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Facts
The Assessing Officer (AO) reopened the assessment for AY 2015-16 to investigate Long Term Capital Gains (LTCG) claimed as exempt under section 10(38) of the IT Act. The AO suspected the shares were used for fictitious LTCG and treated the sale consideration of Rs. 53,00,000/- as unexplained cash credit under section 68. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the approval granted by the PCIT for reopening the assessment under section 151 of the Act was mechanical and lacked application of mind, rendering the reassessment proceedings bad in law. Following various High Court and Tribunal precedents, the approval was deemed invalid.
Key Issues
Whether the reassessment proceedings initiated under section 147/148 of the IT Act are valid when the approval granted by the competent authority under section 151 is mechanical and without proper application of mind.
Sections Cited
10(38), 147, 148, 148A, 151, 250, 68
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Income Tax Appellate Tribunal, AGRA (DB
Before: SHRI M BALAGANESH & SHRI SUNIL KUMAR SINGH
IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (DB) BENCH, AGRA BEFORE: SHRI M BALAGANESH, ACCOUNTANT MEMBER AND SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITA No. 428/Agr/2025 Assessment Year: 2015-16 Govind Sharma, Gali Luharan, Mandi Vs. ITO, Ward 1(3)(1) Ramdas, Mathura-281001, U.P. Mathura-281004 PAN : AWXPS4402R (Appellant) (Respondent) Assessee by Shri Pankaj Gargh, Adv Department by Shri Anil Kumar, Sr. DR Date of hearing 21.01.2026 Date of pronouncement 17.04.2026 ORDER PER: SUNIL KUMAR SINGH, JM. This appeal has been preferred against the impugned order dated 07.07.2025 passed in Appeal No NFAC/2014-15/10113537 by the ld. Commissioner of Income Tax(Appeals)/ NFAC Delhi (hereinafter referred to as the “CIT(A)) u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2015-16, wherein ld CIT has dismissed assessee’s first appeal against the addition of Rs. 53,00,000/- made u/s. 68 of the Act as an unexplained cash credit vide assessment order dated 30.03.2022. 2. At the very outset, we notice that despite, appellant assessee having raised several grounds of appeal before the tribunal, an additional legal ground has also been raised through an application dated 14.01.2026, which reads as under:
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“That the assessment competed u/s. 147 r.w.s 144B of the IT Act in consequence to the issue of notice u/s. 148 is bad in law and without jurisdiction as the approval granted by ld PCIT-I, Agra is mechanical and not in accordance with law as required u/s. 151 of the IT Act. Hence, the entire reassessment proceedings deserve to be quashed.” 3. The additional ground as preliminary issue raised by the appellant assessee, challenging the validity of assumption of jurisdiction u/s. 147 of the Act by the ld A.O. being passed on mechanical approval u/s. 151 of the Act, goes to the root of the matter. We deem it fit to address the same first. The additional ground is accordingly admitted. 4. We have perused the material available on record and heard the rival submissions. 5. Briefly stating the facts are that the appellant assessee filed his return of income for the A.Y. 2015-16 on 15.03.2016, declaring total income of Rs.9,48,570/-. The appellant had shown Long Term Capital Gain of Rs.51,82,545/- as exempt income under section 10(38) of the Income Tax Act, 1961. Based on information received through Insight Portal and Income Tax Return filed by the appellant, the AO observed that for the year under consideration, the appellant had sold shares of M/s Delta Leasing & Finance Ltd for Rs.53,00,000/-, and had reported Long Term Capital Gain amounting to Rs.51,82,545/-. The AO had information that the said scrip i.e. DELTALTD (Delta Leasing & Finance Limited) had been used for providing accommodation entries by way of taking fictitious Long Term Capital Gain and claiming exemption u/s 10(38) of the I.T. Act. Assessee’s 2 | P a g e
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case was reopened u/s. 147 of the Act and notice u/s 148 dated 31.03.2021 was issued to the appellant after obtaining necessary approvals and after following the due procedure of law. Show-cause Notice dated 27-03-2022, wherein, a draft assessment order containing proposed additions was also provided to the appellant inviting objection against proposed additions. However, appellant had failed to submit its response within the time limit prescribed in the Show Cause Notice. Hence, the assessment was concluded based on the available records and the submissions made by the appellant. The AO held that the LTCG claimed as exempt u/s 10(38) of the Act was unexplained and treated the entire sale consideration of Rs. 53,00,000/- as unexplained cash credits u/s 68 of the IT Act. The first appeal filed by the appellant assessee was dismissed by the ld CIT(A), vide impugned order dated 07.07.2025, against which this second appeal.
