High Court Quashes Reopening Based on Broker Register Without Nexus

The petitioner filed his return for AY 2021-22, declaring income of Rs 1.10 crore and had purchased certain land at Adalaj along with co-purchasers through a registered sale deed dated 01.03.2021. Subsequently, a search conducted on a real estate broker led to the seizure of “inquiry registers” containing details of land parcels and indicative rates. Based on an entry dated 18.06.2020 in such a register, the Assessing Officer alleged that the petitioner had paid on-money of Rs. 3.73 crore and issued a notice under Section 148.

The petitioner challenged the notice, contending that the register entry merely reflected indicative market rates, predated the actual transaction by several months, covered different survey numbers and larger land area, and even mentioned a third party unrelated to him. No independent inquiry or material linked the petitioner to the alleged transaction.

Main Issue: Whether reassessment under Section 148 can be initiated solely on the basis of a broker’s seized inquiry register without any direct or live nexus with the assessee.

HC’s Decision: The High Court allowed the writ petition and quashed the reassessment notice. It held that the entire reopening was founded on conjectures, as the seized register entry did not establish any credible link with the petitioner. The Court observed that the entry relied upon merely reflected a prior market inquiry and not an actual transaction, especially when it predated the purchase by nine months. Further, significant discrepancies in survey numbers, land area, and the presence of an unrelated person’s name weakened the Revenue’s case.

Even the broker’s own statement clarified that such registers only contained general property details and not concluded deals. Importantly, the Court emphasised that while the threshold for reopening is “information suggesting escapement”, there must still exist a live and tangible nexus between the material and the assessee. Mere similarity of survey numbers or vague assumptions cannot substitute this requirement. In the absence of any direct or indirect connection, the invocation of Section 148 was held to be unsustainable.

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