Facts
The petitioner, a Hindu Undivided Family (HUF), filed its Income Tax Return (ITR-3) for Assessment Year (A.Y.) 2012-13, which was processed under Section 143(1) of the Income Tax Act
Source reference: p. 7The petitioner also filed a Wealth Tax return for the same year disclosing the purchase of land in Vadodara
Source reference: p. 2The Assessing Officer (AO), upon reviewing the Individual Transaction Statement (ITS), discovered that the petitioner purchased immovable property for ₹2,22,07,564, involving a cash payment of over ₹1.02 Crores
Source reference: p. 4Finding that the disclosed income was only ₹5,30,090, the AO issued a notice under Section 148 on 29.03.2019, believing income had escaped assessment
Source reference: p. 4-5The petitioner challenged the notice and the subsequent rejection of their objections dated 09.11.2019
Source reference: p. 2Issues
1. Whether the disclosure of a transaction in a Wealth Tax return constitutes full and true disclosure for the purpose of Income Tax assessment to bar reopening under Section 147
Source reference: p. 7 / para. 10.22. Whether the Assessing Officer had "reason to believe" that income chargeable to tax had escaped assessment under Section 147
Source reference: p. 8 / para. 123. Whether the requisite sanction under Section 151 of the Act was validly obtained
Source reference: p. 10 / para. 14Law Applied
The court applied Section 147 of the Income Tax Act, 1961, which empowers the Assessing Officer to reassess income if there is "reason to believe" it escaped assessment
Source reference: p. 8It specifically invoked Explanation 2(b) to Section 147, which deems income to have escaped assessment where a return is furnished but no formal assessment is made and income is understated
Source reference: p. 8-9The court relied on the Supreme Court precedent in Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers (P) Ltd. regarding the prima facie nature of "reason to believe" at the notice stage
Source reference: p. 5Sanand Properties P. Ltd. vs. Jt. Commr. Of I.T. [2026 INSC 472] regarding the scope of "escaped assessment" even in cases without active concealment
Source reference: p. 9Section 151 was applied regarding the mandatory prior sanction from the Principal Commissioner
Source reference: p. 10Reasoning
The court reasoned that since the original return was only processed under Section 143(1) and not scrutinized under Section 143(3), the AO was well within his rights to reopen assessment based on tangible material (the ITS data) suggesting under-assessment
Source reference: p. 7-9The court rejected the petitioner's argument that disclosure in a Wealth Tax return satisfied the duty of disclosure for Income Tax, holding that the onus lies on the assessee to explain the source of funds (specifically the ₹1.02 Crore cash payment) in the Income Tax proceedings
Source reference: p. 10The court found a stark discrepancy between the disclosed income of ~₹5 Lakhs and the investment of ~₹2.22 Crores, providing a sufficient "prima facie" basis for reopening
Source reference: p. 6-8Regarding procedure, the court verified the original record and found that the Principal CIT had recorded satisfaction that the case was "fit for issue of notice," fulfilling the requirements of Section 151
Source reference: p. 10Holding
The Court held that the AO is not deemed to have noticed facts disclosed in a separate Wealth Tax return and that the ingredients for reopening under Section 147 were satisfied
The court concluded that the reassessment proceedings were necessary to verify the genuineness and source of the investment and should not be scuttled at the preliminary stage
Source reference: p. 6, 10Final order: Writ petition rejected
Source reference: p. 10Original Court PDF
VIRENDRA NAGINBHAI PATEL (HUF)vsTHE INCOME TAX OFFICER WARD 1(2)(5)
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