Sanchayita Lahkar

The High Court of Gujarat Division Bench of Justice A.S. Supehia and Justice Pranav Trivedi quashed a series of notices issued by the Assessing Officer under Section 153C of the Income Tax Act for Assessment Years 2014-15 to 2020-21, thereby allowing the writ petitions filed by the assessee. The Court held that material gathered from open public sources, or documents taken from a searched third party that bear no concrete link to the assessee, cannot by itself form the foundation for a show cause notice under Section 153C. The case arose from a challenge to notices dated 13.10.2021, which were based on digital data recovered during a search on a land broker and alleged undisclosed investment in a land transaction.

The petitions arise from notices issued under Section 153C of the Income Tax Act dated 13 October 2021 for Assessment Years 2014–15 to 2020–21. A search was conducted on 15 October 2019 in the Land Broker & Financer Group, during which digital images from the mobile phone of an individual were acquired. Based on this material, the Assessing Officer recorded satisfaction and issued show-cause notices to the petitioners.

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The petitioners filed returns in October 2021 and sought copies of the satisfaction notes, which were supplied on 8 November 2021. They objected to the notices on 17 November 2021. Further notices under Section 142(1) were issued on 9 July 2022 and 18 February 2023, and the petitioners submitted replies. The petitioners contended that the documents relied upon during the search did not relate to them, asserting that the MoU found in the mobile data referred to a proposed transaction between other parties, without naming the petitioners. They argued that the Assessing Officer presumed undisclosed investment merely by comparing a sale deed from public records with the MoU recovered during the search.

The respondent opposed the petitions, submitting that the names of the petitioners were revealed during the proceedings, and therefore the satisfaction recorded fulfilled the statutory requirements under Section 153C.

The Court recorded that on 15 October 2019 a search was conducted and “images of an MoU of land bearing Survey No. 329 were recovered” from the mobile device of the searched individual. It observed that “the MoU does not bear the name of the petitioners anywhere” and that the satisfaction note was recorded on 11 October 2021. The Bench stated that “the search against Shri Dhaval Teli and the satisfaction note have no link which embroils the petitioners into the assessment proceedings.”

It was further recorded that the MoU referred to a sale consideration of ₹39.32 crore, including ₹1 crore allegedly paid in cash, but “the name of the petitioners does not figure in the MoU.” The Court stated that the Assessing Officer had “ascertained from the ‘public domain’ that the said land was purchased by the petitioners” and presumed that the seller could not have sold the land for ₹12 crore without receiving on-money.

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The Court noted that the broker had asserted in his statement that he did not broker the deal and had only supplied forms after the search. It recorded that these forms “were not seized during the search but were handed over... post search.” The Court observed that “there was no incriminating material found during the search having a direct nexus with the petitioners” and that the material gathered thereafter could not be considered material pertaining to the petitioners under Section 153C. It concluded that “the search conducted... did not yield any document relating to undisclosed income ‘relating to’ or ‘pertaining to’ the petitioners.”

The Court directed that “the impugned notices are hereby quashed and set aside. The present writ petitions stand allowed. Rule made absolute.”

Advocates Representing the Parties
For the Petitioners: Mr. B. S. Soparkar, Advocate
For the Respondents: Mr. Varun K. Patel, Standing Senior Counsel

Case Title: Sandhya Maulik Patel v. Assistant Commissioner of Income Tax, Central Circle 2(3), Ahmedabad
Neutral Citation: 2025: GUJHC:68116-DB
Case Number: Special Civil Application No. 4162 of 2023
Bench: Justice A.S. Supehia and Justice Pranav Trivedi