EXEL RUBBER PRIVATE LIMITED,HYDERABAD vs. DCIT., CENTRAL CIRCLE-1(2), HYDERABAD

On the facts and circumstance of the case, sanction under Section 151 of the Act, has been granted mechanically and without satisfaction that how it fits under Section 149(1)(b)(i) and Section 149(1)(b)(ii). Accordingly grant of sanction is liable to be declared as nullity and invalid and resultantly, im pugned notice under Section 148 is bad in law.

We have considered the rival contentions as well as the relevant material available on record. The assessee has challenged the validity of the notice issued u/s 148 on various grounds including the ground of limitation, invalid sanction of the specified authority and non-satisfication of the conditions as laid down u/s 149(1)(b) of the Act. The Assessing Officer has recorded identical reasons for reopening of the assessment u/s 148 in pursuant to the search & seizure action u/s 132 of the Act carried out in the case of the assessee and group concerns on 04/01/2023 as under:

The Assessing Officer has obtained the sanction u/s 151 of the I.T. Act from the DGIT (Inv) which is reproduced as under:

Thus, it is clear that an identical sanction was granted by the DGIT (Inv), Hyderabad for all the A.Ys.

At the outset, we note that all these grounds raised

During the Search proceedings, details of various unaccounted cash receipts, viz. scrap sales, cash generated from adjustment purchase transactions, cash received on sale of lands, etc. were found and seized in certain cases. After analysis of the seized material and investigation, the ADIT (Inv.), Unit-(1) has quantified the undisclosed income detected in the hands of the assessee company M/s Ace Tyres Private Limited, as under:

Identical reasons were recorded by the Assessing Officer for all the A.Ys except for the A.Y 2019-20 wherein the Assessing Officer has dropped the proceedings initiated u/s 148 by issuing notice u/s 148 on 18/03/2023 and thereafter, again recorded the reasons for reopening of the assessment for issuing notice u/s 148 of the Act on 14/11/2024. Therefore, we will first deal with the validity of the notices issued u/s 148 of the Act dated 24/11/2023 for the A.Ys 2014-15 to 2018-19. As it is manifest from the reasons recorded by the Assessing Officer that the Assessing Officer has given the total amount of undisclosed income as quantified by the ADIT as well as the Additional income admitted by the assessee in the year-wise chart. Based on the amounts as given in said table/chart, the Assessing Officer treated the income escaped assessment in the case of the assessee for the A.Y 2014-15 to 2018-19 amounting to Rs.50 lakhs or more. During the course of the search & seizure operation on 04/01/2023, a Laptop was found and seized from the possession of one Shri Ramesh Kumar Sanaka, Sr. Accounts Manager who used to look after the financial and accounting matters of Exel Rubber Group of assessee’s business concerns. On verification of the Laptop, the Department found that there was a FOCUS 5.5 Software and some MS Excel work books containing the details of several 100s of transactions representing receipts and payment in cash from the financial year 2013-14 to 2022-23. A statement of Shri Ramesh Kumar Sanaka was recorded during the course of search wherein he explained the transactions as found in FOCUS 5.,5 Software as unaccounted receipts generated from sale of scraps generated under various process of manufacturing of products and packaging material etc. There were also transactions recorded regarding expenditure incurred in cash. These transaction as found recorded in FOCUS 5.5 Software are in the nature of cash receipts as well as cash expenditure and pertain to three companies namely Exel Rubber (P) Ltd, M/s. ACE Tyres (P) Ltd and M/s. Vilas Polymers (P) Ltd. The relevant part of the statement of Shri Ramesh Kumar Sanaka recorded u/s 132(4) of the Act on 04/01/2023, 05/01/2023 and 06/01/2023 during the course of search & seizure action at his residential premises at Flat No.401, Chestiya Estates, Near Nagarjuna High School, Rajeev Nagar, Khairtabad, Hyderabad is reproduced as under:

It is pertinent to mention that the statement of Shri Ramesh Kumar Sanaka, Sr. Accounts Manager of the assessee was recorded on 4th to 6th January, 2023 in pursuant to the search & seizure action conducted in the case of Shri Ramesh Kumar Sanaka at his Flat bearing No.401 vide warrant of authorization dated 03/01/2023 and Panchama as under:

