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Facts
The assessee, Rakesh Divedi, filed an appeal against the order of the Ld. CIT(A) which confirmed the addition of Rs. 5,20,88,345/- made by the AO under section 68 of the Act for cash deposits. The reopening of assessment was initiated under section 147, and a notice under section 148 was issued.
Held
The Tribunal held that the approval for reopening the assessment under section 151 was mechanical, without due application of mind by the PCIT. Citing various High Court and Supreme Court judgments, the Tribunal found that the approval was unsustainable and therefore, the reassessment proceedings and notice under section 148 were bad in law and liable to be quashed.
Key Issues
Whether the reopening of assessment under section 147 was valid, particularly concerning the mechanical approval granted by the PCIT under section 151, and the validity of the notice issued under section 148.
Sections Cited
143(3), 147, 148, 68, 151, 292BB, 143(2)
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Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
Before: SHRI SUDHIR KUMAR & SHRI MANISH AGARWAL
O R D E R
PER MANISH AGARWAL, AM:
1. This appeal is filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (‘Ld. CIT(A)’ in short) dated 07.03.2025 in Appeal No.40/10204/2018-19 arising out of the order passed by the Income Tax Officer, Ward-40(3) u/s 143(3) of the Act (‘the Act’ for short) dated 20.12.2016 for Assessment Year 2009-10.
Brief facts of the case are that assessee is an individual and proprietor of M/s Triambkay Gauri Impex. The information was received by the AO from Investigation Wing that there were cash deposits in the bank account of the assesse with ICICI Bank, however, income of the assessee and gross receipt has not Rakesh Divedi vs. Income Tax Officer commensurate with the cash so deposited, therefore, after recording the reason u/s 147, notice u/s 148 was issued on 31.03.2016 after obtaining statutory approval from the PCIT. Thereafter, assessment was completed vide order dated 20.12.2016 wherein total addition of Rs. 5,20,88,345/- was made u/s 68 of the Act for cash deposited in the bank accounts by holding the same as unexplained cash credits.
Against the said order, assessee has filed an appeal before Ld. CIT(A) who vide impugned order has partly allowed the appeal of the assessee and directed the AO to make addition of peak credit of the total deposits in the bank accounts.
Against the said order, assessee is in appeal before us by taking following grounds of appeal:
1. On the facts and circumstances of the case and in law, the order passed by the learned Commissioner of Income Tax (Appeals) (Ld. CIT(A)) is bad both in the eyes of the law and on facts and thus, liable to be quashed.
2. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred both on facts and in law in confirming the assessment u/s 147 of the Act made by the AO without issuing and serving mandatory notice u/s 143(2) of the Act within the time limit prescribed under the Act thereby making the assessment order invalid and liable to be quashed.
3. (i) On the facts and circumstances of the case, the Ld. CIT(A) has erred in confirming the order of the AO despite the same having been made on the basis of reasons recorded without there being independent application of his mind. (ii) That the reassessment order passed by the AO is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and has been recorded only on borrowed satisfaction.
4. On the facts and circumstances of the case, the Ld. CIT(A) has erred in confirming the order of the AO despite the fact that the re-opening of the assessment proceedings u/s 147 of the Act is bad in law having been made without obtaining proper approval u/s 151 of the act from the prescribed authority and that it was granted in a mechanical manner.
5. (i) On the facts and circumstances of the case, the Ld. CIT(A) has erred in directing the AO to make addition on peak credit theory on the cash deposited
Rakesh Divedi vs. Income Tax Officer in the bank account amounting to Rs. 5,20,88,345/- and delete the entire cash deposits of Rs. 5,20,88,345/- u/s 68 made by the AO (ii) That the Ld. CIT(A) has erred both on facts and in law in directing the AO to adopt the peak credit theory. 6. That the appellant respectfully craves for leave to add, amend, alter, omit or substitute any of the grounds of appeal at any time before or at the time of hearing of the appeal.”
5. Ground of appeal No.1 is general in nature.
6. Ground of appeal
No.2 is regarding non issue of notice u/s 143(2) within the prescribed time limit. In this regard, before us, Ld. AR for the assessee submits that in the instant case notice u/s 148 was issued on 31.03.2016 and subsequently notice u/s 143(2) of the Act was issued on 30.05.2016. However, in response to notice u/s 148 of the Act, assessee filed the return of income on 05.09.2016 thus, the notice u/s 143(2) dt. 30.5.2016 was issued prior to the filing of return in response to notice u/s 148 of the Act. Ld. AR further submits that no notice u/s 143(2) of the Act was issued after filing of return of income, therefore, the entire proceeding completed u/s 147 of the Act are without jurisdiction and Ld. AR requested for quashing the proceedings so made. The Ld. Placed his reliance on the following judgments: - CIT Vs M/s. S. Goyanka Lime and Chemical Ltd. No.- Special Leave to Appeal (C). CC No 11916/2015 dated 08.07.2025, SC - CIT Vs. M/s S. Goyanka Lime and Chemicals Ltd. in 83, 84, 87, 88, 89 of 2012 dated 14.10.2014 (MP) - Capital Broadways Pvt. Ltd. Vs. ITO, Ward 5(3), Delhi & Anr. In WP(C) No. 4303/2017 dated 03.10 2024 (Delhi) - SBC Minerals Pvt. Ltd. Vs. ACIT Circle
22. (2), Delhi in WP(C) No. 7885/2023 & CM APPL 30359/2023 dated 20.08.2024 (Delhi) - Pr. CIT Vs. Pioneer Town Planners Pvt. Ltd. in ITA 91/2019 dt. 20.02.2024 (Delhi)
Rakesh Divedi vs. Income Tax Officer - Naveen Kumar Gupta Versus ITO, Ward 26 (1), New Delhi 18.06.2025 ITAT Delhi - DCIT, CC-28, New Delhi Vs. Manish Uppal in dt. 16.05.2025 (ITAT, Delhi) - Nikita Mahajan Vs ITO Ward-2 (1) Faridabad in dt. 24.01 2025 (ITAT, Delhi) - DCIT Circle-23(1), New Delhi Vs Ram Kumar Shokeen And (Vice- Versa) (10) TMI 417-ITAT Delhi - Arun Dugal vs. DCIT 2025 (10) TMI 417- ITAT Delhi 7. On the other hand, Ld. Sr. DR supported the order of AO and submits that in this case, notice u/s 143(2) was originally issued on 30.05.2016, however, when the assessee has filed return of income, the AO has again issued u/s 143(2) on 18.11.2014 along with summons issued u/s 131. The Ld. Sr. DR placed copy of the notice so issued in the PB page 63 filed by the Revenue. Ld. Sr. DR further submits that this issue was never challenged before the AO and assesse has participated in the proceedings, therefore, in terms of section 292BB of the Act, assessee cannot raise this issue at this stage. Accordingly, ld. Sr. DR prayed for confirmation of the order passed u/s 147 being completed after issue of valid notice u/s 143(2) of the Act.