As regards the preliminary issue raised through the additional ground noted hereinabove, the approval granted by the ld PCIT-1-(Agra) in terms of section 151 of the Act, is enclosed at page 4 of assessee’s paper book containing 100 pages. The said approval in question is endorsed on the proforma dated 31.03.2021 against column No. 1, which states “in view of reasons recorded by ld A.O, I am satisfied that income has escaped
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assessment. It is therefore, a fit case for issue of notice u/s. 148 of the IT Act.” 7. Ld representative for the appellant assessee has submitted that the approval has been granted absolutely in a casual and mechanical manner without application of mind. Ld AR, thus submits that the assessment proceedings based on such mechanical approval not recognized under law vitiates. Ld AR has referred order dated 26.11.2025 passed in ITA No. 386/Agr/2025 for A.Y. 2020-21 and order dated 19.06.2018 passed in ITA 238/Agr/2018 in support of his submissions. 8. Ld Sr DR has supported the impugned order. 9. The single bench of this tribunal, vide order dated 26.11.2025 passed in ITA No. 386/Agr/2025 (A.Y. 2020-21) in Pawan Agrawal v. ITO, Mathura, to which, one of us is the author, has held that the approval in the manner noted herein above is not an approval in the manner known to law. The relevant Paras 4 to 6 read as under:
“4. ……. 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, I find that the Hon’ble Delhi 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 Delhi High court to be a mechanical approval. The relevant observation of the Hon’ble Delhi High Court in this regard are reproduced herein:-
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“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.” 5. The Hon’ble Delhi High Court in the recent decision in the case of SBC Minerals P Ltd vs ACIT reported in 475 ITR 360 (Del) had held as under:- “8. During arguments, learned counsel for the petitioner has restricted the challenge only to the grant of sanction under section 151 of the Act, stating that the same has been granted mechanically and without due application of mind, and therefore, the grant of sanction is liable to be declared as nullity and invalid, and resultantly, the impugned order passed under section 148A(d) and the impugned notice under section 148 issued consequent to the grant of sanction are liable to be quashed. 9. Per contra, learned counsel for the respondent while defending the order granting approval, has submitted that the approval has been granted based upon the material placed before PCCIT. It is further submitted that the order granting approval need not mention the reasons as the same is based on a prima facie finding arrived at from the record. 10. Before considering the merits of the contentions of the parties, it would be apposite to examine the relevant legal framework. 11. Section 151 of the Act, as it stood prior to the substitution by Act of 13 of 2001 is reproduced hereunder:- “151. Sanction for issue of notice. -(1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. 5 | P a g e
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(3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself." 12. A plain reading of the aforesaid provision clearly indicates that the prescribed authority must be "satisfied", on the reasons recorded by the Assessing Officer ["AO"], that it is a fit case for the issuance of such notice. Thus, the satisfaction of the prescribed authority is a sine qua Non for a valid approval. 13. It is a trite law that the grant of approval is neither an empty formality nor a mechanical exercise. The Competent Authority must apply its mind independently on the basis of material placed before it before grant of sanction. 