HC Sets Aside Section 148 Notice Based on Vague Broker Entries

The petitioner filed his return of income for AY 2021-22, declaring a total income of Rs. 99.65 lakh. He, along with co-purchasers, purchased land at Moje Adalaj through a registered sale deed dated 01.03.2021. A search conducted on 28.09.2021 at the premises of a real estate broker led to the seizure of inquiry registers containing details of land parcels and their asking rates.

Based on an entry dated 18.06.2020 in such a register, reflecting certain survey numbers, area, and a quoted rate, the Assessing Officer alleged that the petitioner had paid an on-money amount of Rs. 3.73 crore. Accordingly, a notice under Section 148 dated 30.03.2025 was issued. The petitioner objected, contending that the entry predated the transaction, related to a larger land area, and did not mention his name. With no disposal of objections, the petitioner approached the High Court.

Central Issue: Whether reassessment under Section 148 can be validly initiated solely on the basis of a pre-transaction entry in a broker’s seized inquiry register, without any direct or live nexus with the assessee.

HC’s Ruling: The High Court allowed the writ petition and quashed the reopening notice, holding that the entire exercise was based on conjectures without any tangible link to the petitioner. The Court observed that the seized entry was dated nearly nine months prior to the actual purchase and merely reflected asking rates of land available for sale. It did not represent a concluded transaction. Further, the entry covered additional survey numbers and a significantly larger area than what was actually purchased, thereby weakening any alleged connection. Crucially, the name appearing in the register was of a third party unrelated to the petitioner, and no inquiry was conducted from such a person.

The statement of the broker also did not refer to the petitioner. These factors cumulatively demonstrated the absence of any direct or indirect nexus between the seized material and the petitioner. The Court reiterated that while the threshold for reopening is “information suggesting escapement”, there must still exist a live link between such information and the assessee. In the absence of such a nexus, the jurisdictional requirement fails. Therefore, the impugned notice under Section 148 was held to be unsustainable and was set aside.

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