ₹40,60,300/–. Since the approval order with full facts was available only in the lead matter, the Court borrowed facts from Special Civil Application No. 13210 of 2026 for the consolidated analysis.

3. Origin of the Reassessment: The Search and the Seized Register

The genesis of the reassessment lay in a search and seizure operation conducted under Section 132 of the Income Tax Act, 1961 on 28.09.2021 at the premises of B Safal Group and City Estate Management India, a real estate brokerage entity. During this search, the Department seized inquiry registers from the premises of City Estate Management India. These registers contained particulars of land and plots available for sale across various locations near Ahmedabad — including addresses, names, survey numbers, areas, and asking rates.

Within one such register, the following entry dated 16.01.2020 was found:

"16.01.2020 | Moje:- Bhadaj(Science Park) Nr. Canal Road, TP 301, FP 147/1, 152, 133/1, 130/2, 135/2+ 48, Survey No. 544/B, 544/A/2, 509/A, 506, 538, 514 71,000-s.y. with N.A. Rate : 40,000/- (S. No.) Bro Harshad Patel, Owner Sharadbhai …"

Based solely on this entry, the Assessing Officer recorded a satisfaction note on 02.03.2026. The Principal Commissioner of Income Tax-3, Ahmedabad granted approval on 18.03.2026, following which the impugned Section 148 notice was issued on the same date. The Assessing Officer alleged that the lead petitioner had paid on-money of ₹1,87,14,508/– (representing his stated 5.67% share of an aggregate alleged difference of ₹33,00,61,880/–), computed as the difference between the registered sale deed consideration and the rate quoted in the inquiry register entry of January 2020. Detailed objections filed by the petitioner on 30.06.2026 remained undisposed, prompting the present writ petitions.

4. Arguments Advanced by the Petitioners

Counsel for the petitioners raised several pointed objections to the validity of reopening:

  • The inquiry register entry is dated 16.01.2020, whereas the actual purchase transaction was completed by registered deed on 01.06.2021 — a gap of approximately one and a half years. A pre-transaction entry cannot logically record a transaction that had not yet occurred.

  • The broker himself, Shri Pravin Nagjibhai Bavadiya, proprietor of City Estate Management India, in his statement recorded under Section 131 of the Act on 27.12.2021 and 28.12.2021, explained that the inquiry registers contain details of "land/plots available for sale at different locations near Ahmedabad" — confirming these are market survey notes, not records of concluded transactions.

  • The register entry covers six survey numbers and a combined area of 71,000 square yards, whereas the petitioners purchased only Survey No. 509/A admeasuring 9,786 square yards. The mismatch in both scope and area is substantial.