Therefore, there is a separate authorization and Panchanama for conducting the search & seizure action in case of Shri Ramesh Kumar Sanaka at his residential premises beairng Flat No.401, Chestiya Estates, Rajeev Nagar, Hyderabad during which external harddisk having copied the data from the Lap Top of Shri Ramesh Kumar Sanaka and loose sheets were seized and the same are marked as A/RKS/RES/01, A/RKS/RES/02 and A/RKS/RES/03 as per the list of seized material being Annexuere A to Panchanama reproduced above. It is also clear from the statement that the search was conducted in the personal capacity of Shri Ramesh Kumar Sanaka at his residential premises and his personal belongings, assets, bank account lockers as well as Laptop were subject matter of the search during the action by the Department. There was a simultaneous search & seizure action in case of Exel Group of companies comprising M/s. Exel Rubber (P) Ltd, M/s. Ace Tyres (P) Ltd, M/s. Vilas Polymers (P) Ltd, M/s. Spinmax Tyres (P) Ltd and M/s. Laxes Machine (P) Ltd vide warrant of authorisation and Panchanama as under:

In the said search & seizure action in case of Exel Group, statement of Shri Gangaram Raghunath Reddy, M.D of Exel Group of companies was recorded on 17/01/2023 u/s 132(4) of the I.T. Act. During the said statement, Shri Gangaram Raghunath Reddy was confronted with the statement of Shri Ramesh Kumar Sanaka recorded on 04/01/2023 to 06/01/2023 at his residence at Flat No.401,Chestiya Estates as well as statemenht dated 06/01/2023 again recorded in the search & seizure operation in case of Exel Rupper (P) Ltd a group entity at the Corporate Office at Plot No.7 Thrushna Building, TGHC Layout, Infocity, Madhapur, Hyderabad. During the said statement at the Corporate Office of Exel group of entities Shri Ramesh Kumar Sanaka was confronted with his earlier statement recorded u/s 132(4) of the Act at his residence. The relevant part of the statement in question Nos. 13 and Question No.21 as under:

Thus, the financial year wise summary of unaccounted cash transactions of the entire Exel Group of companies was given by Shri Ramesh Kumar Sanaka which reveals that for the A.Y 2011-12 to 2017-18 i.e. relevant to the A.Y 2012-13 to 2018-19 no specific unaccounted cash receipts is attributed to individual company i.e. Exel Rubber (P) Ltd and Ace Tyres (P) Ltd. Only from the financial year 2018-19 onwards, the details of specific amount of unaccounted cash receipts in case of these 2 entities were given which shows that there was no specific amounts of unaccounted cash receipts atributable to these 2 companies prior to financial year 2018-19, though the total unaccounted cash receipts were given which may be comprising of the unacounted receipts of all 5 entities subjected to search & seizure operation. Shri Ramesh Kumar Sanaka also explained that these unaccounted cash transactions were recorded for the entire group of concerns under one monitoring system of unaccounted cash transactions comprising of receipts as well as payments.

In the assessment order, the Assessing Officer has also admitted this fact that the unaccounted cash receipts as well as expenditure could not be attributed to specific companies and therefore, the Assessing Officer has apportioned the unaccounted cash receipts in the ratio of the turnover of these various entities including the assessee in para 7.32 as under:

This apportionment of the unaccounted income on the part of the Assessing Officer during the assessment Page 29 of 66 proceedings for year-wise and entity-wise and specifically for the assessee M/s. Ace Tyres (P) Ltd is not matching with the details as given by the Assessing Officer while recording the reasons for reopening of the assessment in case of Ace Tyres (P) Ltd. Therefore, at the time of recording the reasons, the Assessing Officer was not reasonably ascertain the amount of unaccounted income escaped the assessment for the A.Ys 2014-15 to 2018-19. Even these details as recorded by the Assessing Officer in the reasons for reopening of the assessment as well as in the assessment order are not matching with the details as furnished by Shri Ramesh Kumar Sanaka being reproduced in the statement recorded u/s 132(4) of the Act as well as the actual transaction as found in the Laptop of Shri Ramesh Kumar Sanaka. The total sum of the receipt and payment side of the Excel Sheets as taken from the Laptop of Shri Ramesh Kumar Sanaka are Rs.233,32,59,032/- and Rs.231,50,84,420/- respectively. Therefore, the net difference of the receipt and payments of the total transactions as found in the Excel sheets taken from the Laptop of Shri Ramesh Kumar Sanaka is less than Rs.2 crores. For ready reference, some of the transactions found in the said Excel sheets are reproduced as under:

