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2026 Supreme(SC) 520
SUPREME COURT OF INDIA
J.B. PARDIWALA, K.V. VISWANATHAN, JJ.
Sanand Properties P. Ltd. – Appellant
Versus
Jt. Commr. of I.T. Range 6 And Ors. – Respondents
Civil Appeal No. 9107 of 2012 [Arising out of Special Leave Petition (Civil) No. 22613 of 2012] With Civil Appeal No. 744 of 2013 [Arising out of Special Leave Petition (Civil) No. 17029 of 2012] And Civil Appeal No. 19487 of 2017
Decided On : 12-05-2026
Important Points
(1) Reopening of assessments – Mere intimation by assessee of a transaction does not preclude Assessing Officer from reopening assessment if there is tangible material to prima facie indicate that primary facts regarding true nature of transaction had not been brought to notice of Assessing Officer by assessee.
(2) Duty of disclosing all primary facts relevant to a question before assessing authority lies with assessee and merely producing account books and documents does not fulfil that obligation.
(3) Validity of a reopening must be tested solely on the basis of reasons recorded at the time of issuing notice under Section 148 of I.T. Act. A document not referred to in those reasons recorded under Section 148 cannot be used to justify validity of reopening.
Subject
Taxation - Income Tax Reassessment
Act Referred
Headnote
(B) Reassessment - Scope - Extraneous documents not referred in reasons recorded cannot justify reopening.
(C) Association of Persons - Share of profit versus share of revenue - Clause allocating percentage of gross sale proceeds upfront before expenses - Such amount constitutes revenue share, taxable in hands of member as business receipt - Diversion by overriding title.
Facts of the case:
Assessee, member of AOP for housing project development, declared share from AOP as exempt profit in returns. Scrutiny assessments completed. Post-survey notices for reopening issued alleging receipt as share of gross proceeds not profit. High Court differed on reopening validity across years and on taxability.
Findings of Court:
Reopening notices valid for both years due to tangible material revealing true nature of receipt. Amount equivalent to percentage of gross sale proceeds is revenue share, not profit, hence taxable in assessee's hands.
Issues: Whether reopening of assessments for relevant years was valid and whether amount accrued from AOP is liable to be taxed in hands of assessee.
Ratio Decidendi: The court ruled that duty to disclose primary facts including relevant clauses lies on assessee; mere production of agreement without highlighting key provisions does not amount to full disclosure. Plain reading of clause together with conduct establishes allocation of gross receipts as revenue share taxable separately, not contingent on profit.
Result: Civil Appeals disposed of with reopening upheld and amount held taxable as business receipt.
For the Appellant(s) : Mrs. Anil Katiyar, AOR Ms. Manisha T Karia, Sr. Adv. Ms. Anita Bafna, AOR Ms. Shreya Gupta, Adv. Ms. Ananya Arora, Adv. Mr. Deepin Sahni, Adv. Mr. Vishal Navale, Adv. Mr. Varun Khetwani, Adv.
For the Respondent(s): Ms. Manisha T Karia, Sr. Adv. Ms. Shreya Gupta, Adv. Ms. Ananya Arora, Adv. Mr. Vishal Navale, Adv. Mr. Deepin Sahni, Adv. Mr. Varun Khetwani, Adv. Ms. Anita Bafna, AOR Mr. Raghavendra P Shankar, A.S.G. Mr. Raj Bahadur Yadav, AOR Mr. Karan Lahiri, Adv. Mr. Navanjay Mahapatra, Adv. Mr. Sarthak Karol, Adv. Mr. Priyanka Terdal, Adv. Ms. Manisha T. Karia, Sr. Adv. Mr. Vipin Kumar, AOR Mr. Deepin Deepak Sahni, Adv. Ms. Shreya Gupta, Adv. Ms. Ananya Arora, Adv. Mr. Varun Khetwani, Adv.
