BHAVIKA BHUWALKA,DELHI vs. INCOME TAX OFFICER, WARD-5(1)(2), NOIDA, NOIDA

The Ld. Counsel for the assessee at the outset referring to ground No.3.1 and 3.2 of grounds of appeal submitted that the Ld. CIT(A) grossly erred in upholding the validity of notice u/s.148 even though the same was issued without proper sanction in terms of section 151 of the Act. The Ld. Counsel for the assessee submitted that the assessment year involved in the present case is A.Y. 2013-14 and the notice issued u/s.148 is dated 13.03.2021 which is beyond period of four years and in view of provision of section 151 of the Act the competent authority for sanctioning for reopening an assessment which is beyond a period of three years is PCIT/CIT. The Ld. Counsel for the assessee referring to page- 2 of the paper book which is the Form for recording the reasons for initiating proceedings u/s.147/148 and for obtaining the approval of PCIT submitted that the sanction was granted by the PCIT by merely appending his signature without any date and not recording any satisfaction for issue of notice u/s.148 of the Act. The Ld. Counsel for the assessee further referring to page-2 of the paper book submitted that in the case of the assessee Additional Commissioner appears to have granted permission to the AO to record reasons issued notice u/s.148 of the Act. The Ld. Counsel submitted that even this sanction even not accordance with provision of section 151 of the Act and also undated.

The Ld. Counsel further referring to page-5 and 6 of the paper book which is the letter written ITO, Headquarters to the Additional CIT informing that the PCIT had given approval under section 151 for issuance of notice u/s.148 of the Act, submitted that on a single day on 30.03.2021 the Ld.PCIT had sanctioned approval u/s.151 in as many as 47 cases on a single day.

The Ld. Counsel for the assessee placing reliance on the decision of Hon’ble Delhi High Court in the case of PCIT Vs. Pioneer Town Planners Pvt. Ltd. (2024) 465 ITR 356 submitted that the Hon’ble High Court held that when PCIT while granting approval u/s.151 of the Act simply wrote “Yes”, without specifically noting his approval for issue of notice u/s.148 of the Act, such an approval could not be considered to be valid approval.

The Ld. Counsel for the assessee submits that in his case the Ld.PCIT did not even mention the word “Yes” while granting sanction u/s.151 of the Act. Referring to the decision of Hon’ble Delhi High Court in the case of Capital Broadways Pvt. Ltd. Vs. ITO (2024) 301 taxmann 506, the Ld. Counsel for the assessee submitted that mere repeating of the words of the statue, mere rubber stamping of the letter seeking sanction or using similar word like “Yes, I am satisfied” the requirement of law and the same cannot be considered to be valid approval as the same is not reflective of independent application of mind.

The Ld. Counsel for the assessee further referring to page -3 which are the reasons for reopening of assessment u/s.148 of the Act, submitted that the reason for reopening of assessment was stated to be that the assessee purchased penny stock from Global Capital Market Limited to the tune of Traded value of Rs.5,40,000/- in the Financial Year 2012-13 relevant to the A.Y. 2013-14.

Heard rival submissions, perused the orders of the authorities below and the materials placed before me. On perusal of the sanction granted u/s.151 of the Act by ld. PCIT it is observed that the sanction was granted both by Addl. CIT as well as PCIT and both the sanctions on the same page is undated. The assessment year involved in the case of the assessee is 2013-14 and the notice issued u/s.148 for reopening the assessment was beyond the period of three years from the end of the relevant assessment year since notice is dated 31.03.2021. As per the provisions of section u/s.151 of the Act relevant for the A.Y.2013-14 when an assessment proposed to be reopened u/s.148 of the Act beyond the period of three years from the end of the relevant assessment year, the competent authority to grant sanction u/s.151 of the Act is PCIT/CIT. In the case of the assessee it is observed that the Ld. PCIT who is the competent authority to grant sanction u/s.151 of the Act had simply signed without recording any satisfaction as to why he is granting sanction for issue of notice u/s.148 of the Act. It is further observed that such a sanction is also undated which means it is not known whether the sanction was granted prior to issue of notice u/s. 148 of the Act or after the issue of notice u/s.148.

The Hon’ble Jurisdictional High Court in the case of Capital Broadways Pvt. Ltd. (supra) held as under :-

The satisfaction arrived at by the concerned Officer should be discernible from the sanction order passed under Section 151 of the Act. However, as may be seen, the approval order is bereft of any reason. There is no whisper of any material that may have weighed for the grant of approval.

This Court in the case of The Principal Commissioner of Income-tax v. Pioneer Town Planners Pvt. Ltd. (2024) SCC OnLine Del 1685/[2024] 160 taxmann.com 652/465 ITR 356 (Delhi) while dealing with an identical challenge of approval, having been accorded mechanically, had held as under.- "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 proceeding as per Section 148 of the Act.

In the case of Chhugamal Rajpal, the Hon'ble Supreme Court refused to consider the affixing of gnature 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 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 thereunder. 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, 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."

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 Page | 10 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.

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 Experion 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.

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."

In the case of Principal Commissioner of Income-tax v. Meenakshi Overseas (P.) Ltd. [IT Appeal No. 651 of 2015,dated 26-5-2017) while reiterating that the satisfaction has to be accorded on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice, the Court noted that by writing the words "Yes, I am satisfied" the mandate of Section 151(1) of the Act as far as approval of Additional CIT was concerned, stood satisfied. However, we may take note that such finding was arrived at by the Court in light of the fact that Additional CIT addressed a letter to the ITO stating as under:- "In view of the reasons recorded under Section 148(2) of the IT Act, approval for issue of notice under Section 148 is hereby given in the above-mentioned case, you Page | 11 are, accordingly directed to issue notice under Section 148 and submit a compliance report in this regard at the earliest."

Such letter sent by the Additional CIT to the ITO clearly reveals that the sanction was accorded after due application of mind and on considering the reasons narrated by the Assessing Officer. However, in the present case, there is no such material to come to the conclusion that PCIT granted approval after considering the reasons assigned by the Assessing Officer. The decision rendered in Meenakshi Overseas (P.) Ltd. (supra), is therefore not applicable to the facts and circumstances of the present case.

Dealing with an identical challenge where the competent authority just recorded "Yes I am satisfied", the Madhya Pradesh High Court in the case of CIT v. S. Goyanka Lime & Chemicals Ltd. ITA 82/2012/(2015) 56 taxmann.com 390)/231 Taxman 73 (MP) held 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 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.

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." Page | 12

The SLP challenging the decision rendered by the Madhya Pradesh High Court was dismissed by the Supreme Court CIT) v. S. Goyanka Lime & Chemical Ltd. [2015] 64 taxmann.com 313/237 Taxman 378 (SC).

As explained in the above cases, mere repeating of the words of the statute, mere rubber stamping of the letter seeking sanction or using similar words like "Yes, I am satisfied" will not satisfy the requirement of law. Hence, we are of the firm view that PCIT has failed to satisfactorily record his concurrence. The mere use of expression "Yes, I am satisfied" cannot be considered to be a valid approval as the same does not reflect an independent application of mind. The grant of approval in such manner is thus flawed in law.

Ratio of the above decision squarely applies to the facts of the assessee’s case. Thus, respectfully following the said decision I hold that the notice issued u/s.148 was without obtaining valid sanction u/s.151 of the Act and, therefore, such notice u/s. 148 and also the consequential assessment made u/s. 144B r.w.s. 147 of the Act dated 28.03.2022 pursuant to such notice is bad in law, nonest and void ab initio. Thus, the assessment order is hereby quashed.

In the result, the appeal of the assessee is allowed.