The question arises whether by initiating the proceedings u/s 148 of the Act, the condition as stipulated u/s 149(1)(b) of the Act are satisfied or not. For ready reference, section 149(1) of the Act is reprodued as under: “149. (1) No notice under section 148 shall be issued for the relevant assessment year, (a) if three years have elapsed from the end of the relevant assessment vear, unless the case falls under clause (b); [(b) if three vears, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of i) an asset (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:

Once the case of the assessee does not fall in the ambit of clause (b) of section 149(1) of the Act, then the reasons recorded by the Assessing Officer for reopening of the assessment giving the details of undisclosed income as quantified by the ADIT (Inv) Unit-I, reveals that the Assessing Officer has recorded his satisfaction in the reasons mechanically without application of mind so far as the correct amount of escaped income for each of the years and each of the companies. This non-application of mind at the time of recording the reasons also corroborated by the fact that in the assessment order, the Assessing Officer has determined the different amount of escaped income for each A.Y which is estimated in the ratio of turnover of each of the group companies from the total amount of cash receipts found in the Laptop of Shri Ramesh Kumar Sanaka, pertaining to the entire group. Even if for the sake of argument, it is presumed that the quantum of escaped income for each A.Y was more than Rs.50 lakhs and the Assessing Officer at the time of recording the reasons was not supposed to undertake a detailed or depth examination of evidence collected during the search, the prima facie undisputed fact is that the details of unaccounted cash receipts and cash payments found during the course of search & seizure action were not specifically attributed to each of the group companies and further only the receipts found in the said seized material are taken into consideration for arriving to the conclusion that the income of more than Rs.50 lakhs for each of the companies has escaped assessment. The Assessing Officer has proceeded on the basis of the details provided by the ADIT (Inv) and not proceeded on the basis of the seized material containing these transactions of unaccounted cash receipts and payments. The reasons recorded by the Assessing Officer Page 36 of 66 manifest that no such minimum verification was done by the Assessing Officer regarding the nature of the transaction, the net outcome of the receipt and payment as recorded in the said seized material, apportionment of the amounts of receipts and payments to each of the group companies to quantify the income escaped assessment for the A.Ys 2014-15 to 2018-19. Thus it is a simple case of non-application of mind and a borrowed satisfaction on the part of the Assessing Officer while recording the reasons for reopening.

One more contention and point raised by the learned Counsel for the assessee is that the seized material was found from the possession of Shri Ramesh Kumar Sanaka in a separate search Page 37 of 66 & seizure action and therefore, the case of the assessee does not fall in the first proviso to section 148A of the I.T. Act. We have already reproduced the search warrant/ authorization separately issued in the name of Shri Ramesh Kumar Sanaka for conducting a search at his residential premises. The search in the case of the assessee and other group concerns was carried out under a separate authorization and warrant of search. It is evident from the Panchanama and authorization separately given that there are two search and seizure operations conducted by the Department, one in the case of 5 companies of Exel Group of Companies including the assessee and another in the case of Shri Ramesh Kumar Sanaka, Sr.Accounts Manager of the Exel Group at his residential premises. Both these searches were also conducted at different placed. The only common thread between these 2 search operations is that Shri Ramesh Kumar Sanaka is a Sr. Accounts Manager of Exel group of companies, however, the said relation between Shri Ramesh Kumar Sanaka and the assessee company cannot obliterate the fact of 2 separate search & seizure operations. Section 148A casts an obligation on the Assessing Officer to conduct an inquiry with the prior approval of specified authority before issuing notice u/s 148 of the Act. However, the proviso to the said section carves out an exception in the cases where a search is initiated u/s 132 or books of account, other documents or any asset are requisitioned u/s 132A of the Act in the case of the assessee on or after 1/4/2021. Therefore, only because of this proviso, the Assessing Officer need not to conduct any inquiry u/s 148A before issuing notice u/s 148 of the Act. In the case in hand, though the search was conducted in the case of the assessee u/s 132 of the Act on 4th January, 2023, however, the alleged incriminating material which is the basis of the initiation of proceedings u/s 147/148 of the Act is found and seized from the possession of Shri Ramesh Kumar Sanaka under a separate search & seizure operation. Thus, that being the case, the proceedings u/s 147/148 could be initiated only as per clause (b) and clause (c) of the proviso to section 148A of the Act. For ready reference, section 148A is quoted as under:

