REASSESSMENT QUASHED WHERE REOPENING IS SOLELY PREMISED ON UNVERIFIED THIRD-PARTY ALLEGATIONS WITHOUT INDEPENDENT INVESTIGATION

The Petitioner purchased a parcel of land at Village Tajpur (Survey No. 105) in 2016 and subsequently finalized a settlement/sale deed with the original owners (the Trivedi family) in October 2019 for Rs. 80,00,000.

For Assessment Year 2020-21, the Petitioner declared an income of Rs. 21,86,120.

Following a survey under Section 133A on a separate entity (M/s. Crown Decor Pvt. Ltd.), authorities found a PDF of an undated, unsigned draft complaint by a broker (Ramesh Suthar) on an employee's phone.

The Revenue Department alleged the Petitioner paid an additional Rs. 4.68 Crores in cash to settle land disputes, based on this draft complaint and a screenshot of an image of a handwritten note.

Consequently, the Respondent issued a notice under Section 148A(1) and an order under Section 148A(3) to reopen the assessment.

1. Whether the Revenue Department can initiate reassessment proceedings under Section 148 of the Income Tax Act based solely on a draft, undated complaint found in the digital device of a third party not connected to the assessee.

2. Whether the "reason to believe" that income has escaped assessment can be based on surmises, conjectures, and unverified allegations without independent investigation or summoning the author of the incriminating document.

The court applied the procedural and substantive requirements for reassessment under Sections 148 and 148A of the Income Tax Act, 1961.

The core principle applied is that the "information" suggesting escapement of income must be reliable and have a direct nexus with the assessee; reopening cannot be premised on "conjectures and surmises" or "hearsay" documents found during a search on entities with which the Petitioner has no connection.

The Court observed that the entire Revenue case rested on a PDF of an undated complaint found on the mobile phone of an employee of "Olympic Decor LLP," whereas the survey was conducted at "M/s. Crown Decor Pvt. Ltd".

It was established that the Petitioner had no connection to these entities or the employee, Shri Praful Bhatt.

Crucially, the author of the complaint (Ramesh Suthar) was never summoned or questioned by the Assessing Officer to verify the claims of cash transactions.

The Court noted that despite recording statements from the Petitioner and the seller (Mr. Trivedi), nothing was found to substantiate the alleged cash payments.

Furthermore, the screenshot/image of a cash receipt did not indicate the recipient or the Petitioner’s involvement.

The Court found a total lack of a "direct link" between the search material and the Petitioner.

The Court quashed and set aside the notice under Section 148A(1), the order under Section 148A(3), and the consequential notice under Section 148 of the Income Tax Act.

Rule was made absolute in favor of the Petitioner.