Sanjay Garg, Judicial Member and Narendra Prasad Sinha, Accountant Member of the Income Tax Appellate Tribunal (ITAT) Ahmedabad recently provided relief to Mr Patel, whose land was illegally sold for a hefty cash by some unscrupulous individuals who forged his signatures on the sale deed.
This land is located in Hanspura Village and was purchased in 2005 by Patel and some of his friends. Patel hails from Saijpur Bogha, Ahmedabad, Gujarat. However, on July 25, 2014 a notorious land grabbing gang sold Mr Patel’s land for Rs 6.82 crore in cash by forging his signature on the sale deed.
Patel was completely unaware of this fraud, and also the gang did not use Patel’s PAN number in the sale deed. On December 29, 2015, Patel filed his income tax return (ITR), declaring an income of Rs 1.37 lakh.
Later, the tax department’s investigation wing got to know about this sale and Patel received an income tax notice for failing to report this land sale transaction and not paying the tax on it. After this, the Income Tax Assessing Officer (AO) acting on information from the Tax Investigation Wing reopened his case file under Section 147 and started his assessment.
In the time between the illegal sale and the tax notice, Patel learned about the fraudulent sale of his co-owned land. Once he became aware of the fraud, he took legal action and filed a fraudulent sale case in civil court, which is currently pending in the Gujarat High Court.
it’s important to note that the tax aspect is separate from the land title case which is pending in high court and this article focuses on the tax dispute aspect.
Returning to the tax issue, after Patel received the tax notice, the assessment proceedings started. During this process, Patel clarified that neither did he sell the land to anyone nor was any Power of Attorney (POA) executed in favour of any person for selling the land.
He also explained that the sale deed was executed using POA and forged signatures by a notorious land grabbing gang. He told the tax department that he had filed a special civil suit in the court of the Principal Senior Civil Judge, Ahmedabad (Rural), Mirzapur and this civil court had passed an order on June 3, 2020, declaring the sale deed as void. However, the land buyers filed an appeal in the Gujarat High Court.
This appeal by the land buyers before the Hon’ble Gujarat High Court is still pending and thus the dispute about the title of the land was still unresolved. As a result, the Income Tax Assessing Officer (AO) he made a protective addition to Patel’s income regarding the capital gain from the land sale.
The AO treated the entire proportionate sale proceeds of Rs 3.41 crore as Patel’s income and completed the assessment under Section 147 read with Section 144B, on September 25, 2021. On April 21, 2026 Patel won the case in ITAT Ahmedabad. R B Patel represented Mr Patel before ITAT Ahmedabad.
Mihir Tanna, associate director, S.K Patodia LLP says that a protective attachment is a temporary measure done by the Income TaxDepartment to secure potential tax demands. It is invoked during the pendency of assessment, reassessment, or specific penalty proceedings when the Assessing Officer is of the view that the tax payer might dispose of property before theprobable income tax demand can be collected. This power is exercised with prior approvalfrom prescribed authorities.
Tanna says: “Once the assessment is complete, theprovisional attachment ceases, and regular recovery proceedings will continue if a demand isconfirmed. Usually such power is exercised based on tangible material.”
Also read: Flipping farm land for cash? ITAT’s ruling may close India’s oldest black money trick
ITAT Ahmedabad judgement discussion
A summary of the judgement is as follows:
Sale deed was signed on the basis of a forged POA
ITAT Ahmedabad said in its judgement dated April 21, 2026 that there is no dispute to the fact that the sale deed on the basis of which addition for capital gain was made in Patel’s hands of the, was declared as void by the Principal Senior Civil Judge, Ahmedabad [Rural], Mirzapur via an order dated June 3, 2020.
ITAT Ahmedabad said thus it transpires that the sale deed was effected on the basis of a forged POA and forged signature and the PAN-card of the assessee was not enclosed with the sale deed. Moreover, the entire sale consideration of Rs 6.82 crore was allegedly paid in cash for which no receipt mentioning Mr Patel was brought on record before the court.
Therefore, the Principal Senior Civil Judge had held “the registered sale deed was void due to non-payment of consideration amount and due to fraud exercised by defendants in the registration of the documents”.
In view of this specific finding, ITAT Ahmedabad said the AO should have examined the payment of consideration amount by the buyers before making any addition to Patel’s income.
However, the AO made no enquiries from the buyers about their source of payment for this much cash. The Income Tax Department also did not provide any evidence that they had initiated any proceeding against the buyer(s) to examine their source of investment.
ITAT Ahmedabad said: “Merely because the buyers had filed an appeal before the Hon’ble Gujarat High Court and the title of the land under question was still under dispute, the AO was not correct in making the addition on account of capital gain in the hands of the assessee, even on a protective basis.”
District judge has declared the sale deed void
It is an undisputed fact that the sale deed on the basis of which the addition of capital gain was made has been declared as void.
ITAT Ahmedabad said the protective addition made in Patel’s hands was to protect the interest of revenue in case the Hon’ble Gujarat High Court decided the ownership of the land against Patel. In the present case, the reassessment proceeding to tax the capital gain on sale of the land was already initiated by the AO within the prescribed time limit.
Therefore, ITAT Ahmedabad said the Income Tax Department will be free to initiate proceedings under Section 283 of the Income Tax Act, 2025 in accordance with the findings of the Hon’ble Gujarat High Court. Hence, the apprehension of the Income Tax Department is unfounded.
Tax department has not shown evidence that Patel got the money
Moreover, there is no evidence that Patel had got any of this money in respect of the land sale.
Lastly, ITAT Ahmedabad said the AO was not correct in treating the entire sale consideration of Rs 3.41 crore as capital gain arising to the assessee, without allowing any deduction towards cost of acquisition.
ITAT Ahmedabad said: “The land was purchased by assessee in the year 2005 and the AO should have allowed deduction for cost of acquisition, even if he wanted to tax the capital gain on a protective basis.”
Order:
- The fact remains that no capital gain arose in the hands of the assessee (Patel) as the sale transaction was declared as void. Therefore, the addition of Rs 3,41,26,500 as made by the assessee (Patel) on account of LTCG on sale of land, is deleted.
- The grounds taken by the assessee (Patel) are allowed.
- In the result, the appeal of the assessee is allowed. Order pronounced in the Court on April 21, 2026 at Ahmedabad, Gujarat, India.
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