Therefore, if the Assessing Officer has not followed the procedure as provided in clause (b) and clause (c) of the proviso to section 148A of the Act, and initiated proceedings on the premises that the case of the assessee falls under clause (a) of 1st proviso to section 148A, then the approval/sanction granted by the DG IT(Inv) u/s 151 of the Act is also not based on the verification and application of mind on the relevant record but merely accepting the proposal sent by the Assessing Officer seeking the approval/ sanction u/s 151 r.w section 148 of the Act. The first proviso to section 148A contemplates that no notice u/s 148 shall be issued unless there is information with the Assessing Officer which suggest income chargeable to tax has escaped the assessment in the case of the assessee for the relevant A.Y and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. The Explanation (3) to section 148 explains that the specified authority means specified authority referred to in section 151 of the Act. Even otherwise, section 151 also provides the tax authorities which are specified authority for the purpose of section 148 and 148A of the Act. The term used in the heading of section 151 is “sanction for issue of notice”. Therefore, the approval u/s 151 of the Act is not a mere permission but it is a sanction for issuing notice u/s 148. In the case in hand, the DGIT (Inv) has granted the sanction to the proposal in the proforma sent by the Assessing Officer placed at page Nos. 35 to 37 of the paper book as under:

Though there is a recommendation by the Pr. CIT, however, the sanction/approval granted by the DG reveals that it has concurred with the proposal that the impugned matter covered u/s 149(1)(b) of the Act and issue of notice u/s 148 is approved. This sanction/approval granted by the DGIT (Inv) Hyderabad in the light of the facts as discussed in the preceding part of this order clearly shows that the crucial aspects of the matter were overlooked while granting the sanction/approval. The seized material was found and seized from the possession of one Shri Ramesh Kumar Sanaka in a separate search & seizure operation which is the very basis of the initiation of the proceedings. However, the proceedings are initiated on the premises that the seized material is found from the possession of the assessee during the search & seizure operation of the assessee. The other glaring aspect of the matter is that only the receipt side of the details of the transactions found in the Laptop of Shri Ramesh Kumar Sanaka are taken into consideration without proper appropriation/allocation of these receipts to each of the group companies of Exel Group. The next important aspect was ignorance or wrong perception was formed by all the authorities right from the Assessing Officer to Pr. CIT and the DGIT (Inv) that case falls in section 149(1)(b) (ii) & (iii) without bringing anything brought on record to indicate that the alleged income escaped the assessment represents either an asset or entry/entries in the books of account of the assessee. We have discussed in the earlier part of this order that this case does not fall in the ambit of sub clause (i) or sub-clause (iii) of clause (b) of section 149(1) of the Act. The definition of the asset is provided in Explanation to section 149(1) as reproduced in the foregoing part of the order which clarifies that for the purpose of clause (b) of section 149(1) of the Act, an asset shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in the bank account. Though this is an inclusive definition, however, the asset as defined in the explanation bring into its fold movable property, shares or securities, loans or likewise assets. In the absence of any of these assets found during the search or recorded in the seized material, the case of the assessee does not fall in the sub clause (i) of clause (b) of section 149(1) of the Act. The Rajkot Bench of the Tribunal in the case of Mukesh Manekchand Shety vs. Dy. CIT in 545 to 547.Rjt/2024 vide order dated 10/06/2025 has considered and decided an identical issue in para 40 as under:

Secondly, when the details found in the Laptop of Shri Ramesh Kumar Sanaka are not in the nature of entry or entries in the books of account, then ignoring this important and crucial aspect at the time of the approval/sanction granted by the DGIT (Inv.) clearly manifests non-application of mind.

In the case of CIT vs. Goyanka Lime & Chemical Ltd (2015) 56 Taxmann.com (MP), the Hon'ble Madhya Pradesh High Court has held in para 7 to 10 as under: “7. We have considered the rival contentions, and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court, and the following principles are laid down:— 'The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.' 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9. As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue.

The Hon'ble High Court has discussed the purpose of safeguard provided to prevent the exercise of arbitrary powers of the Assessing Officer particularly after a lapse of substantial time from the completion of the assessment. The Hon'ble High Court has further observed that the Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. Therefore, the notice issued u/s 148 of the Act was quashed by the Hon'ble High Court on the ground of non- application of mind by the authorities before granting the approval.