14. Perusal of the record reveals that the request for approval under section 151 of the Act in a printed format was placed before the Principal Chief Commissioner of Income-tax ["PCCIT"] on 20-3-2023. PCCIT granted the approval the same day. The approval accorded by the PCCIT in Column No. 22 is extracted below:- 22 Reasons for according Remarks: Approved u/s approval/rejection by the specified 148(d) as a fit case. authority to order u/s 148A(d) AND/OR Name: RAJAT BANSAL issuance of notice under section 148 of Designation: PCCIT, the Income-tax Act, 1961? DELHI Date: 20/03/2023 15. It is evident that the approval order is bereft of any reasons. It does not even refer to any material that may have weighed in the grant of approval. The mere appending of the word "approved" by the PCCIT while granting approval under section 151 to the re-opening under section 148 is not enough. While the PCCIT is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. The reasons are the link between material placed on record and the conclusion reached by the authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. Our opinion in this regard is fortified by the decision of the Apex Court in Union of India v. Mohan Lal Capoor AIR 1974 SC 87. The grant of approval by PCCIT in the printed format without any line of reason does not fulfil the requirement of Section 151 of the Act. 16. We note that dealing with an identical challenge of approval having been accorded mechanically and without due application of mind had arisen for our consideration in the case of Pr. CIT v. Pioneer Town
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Planners (P.) Ltd. [2024] 160 taxmann.com 652/465 ITR 356 (Delhi)/SCC OnLine Del 1685, wherein, we had held as follows:-
"13. The primary grievance raised in the instant appeal relates to the manner of recording the approval granted by the prescribed authority under Section 151 of the Act for reopening of assessment proceedings as per Section 148 of the Act.
** ** 17. Thus, the incidental question which emanates at this juncture is whether simply penning down "Yes" would suffice requisite satisfaction as per Section 151 of the Act. Reference can be drawn from the decision of this Court in N.C. Cables Ltd., wherein, the usage of the xpression "approved" was considered to be merely ritualistic and formal rather than meaningful. The relevant paragraph o f the said decision reads as under:- "11. Section 151 of the Act clearly stipulates that the Commissioner of Income-tax (Appeals), 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 Commissioner of approved Income-tax (Appeals) 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 Income-tax Appellate Tribunal cannot be disturbed." 18. Further, this Court in the case of Central India Electric Supply Co. Ltd. v. ITO [2011 SCC OnLine Del 472] has taken a view that merely rubber stamping of "Yes" would suggest that the decision was taken in a mechanical manner. Paragraph 19 of the said decision is reproduced as under: - "19. In respect of the first plea, if the judgments in Chhugamal Rajpal [1971] 71 ITR 603(SC), Chanchal Kumar Chatterjee [1974] 93 ITR 130 (Cal) and Govinda Choudhary and Sons case [1977] 109 ITR 370 (Orissa) are examined, the absence of reasons by the Assessing Officer does not exist. This is so as along with the proforma, reasons set out by the Assessing Officer were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired.
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It is a case where literally a mere stamp is affixed. It is signed by an Under Secretary underneath a stamped Yes against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the Income-tax Officer was to be agreed upon, the least which is expected is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the apex court in Union of India v. Μ. L. Capoor, AIR 1974 SC 87, 97 wherein it was observed as under: "27.... We find considerable force in the submission made on behalf of the respondents that the 'rubber stamp' reason given mechanically for the supersession of each officer does not amount to 'reasons for the proposed supersession'. The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion.
28.... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject-matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable. "[emphasis supplied]." 19. In the case of Chhugamal Rajpal, the Hon'ble Supreme Court refused to consider the affixing of signature alongwith the noting "Yes" as valid approval and had held as under:-
"5. ---
Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this 8 | P a g e
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was a fit case for the issue of a notice under section 148. To Question 8 in the report which reads "whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148", he just noted the word "yes" and affixed his signatures there under. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. The important safeguards provided in Sections 147 and 151 were lightly treated by the Income-tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance."
