ELITE COUNTRY DEVELOPERS PVT LTD,NEW DELHI vs. ITO WARD - 8(2), NEW DELHI

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ITA 1422/DEL/2020Status: DisposedITAT Delhi22 May 2025AY 2010-11Bench: SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S. (Judicial Member)4 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the approval granted by the PCIT under Section 151 for reopening the assessment was mechanical, evidenced by phrases like 'yes I am satisfied' or 'approved', indicating a lack of application of mind. Citing High Court precedents, the Tribunal ruled that such mechanical approval invalidates the assumption of jurisdiction under Section 147. Consequently, the entire reassessment proceedings were quashed.

What were the facts?

The assessee, Elite Developers Pvt. Ltd., filed its return for AY 2010-11. Following information about a cash deposit in a third party's account, the AO believed the assessee made undisclosed payments of Rs. 4.69 Cr for agricultural land. An assessment was completed under Section 143(3)/147, adding Rs. 4.69 Cr under Section 68, which was subsequently upheld by the CIT(A).

What were the issues?

Whether the approval granted by the PCIT under Section 151 for reassessment was mechanical and without proper application of mind, thereby invalidating the assumption of jurisdiction under Section 147 of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 68,Section 151

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, DELHI

For Appellant: Ms. Apoorva Bhardwaj, CA
Hearing: 14/05/2025Pronounced: 22/05/2025
1.

This appeal is filed by the Assessee against the order of Commissioner of Income Tax (Appeal) (‘Ld. CIT(A)’ for short)- 3, New Delhi, dated 06.03.2020 for the Assessment Year 2010-11.

2.

Facts in brief: The Assessee has filed its return of income declaring total income at Rs.21,70,269/-. Office of the DIT(I & CI) Chandigarh, stated that cash of Rs.1,54,64,000/- has been deposited in the bank account of Shri Mangal Singh during the FY 2009-10. Consequent to the examination of documents, the AO was of the opinion that the Assessee company has made payment of Rs.4,69,21,625/- for the purchase of agriculture land over and above the cost of land declared in the books of the company. The assessment order came to be passed u/s 143(3)/147 of the Act on 30.12.2017 by making an addition of Rs.4,69,21,625/- u/s 68 of the Income tax Act 1961(‘Act’ for short). Aggrieved by the assessment order, the Assessee preferred an appeal before the Ld. CIT(A) and the Ld. CIT(A) order dated 06.03.2020 dismissed the appeal of the Assessee. As against the order of the Ld. CIT(A), the Assessee has preferred the present appeal.

3.

The Assessee has raised several (revised) grounds challenging the validity of assumption of jurisdiction u/s 147 of the Act together with merits.the ld. Counsel submitted that the AO obtained the approval of PCIT as required u/s 151 of the Act on 29.03.2017, which has been issued in a mechanical manner, wherein, ld. PCIT granted approval without application of mind by writing ‘yes I am satisfied’.

Thus, submitted that the assessment framed in consequence to such mechanical approval deserves to be set-a-side. Therefore, sought for allowing the Appeal.

4.

Per contra, the ld. DR relying on the orders of the lower authorities, submitted that the ld. PCIT has indeed applied his mind and after application of mind, granted sanctioned as required u/s 151 of the Act. Thus, sought for dismissal of the appeal of the Assessee.

5.

We have heard the rival submissions and perused the material available on record.The reasons recorded for reopening the assessment together with the approval granted by the Pr.

Commissioner of Income Tax, Delhi-3 in terms of section 151 of the Act are enclosed in pages 31 to 32 of the Paper Book. On perusal of the Proforma seeking approval u/s 151 of the Act, we find that the ld.PCIT had merely stated that ‘I am satisfied’. This sort of approval granted u/s 151 of the Act was held to be approval granted without application of mind and construed as mechanical by the Hon’ble Madhya Pradesh High Court in the case of CIT Vs. S. Goyenka Lime and Chemicals Ltd reported in 56 taxmann.com 390 (MP HC). The Special Leave Petition (SLP) filed by the revenue against this decision was dismissed by the Hon'ble Supreme Court reported in 64 taxmann.com 313. Further, we find that the Hon’ble Jurisdictional High court in the case of PCIT Vs. NC Cables Ltd reported in 391 ITR 11 (Del) had also held the same, wherein, the approving authority had merely stated “approved” in the Proforma while granting approval in terms of section 151 of the Act. This approval was held by the Hon’ble Jurisdictional High Court to be a mechanical approval. The relevant observation of the Hon’ble Jurisdictional High Court in this regard are reproduced herein:-

11.

Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed.

12.

The substantial questions of law framed are answered in favour of the assessee and against the Revenue. The appeal is dismissed.”

6.

Respectfully following the aforesaid decisions, we hold that the reopening has been made in the instant case by not taking approval u/s 151 of the Act from the competent authority in the manner known to law. Accordingly, the entire reassessment proceedings are hereby quashed. Hence, one of the legal grounds challenging the validity of assumption of jurisdiction u/s 147 of the Act is allowed in the above mentioned terms by quashing the reassessment, the other grounds raised by the Assesseerequires no adjudication and they are left open.

7.

In the result, the appeal of the Assesseeis allowed.

Order pronounced in the open court on 22nd May, 2025

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