In the case of SBC Minerals (P.) Ltd. v. Assistant Commissioner of Income-tax (Supra), the Hon'ble Delhi High Court while considering an identical issue has held in para 14 and 15 as under: “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: approval/rejection by Approved u/s the specified authority 148A(d) as a to order u/s 148A(d) fit case. AND/OR issuance of Name: RAJAT notice under section BANSAL 148 of the Income-tax Designation: Act, 1961? PCCIT, 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 Page 48 of 66 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.

Therefore, if the approval/sanction granted by the specified authority does not refer to any material that may have weighted in grant of approval, then the same is found to be recorded without application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. The reasons are linked between the material placed on record and the conclusion reached by the authority in respect of an issue. The grant of approval without any line of reason does not fulfil the requirement of section 151 of the Act.

Similar view has been taken by the Hon'ble Andhra Pradesh High Court in case of Shri P Munirathnam Chetty and P Satyanarayana Chetty vs, Income Tax Officer (Supra) held as under: “Having gone through the reasons given by the Income-tax Officer for starting the proceedings under section 147, I am unable to agree with the contention of the petitioner that reasons have not been recorded. In this connection, the learned advocate drew my attention to Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 , 607 (SC). In that case the Supreme Court held that the report of the Income- tax Officer did not fulfil the requirements of section 151(2). But, on a perusal of the facts of the case, it is found that they bear no resemblance to the facts of the present case. In that case, the Supreme Court observed, the Income-tax Officer does not set out any reason for coming to the conclusion that this is a fit case to issue notice under section 148. He vaguely referred to certain communications received by him from the Commissioner of Income-tax, Bihar and Orissa, without mentioning the facts contained in those communications. All that he has said was that from those communications it appeared that the alleged creditors are name-lenders and the transactions are bogus. The Income- tax Officer did not even come to a prima facie conclusion that the transactions to which he referred to are not genuine transactions. He appeared to have only a vague feeling that they may be bogus transactions. Further, in his report he stated, "hence proper investigation regarding these loans is necessary". In those circumstances the Supreme Court pointed out that the conclusion of the Income-tax Officer was that there was a case for investigation as to the truth Page 49 of 66 of the alleged transactions which is not the same thing as saying that there are reasons to issue notice under section 148. In this case, however, the Income-tax Officer refers to the order of the sales tax authority determining a turnover at a higher figure and levying penalty for the suppression of turnover. On the basis that the turnover has been suppressed he was prima facie entitled to assume on the strength of the order of the sales tax authorities, the Income- tax Officer had reasonable grounds to say that there was omission or failure on the part of the assessee to disclose fully and truly the material facts necessary for the purpose of computation of the correct income. This is not a case where the Income-tax Officer merely thought that it is a case only for investigation as was the case before the Supreme Court nor is there any vagueness about his report. It is then contended that the Commissioner ought to have exercised his mind and he must have been satisfied independently that this was a fit case for initiating proceedings under section 148 of the Act. By merely saying "Yes" against the column No. 8, Sri Dasaratharama Reddy argues that the Commissioner acted only as a rubber stamp and did not exercise his mind. He referred again to the same decision of the Supreme Court in which this aspect also is considered. In that case also under column 8 the Commissioner had merely marked "Yes". The Supreme Court observed that the Commissioner as well as the Income-tax Officer appeared to have taken the duty imposed on them under the provisions of sections 147 and 148 and 151 as of little importance and they had substituted the form for the substance. These observations of the Supreme Court will have to be considered in the context of the particular case with which they were dealing. As observed already they first came to the conclusion that the Income-tax Officer had no material before him which would satisfy the requirements of either section 147(a) or section 147(b) and the report submitted by him to the Commissioner did not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under section 148. When in those circumstances the Commissioner merely put the word "Yes" against the column 8, the Supreme Court observed that if only the Commissioner had read the report carefully he would never have come to the conclusion on the material before him that this is a fit case to issue notice under section 148. It cannot be said in the instant case that if the Commissioner had read the present report he would not have come to the conclusion that this is a fit case under section 148. It is to Page 50 of 66 be noticed that while the Act requires that the Commissioner should be satisfied, it does not require he should record his reasons for his satisfaction. It is true that if this court comes to the conclusion that the Commissioner could not have been satisfied at all having regard to the facts and circumstances of the case, the court would not hesitate to say that the requirements of section 151(2) are not satisfied even though the Commissioner might have said against column 8 that he was so satisfied. But, in this case, I am unable to say that the Commissioner could not have applied his mind or could not have been satisfied. The form like the one which is being used containing an endorsement merely saying "Yes" would justifiably cause apprehension that the act of the Commissioner is a mechanical act. In order to obviate this impression and to infuse more confidence in the assessee, it would be proper if the Commissioner also briefly states why he has given his sanction to the proceedings under section 147, thus avoiding all arguments in courts of law whether he applied his mind or he would have been satisfied in the circumstances of the case or not. The writ petition is dismissed but in the circumstances without costs.”