This Court, while following Chhugamal Rajpal in the case of Ess Adv.(Mauritius) S. N. C. Et Compagnie v ACIT [2021 SCC OnLine Del 3613], wherein, while granting the approval, the ACIT "This is fit case for issue of notice under section 148 of-has written the Income- tax Act, 1961. Approved", had held that the said approval would only amount to endorsement of language used in Section 151 of the Act and would not reflect any independent application of mind. Thus, the same was considered to be flawed in law. 21. The salient aspect which emerges out of the foregoing discussion is that the satisfaction arrived at by the prescribed authority under section 151 of the Act must be clearly discernible from the expression used at the time of affixing its signature while according approval for reassessment under section 148 of the Act. The said approval cannot be granted in a mechanical manner as it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase "Yes" does not appropriately align with the mandate of Section 151 of the Act as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose. 22. So far as the decision relied upon the Revenue in the case of Meenakshi Overseas Pvt. Ltd. is concerned, the same was a case where the satisfaction was specifically appended in the proforma in "Yes, I am satisfied". Moreover, paragraph 16 of-terms of the phrase the said decision distinguishes the approval granted using the expression "Yes" by citing Central India Electric Supply, which has already been discussed above. The decision in the case of Experian Developers P. Ltd. would also not come to the rescue of the Revenue as the same does not deal with the expression used in the instant appeal at the time of granting of approval
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Therefore, it is seen that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression "Yes" could be considered to be a valid approval In fact, the approval in the instant case is apparently akin to the rubber stamping of "Yes" in the case of Central India Electric Supply."
The decision in Pioneer Town Planners (P.) Ltd. (supra) case has been followed by this Court in number of other cases including the recent case of Pr. CIT v. MDLR Hotels (P.) Ltd. [IT Appeal No. 593 of 2023, dated 30-7-2024].
As noticed aforesaid, we are of the firm opinion that the PCCIT has failed to satisfactorily record its concurrence. By no stretch of imagination, the mere use of expression "approval" could be considered to be a valid approval as the same does not reflect any independent application of mind. Grant of approval in such manner in this case is flawed in law.
Hence, for the reasons stated above, we are of the view that the approval granted by the PCCIT for issuance of order under section 148A(d) is not valid. Consequently, the order passed under section 148A(d) and the notice under section 148 issued pursuant to order under section 148A(d) are set aside and quashed. 20. Writ Petition is disposed in terms of the aforesaid order."
Similar view was also taken by the Hon'ble Bombay High Court in the case of Vodafone India Ltd vs DCIT reported in 464 ITR 385 (Bom). For the sake of convenience, the entire order is reproduced below:- "ORDER
Petitioner is impugning a notice dated 30th March 2023 under Section 148A(b) of the Income Tax Act, 1961 ("the Act"), an order dated 19th April 2023 passed under Section 148A(d) of the Act and a notice dated 19th April 2023 issued under Section 148 of the Act on various grounds.
One of the grounds raised across the bar is that the sanction for issuance of the order under Section 148A(d) of the Act has been granted without application of mind by all the five officers involved. For ease of reference, the sanction under Section 151 is scanned and reproduced herein:
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Mr. Mistri states this ground could not have been taken in the Petition because the sanction was made available only with the surrejoinder filed by L. A. Janbandhu, Deputy Commissioner of Income Tax-5(2)(1), Mumbai and affirmed on 5th March 2024. We totally agree with Mr. Mistri's submission that the approval has been applied for and granted mechanically. In column 7- the quantum of income which has escaped assessment, the amount is Rs.42858,47,29,611/-. In the impugned order passed under Section 148A(d) of the Act, the amount mentioned as having escaped assessment is totaling to Rs.12431,99,24,486/-. A summary of amount reflected in the notice dated 30th March 2023 issued under Section 148A(b) of the Act, visa-vis., an amount in order dated 19th April 2023 reads as under: Summary of Amount reflected in notice dated 30.03.2023 vis-a-vis Amounts in order dated 19.04.2023 Entity Information amount as Amounts as per Differences name per Notice dtd Order 30.03.2020 19.04.2023 VCL 88,327,187,135 2379653779 64,530,649,356 VDL 64,194,219,901 16356031168 47,838,188,733 VEL 16,331,855,448 4454592437 11,877,263,011 VSL 154,472,355,369 50735554674 103,736,800,695 VSPL 57,285,990,365 18694379653 38,591,610,712 VWL 47,973,121,393 10282828775 37,690,292,618 Grand 428,584,729,611 124,319,924,486 304,264,805,125 Total Amt. 42,858.47 12,431.99 30,426.48 in 4. In the approval, the Principal Chief Commissioner of Income Tax ("PCCIT") states, "Based on the material available on record and careful consideration of the same, I am satisfied that it is a fit case to issue notice under Section 148 of the IT Act. Hence, draft order submitted by the Assessing Officer under Section 148A(d) of the Act is hereby approved" In our view, this is an incorrect statement made by the PCCIT that the record 12 | P a g e