| Table of Content |
|---|
| 1. introduction to three connected tax appeals (Para 1 , 2 , 3 , 4 , 5 , 6 , 7) |
| 2. factual background of sppl and aop setup (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15) |
| 3. high court ruling on ay 2007-08 reopening (Para 16 , 17 , 18 , 19 , 20 , 21) |
| 4. high court ruling on ay 2008-09 reopening (Para 22 , 23 , 24 , 25) |
| 5. parallel proceedings and itat high court orders (Para 26 , 27 , 28 , 29 , 30 , 31 , 32 , 33) |
| 6. assessee arguments against reopening and taxability (Para 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43) |
| 7. revenue arguments for revenue share taxability (Para 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54) |
| 8. issues and statutory framework for reassessment (Para 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62) |
| 9. tangible material test for valid reopening (Para 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71 , 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 85 , 86 , 87) |
| 10. clause 7 interpreted as revenue share (Para 88 , 89 , 90 , 91 , 92 , 93 , 94 , 95 , 96 , 97 , 98 , 99 , 100 , 101 , 102 , 103 , 104 , 105) |
| 11. final holdings on reopening and tax liability (Para 106 , 107 , 108 , 109 , 110 , 111 , 112 , 113 , 114 , 115 , 116 , 117 , 118 , 119 , 120 , 121 , 122 , 123 , 124 , 125 , 126 , 127 , 128) |
JUDGMENT :
J.B. PARDIWALA, J.
For the convenience of exposition, this judgment is divided into the following parts:
| INDEX | ||
| A. | FACTUAL MATRIX | |
| (i) (ii) (iii) | The Impugned Order in Civil Appeal No. 744 of 2013 The Impugned Order in Civil Appeal No. 9107 of 2012 The Impugned Order in Civil Appeal 19487 of 2017 | |
| B. | SUBMISSIONS ON BEHALF OF THE PARTIES | |
| (i) (ii) | Submissions on behalf of the Assessee Submissions on behalf of the Revenue | |
| C. | ISSUES TO BE DETERMINED | |
| D. | ANALYSIS | |
| (i) (ii) | Whether the reopening of assessments of the SPPL for the AY 2007-08 and the AY 2008-09, respectively, were valid? (a) Statutory Framework Governing Reassessment under Section 147 and Section 148 of the IT Act, 1961 respectively (b) Meaning and scope of “reason to believe” under Section 147 of the IT Act, 1961 (c) Whether the Assessing Officer had any tangible material or were the reopening of assessments on mere change of opinion? Whether the amount accrued to the SPPL from the AOP, based on Clause 7 of the AOP Agreement dated 29.04.2003, is liable to be taxed in the hands of the SPPL for the AY 2008-09 and the AY 2009-10, respectively? | |
| E. | CONCLUSION | |
| (i) (ii) | Civil Appeal No. 744 of 2013 and Civil Appeal No. 9107 of 2012 Civil Appeal No. 19487 of 2017 | |
1. Since the issues raised in all the three captioned civil appeals arise out of the same set of facts and the parties are also the same, those were heard analogously and are being disposed of by this common judgment and order.
2. We shall treat the Civil Appeal No. 9107 of 2012 as the lead matter. The same has been preferred by the Sanand Properties P. Ltd. (hereinafter referred to as “the SPPL”).
3. Civil Appeal Nos. 744 of 2013 and 19487 of 2017, respectively on the other hand, have been preferred by the Revenue.
4. The central issue involved in these appeals pertains to the validity of reopening of assessment and taxability of the income accrued to the SPPL from the Association of Persons named Fortaleza Developers (hereinafter referred to as “the AOP”), being one of the members of the AOP.
5. Civil Appeal No. 744 of 2013, arises from Writ Petition (C) No. 1647 of 2011 filed by the SPPL before the Bombay High Court, seeking to challenge the reopening of assessment for the AY 2007-08. The High Court, vide its impugned judgment & order dated 23.09.2011, allowed the writ petition and quashed the notice for reopening of assessment for the AY 2007-08, holding that the Assessing Officer had sought to reopen the assessment on mere change of opinion. The High Court held that the Assessing Officer could not have done so, in th