It was held by the Hon'ble High Court that merely putting the word ‘yes’ against the column would not satisfy the requirement of section 151 of the I.T. Act.

The Hon'ble Delhi High Court in the case of Pr. CIT vs. Pioneer Tower Planners Pvt. Ltd (456 ITR 356 (Del) has explained the proposition of law in para and 20 & 21 as under:

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.”

Therefore, the approval/sanction u/s 151 of the Act must exhibit the reasons for arriving to the satisfaction that it is a fit case for issuing notice u/s 148 of the Act. The approval granted cannot be in a mechanical manner as it acts as a linkage between the facts considered and conclusion reached.

The Amritsar Bench of the Tribunal in the case of Som Raj vs. Income Tax Officer in dated 21/02/2022 has considered the issue of validity of the approval/sanction u/s 151 of the Act in para 7 to 9 as under: “7. We have heard the learned Authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. In so far the claim of the learned AR, that the AO had in the body of the "reasons to believe" stated that the approval u/s 151 of the Act was to be obtained from the Commissioner of Income-tax (OSD), Range-VI, Pathankot, while for the same as per the form of approval was obtained from the Additional CIT, Range-VI, Pathankot is concerned, we are of the considered view, that the said assertion of the ld AR is based on misconceived and half- baked facts. As stated by the Ld DR, and rightly so, as the Commissioner of Income-tax Range-VI, Pathankot was at the relevant point of time holding the charge as that of the Additional CIT, Range-VI, Pathankot, therefore, it was incorrect on the part of the ld AR to claim that the AO had obtained the approval from an authority different from that as stated in the body of the "reasons to believe". We, thus, finding no substance in the aforesaid claim of the ld AR are constrained to reject the same.

An identical issue having similar facts has been adjudicated by this Bench of the ITAT in case of Shri Satnam Singh, Jalandhar Vs. ITO, Ward-1(4), Jalandhar in for the A.Y. 2013-14 vide order dt. 29/06/2021 wherein by following the order dated 15/03/2021 in ITA No. Page 54 of 66 215/Chd/2020 for the A.Y. 2009-10 in the case of Shri Tek Chand, Karnal Vs. ITO, Ward-2, Kaithal, the issue has been decided in favour of the assessee and the relevant findings have been given in para 14 to 14.4 which read as under: 14. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that the A.O. obtained the approval of the JCIT before issuing the notice under section 148 of the Act, proforma copy of which is placed at page no. 1 of the assessee's paper book, in the said Performa for recording the reasons for initiating the proceedings under section 147 / 148 of the Act and for obtaining the approval of the Ld. JCIT, it has been mentioned in column no. 11 as under: " Yes it is approved for 148 action " Sd/- (Umesh Takyar) Joint Commissioner of Income Tax Range-1, Jalandhar” From the aforesaid approval it is clear that the JCIT, Range-1, Jalandhar recorded the satisfaction in a mechanical manner without application of mind. He accorded the sanction for issuing notice under section 148 of the Act in a mechanical manner. 14.1 On a similar issue the Hon'ble Guwahati High Court in the case of Ladhuram Laxmi narayan Vs. ITO, Additional 102 ITR 595 (supra) held as under: 22. Sub-section (2) of Section 151 requires that before issuing a notice under Section 148, the Commissioner must be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. The submission of the learned counsel is that in the instant case there was no real satisfaction of the Commissioner or in other words there could not be satisfaction of the Commissioner as contemplated under Subsection (2) in the facts and circumstances of the case. In the column of the report whether the Commissioner was satisfied, the Additional Commissioner said " Yes ".

