Case Note & Summary
The petitioner, Gopal Bhachabhai Jatiya, filed a Special Civil Application under Article 226 of the Constitution of India before the Gujarat High Court challenging a reassessment notice issued under Section 148 of the Income Tax Act, 1961 by the Income Tax Officer, Ward-1, Gandhidham. The dispute arose from two sale deeds dated 28.08.2018 and 29.08.2018, which were allegedly executed by fraudulent persons. The petitioner contended that these sale deeds had been cancelled by a competent court and the consideration paid had been reversed. The petitioner placed on record the cancelled registered sale deeds from page 86 onwards of the writ petition. The court, on 17.02.2026, directed the Assessing Officer to file an affidavit dealing with these aspects. In compliance, the respondent filed an additional affidavit dated 23.02.2026, wherein it was stated that the documents appeared to be cancellation of registered sale deeds by a competent court with effect on revenue records and reversal of transaction consideration, but these documents were not provided during the Section 148A proceedings. The court, after hearing both sides, observed that since the sale deeds had been cancelled and the consideration reversed, the very basis for the reassessment proceedings ceased to exist. The court quashed the reassessment notice and allowed the petition. The judgment was delivered by a Division Bench comprising Honourable Mr. Justice A.S. Supehia and Honourable Mr. Justice Pranav Trivedi on 24.02.2026.
Headnote
A) Income Tax - Reassessment - Section 148 of Income Tax Act, 1961 - Cancellation of Sale Deeds - The petitioner challenged a reassessment notice issued under Section 148 of the Income Tax Act, 1961, on the ground that the sale deeds which formed the basis for the alleged income escaping assessment had been cancelled by a competent court and the consideration reversed. The court held that since the sale deeds were cancelled due to fraud and the consideration reversed, the very basis for the reassessment proceedings ceased to exist, and the notice was liable to be quashed. (Paras 1-5) B) Income Tax - Reassessment Proceedings - Section 148A of Income Tax Act, 1961 - Non-production of Documents - The respondent authority contended that the documents regarding cancellation of sale deeds were not produced during the Section 148A proceedings. However, the court noted that the additional affidavit filed by the respondent acknowledged the cancellation and reversal of consideration, and thus the reassessment notice could not be sustained. (Paras 3-5)
Issue of Consideration
Whether a reassessment notice under Section 148 of the Income Tax Act, 1961 can be sustained when the sale deeds, which formed the basis for the alleged income escaping assessment, have been cancelled by a competent court and the consideration reversed
Final Decision
The court quashed the reassessment notice under Section 148 of the Income Tax Act, 1961 and allowed the petition. Rule made absolute.
Law Points
- Reassessment notice under Section 148 of Income Tax Act
- 1961 cannot be sustained when the underlying transaction (sale deed) has been cancelled by competent court and consideration reversed
- as the basis for alleged income escaping assessment vanishes