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has been carefully considered before granting of approval. We say this because the record would certainly have contained the notice issued under Section 148A(d) of the Act and the information annexed to that notice states escapement of income in the sum of Rs.42858,47,29,661/-, whereas the amount mentioned in the order passed under Section148A(d) of the Act totals to Rs.12431,99,24,486/-. In the said order, there is not even an explanation as to how the amount has changed or has gone down. In the affidavit in reply, it is stated that in the notice the transaction value was taken gross and subsequently it was seen that there were duplicate entries which were corrected while passing the order dated 19th April 2023. The notice issued does not contain any duplicate entries. If there were duplicate entries, the Assessing Officer ("AO") was duty bound to issue clarification in the order and also give details of what were those duplicate entries. The AO should have come clean on the error made. Therefore, if only the PCCIT or the other officers had bothered to see the records and had really applied their mind to the same, these errors would not have crept in. This displays total non-application of mind by all those persons who have endorsed their approval for issuance of notice under Section 148 of the Act. With great regret, we have to mention that these approvals are being granted mechanically and without application of mind and this is not the only matter. Innumerable orders passed under Section 148A(d) of the Act are being set aside in view of the approval being granted without application of mind. Officer should realize that this is also delaying assessment/ reassessment proceedings and is also affecting the revenue of the nation. We find that the approval has been granted in a most casual manner. The power vested in the Authorities under Section 151 to grant or not to grant approval to the AO to reopen the assessment is coupled with a duty. The Authorities were duty bound to apply their mind to the proposal put up for approval in the light of material relied upon by the AO. That power cannot be exercised casually on a routine perfunctory manner. The important safeguards provided in Section 147 and 151 were treated lightly by the officers. While recommending and granting approval it was obligatory on the part of the officers to verify whether there was any genuine material to suggest escapement of income. It was obligatory on all the Authorities and PCCIT in particular to consider whether or not power to reopen is being invoked properly. We are of the opinion that if only the Authorities had read the record carefully, they would never have come to the conclusion that this is a fit case for issuance of notice under Section 148 of the Act. They would have either told the AO to correct the figures in Column 7 or would have sent the papers back for reconsideration. These officers have substituted the form for substance. 5. We, therefore, quash and set aside the impugned order dated 19th April 2023 passed under Section 148A(d) of the Act. The consequent notice issued under Section 148 of the Act also dated 19th April 2023 is also quashed and set aside.
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Petition disposed. No order as to costs. 7. A copy of this order be sent to the Revenue Secretary, Ministry of Finance, Government of India, New Delhi, for information and necessary action. We only hope that some remedial action will be taken to stop this casual behaviour.” 10. In Ghanshyam v. ITO, Mathura, ITA No 238/Agr/2018 (A.Y. 2008-09), the single bench of this tribunal, vide order dated 19.06.2018, has also held that merely writing ‘Ji-haan-mai-santhusht-hoon’, (Yes, I am satisfied), such an approval is no approval in the eye of law, having been granted without application of mind. 11. The facts of the instant case are almost identical to the facts of the case law depicted as herein above. Respectfully, following the aforesaid decisions based on authoritative precedents, we hold that in the instant case, the reopening has been made by not taking approval u/s.151 of the Act from the competent authority in a manner known to the law. The aforesaid additional ground challenging the validity of assumption of jurisdiction u/s.147 of the Act is allowed in above terms. Since the reassessment is quashed, the other legal and factual grounds raised by the assessee need not be adjudicated and are left open. 12. In the result, the assessee’s appeal is allowed. Order pronounced on - 17.04.2026 Sd/- Sd/- (M BALAGANESH) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 17.04.2026 14 | P a g e