We have already found that the first ground given by the Income-tax Officer in his report praying for sanction for acting under Section 148 is admittedly a mistaken ground and, therefore, non-existent. That being so, the satisfaction of the Additional Commissioner in the instant case, so far as the first ground is concerned, is wholly mechanical without applying his mind. It has further been held Page 55 of 66

In the result, in any view of the matter, we find that the impugned notice under Section 148 in the instant ease is bad in law and without jurisdiction. Accordingly, we quash the impugned notice dated March 10, 1.971, under Section 148 of the Act. 14.2 A similar view has been taken by the Hon'ble Andhra Pradesh High Court in the case of P. Munirathnam Chetty And P. Vs. ITO, C-Ward 101 ITR 385 (supra)wherein it has been held as under: The form like the one which is being used containing an endorsement merely saying "Yes" would justifiably cause apprehension that the act of the Commissioner is a mechanical act. In order to obviate this impression and to infuse more confidence in the assessee, it would be proper if the Commissioner also briefly slates why he has given his sanction to the proceedings under Section 147, thus avoiding all arguments in courts of law whether he applied his mind or he would have been satisfied in the circumstances of the case or not. 14.3 On an identical issue the ITAT Chandigarh Bench "B" Chandigarh vide order dt. 15/03/2021 in for the A.Y. 2009-10 in the case of Shri Tek Chand Vs ITO, Ward-2, Kaithal held as under: 14.1 The A.O. obtained the approval of the PR. CIT before issuing the notice under section 148 of the Act. The proposal dt. 11/03/2016 seeking the approval for issuance of notice under section 148 of the Act, by the A.O. is placed at page no. 2 & 3 of the assessee's paper book. While giving the approval the Ld. PR. CIT, Karnal recorded as under: " Yes, satisfied, it is a fit case for issue of notice under section 148" Sd/- Pr. CIT, Karnal 14.2 From the aforesaid approval, it is clear that the Ld. Pr. CIT recorded satisfaction in the mechanical manner, without application of mind to accord sanction for issuing notice Page 56 of 66 under section 148 of the Act. On an identical issue the Hon'ble M.P. High Court in the case of CIT Jabalpur Vs. S. Goyanka Lime & Chemical Ltd. reported at (2015) 56 Taxmann.com 390 by following its own decision in the case of Arjun Singh Vs. ADIT (2000) 246 ITR 363 (M.P) held as under: 7. We have considered the rival contentions, and we find that while according to sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am satisfied". In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court, and the following principles are laid down:-- The Commissioner acted, of course, mechanically in order to discharge is statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, 1 am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material.

Therefore, in view of the fact that notice issued u/s 148 of the Act in respect of A.Ys 2014-15 to 2018-19 after the expiry of 3 years from the end of the A.Y, the approval of the specified authority granted in a mechanical way renders the reopening of the assessment itself bad in law. Accordingly, in view of the facts and circumstances as cited above and various decisions as stated above, we hold that the reopening of the assessment is not valid and liable to be set aside. Apart from the invalid approval/sanction u/s 151 of the Act, the Assessing Officer has also failed to bring the case in the category where mandatory conditions u/s 149(1)(b) of the Act are satisfied for initiation of proceedings u/s 147/148 of the Act after the expiry of 3 years from the end of the relevant A.Ys and therefore, the reopening of the assessment for want of the satisfaction of mandatory condition u/s 149(1)(b) of the Act is also invalid and liable to be quashed. We order accordingly.”

Identical issues have been considered by us in case of M/s. Ace Tyres (P) L:td in for the A.Y 2019-20 vide even date order as under: “43. So far as the facts and circumstances leading to the initiation of the proceedings u/s 147/148 of the Act are concerned, the same are common for all the A.Ys from 2014- 15 to 2019-20. Therefore, the same are not required to be repeated here. Only new fact for the year under consideration is that initially, the Assessing Officer issued notice u/s 148 on 18/03/2023 in response to which the assessee has filed the return of income on 15/11/2023. However, the Assessing Officer dropped the re-assessment initiated vide notice u/s 148 dated 18/03/2023 and issued Page 61 of 66 a fresh notice u/s 148 on 14/11/2024. Thus, the assessee has challenged the notice issued by the Assessing Officer u/s 148 on 14/11/2024 which is after 3 years from the end of A.Y under consideration on the similar grounds and contention as raised against this notice u/s 148 for the A.Y 2014-15 to 2018-19 as well as on the ground that in the absence of any fresh material after dropping of the earlier proceedings, the Assessing Officer has no jurisdiction to issue a 2nd notice u/s 148 of the Act. Further, the assessee has also challenged the validity of the second notice issued u/s 148 dated 14/11/2024 on the ground that while issuing this notice, the Assessing Officer cannot assume jurisdiction as per the proviso to section 148A of the Act. The learned Counsel for the assessee has submitted that once the original proceedings initiated vide notice u/s 148 dated 18/03/2023 were dropped by the Assessing Officer, then the second notice issued u/s 148 on 14/11/2024 is invalid as the Assessing Officer has not followed the procedure in accordance with the provisions of section 148A of the Act. The Assessing Officer was required to issue a notice u/s 148A(b) and then was to pass an order u/s 148A(d) of the Act before issuing notice u/s 148 of the Act.

The next contention of the learned Counsel for the assessee is that the sanction was required to be taken u/s 151 of the Act from the Pr. Chief Commissioner and not from the Director General of the Income Tax.

On the other hand, the learned DR has submitted that the Assessing Officer has dropped the proceedings initiated vide notice u/s 148 dated 18/03/2023 due to technical reason of not issuing notice u/s 143(2) of the Act within the period of limitation and therefore, the 2nd notice u/s 148 was issued based on the same material/information in the possession of the Assessing Officer arising from the search & seizure action and hence, the proviso to section 148A is applicable for issuing 2nd notice u/s 148 of the Act. Thus, the learned DR has submitted that there is no infirmity or illegality in the notice issued by the Assessing Officer u/s 148 dated 14/11/2023.

We have considered the rival submissions as well as the relevant material available on record. The Assessing Officer Page 62 of 66 has given the reasons for reopening of the assessment placed at page No.25 to 27 of the paper book as under:

It is clear from the above reasons recorded by the Assessing Officer that the notice u/s 148 of the Act was initially issued on 18/03/2023 was dropped by the Assessing Officer and thereafter, a fresh notice u/s 148 was issued on 14/11/2024. Undisputedly, the re-assessment order passed by the Assessing Officer is in pursuant to the notice u/s 148, dated 14/11/2024 and therefore, the reopening of the assessment for the A.Y 2019-20 was also after the expiry of 3 months from the end of the A.Y under consideration. The Assessing Officer has given identical reasons for reopening of the assessment as recorded for the reopening of the assessments for the A.Y 2014-15 to 2018-19. Therefore, so far as the validity of the reopening of the assessment for the A.Y 2019-20 as considered to the extent of the common facts and circumstances to the reopening of the assessment for the A.Y 2014-15 to 2018-19 is concerned, our finding on this issue for the A.Y 2014-15 is applicable mutatis-mutandis for the year under consideration and consequently, the notice issued u/s 148 of the Act on 14/11/2024 is held as invalid and liable to be quashed.

Since this notice u/s 148 of the Act, dated 14/11/2024 was issued after dropping the proceedings initiated by the Assessing Officer vide notice u/s 148 dated 18/03/2023, therefore, in our considered opinion, the Assessing Officer cannot initiate the fresh proceedings u/s 147/148 of the Act on the basis of the same material and facts after the proceedings initiated earlier vide notice u/s 148A of the Act dated 18/03/2003 were dropped by the Assessing Officer. The reasons for dropping of the proceedings were not beyond the control of the Assessing Officer. The Assessing Officer has given the reasons that notice u/s 143(2) was issued, however, non-issuance of notice u/s 143(2) leads to the inference and conclusion that the Assessing Officer did not choose to scrutinize the return of income filed by the assessee in response to the notice issued by the Assessing Officer u/s 148 dated 18/11/2023 and thus, proceedings stands dropped/closed by accepting the return of income. In the absence of fresh material or change in the facts, the Assessing Officer cannot be allowed to reinitiate the proceedings already dropped by issuing a second notice u/s 148 of the Act and that too when the reasons for dropping of the earlier proceedings was not beyond the control of the Assessing Officer. Therefore, we are of the considered view that the notice issued u/s 148 on 14/11/2024 after dropping the proceedings initiated vide notice u/s 148 issued on 18/03/2023 is invalid and liable to be quashed on this ground alone. We order accordingly.”

In view of our finding on these issues arising for the A.Y 2019-20, in case of M/s. Ace Tyres (P) Ltd, we hold that the proceedings initiated by issuing notice u/s 148 of the Act, dated 14/11/2024 is invalid and liable to be quashed. We order accordingly.

In the result, all the appeals of the assessee for the A.Ys 2015-16 to 2019-20 are allowed.