Heard both the parties and perused the materials available on record. It is seen that AO has issued fresh notice u/s 143(2) of the Act after filing of return of income by the assessee in response to notice u/s 148 and thus the said notice was well within the statutory time as per Act. Therefore, we find no merits in the argument of Ld. AR. Accordingly, grounds of appeal No.1 & 2 of the assessee are dismissed.
Rakesh Divedi vs. Income Tax Officer 9. Ground of appeal No. 3 & 4 are with respect to the validity of reopening of the assessment as the approval given by ld. PCIT is mechanical approval and reasons recorded are vague and based on borrowed satisfaction.
Heard both the parties and perused the materials available on record. In the instant case, ld. PCIT has granted the approval u/s 151 of the Act in terms of the approval granted, as available in pages 3 & 4 of the PB. The said approval is reproduced as under:
Name and address of the assessee Sh. Rakesh Divedi 87, Triveni Apartment, Pitampura, Delhi-110034.
2. PAN/GIR No. APCD9179A 4. District/Ward/Range Individual 5. Assessment Year in respect of which it is 2009-10 proposed to issue notice u/s 148 6. The quantum of income which has Rs.5,20,88,345/- escaped assessment 7. Whether the provisions of section 147(a) Section 147(b) is applicable of 147(b) or 147(c) are applicable or both sections are applicable 8. Whether the assessment is proposed to be Yes made for the first time, if the reply is in the affirmative, please state: a. Whether any voluntary return has already Yes been filed and b. If so, the dates of filing the said return 30,30,k2010 9. If the answer to item 8 is in the negative, N.A. please state a. The income originally assessed - b. Whether it is a case of under assessment - at too low a rate, assessment of which has been made, the subject of excessive relief of allowing loss or depreciation; 10. Whether the provision of Section 150(1) is A.N applicable. If the reply is in the affirmative, the relevant facts may be stated against item no.10 and it may also be brought out that provisions of section 150(2) would not stand in the way of initiating proceedings under section 147.
Rakesh Divedi vs. Income Tax Officer 11. Reasons for the belief that income has As per annexure “A” escaped assessment. 12. Whether the Pr. Commissioner of Income Yes, I am satisfied. Tax is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice under section 148 of the Income Tax Act, 1961.
From the perusal of the approval granted by ld. PCIT as observed in column No.12 of the Performa, it is seen that ld. PCIT has simply stated “Yes I am satisfied” and while granting the approval it appears that ld. PCIT has simply given his consent on the material forwarded by the lower authorities without even looking into the facts as the detailed reasons alongwith the approval was sent for his approval and he simply granted the approval.
The Hon’ble Supreme Court in case of CIT vs. S. Goyanka Lime & Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC) examined the identical issue as to according the sanction for reopening the assessment u/s 148 of the Act by merely recording “Yes. I am satisfied” and held the reopening on the basis of mechanical sanction as invalid by making following observations :- “ Section 151, read with section 148 of the Income-tax Act,1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under. section 148, reopening of assessment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes [In favour of assessee] Search and Seizure-Procedure for black Assessment- Search was conducted at residential and business premises of Assessee and notice for block assessment u/s. 158- BC was issued- For block period, returns were filed that were processed u/s. 143 (1)- However, notice u/s. 148 was issued by AO, on basis of certain reasons recorded- Assessee objected to same before AO, that was rejected and assessment was completed u/ss. 143(3) and 147-CIT(A) found that reason recorded by Joint Commissioner of Income Tax, for according sanction, was merely recording ‘I am Satisfied'-Action for sanction was alleged to be without application of mind and to be done in mechanical manner-Held, while according sanction, Joint Commissioner, Income Tax only
Rakesh Divedi vs. Income Tax Officer recorded "Yes, I am satisfied"-Mechanical way of recording satisfaction by Joint Commissioner, that accorded sanction for issuing notice u/s. 147, was clearly unsustainable-On such consideration, both Appellate authorities interfered into matter- o error was committed warranting reconsideration-As far as explanation to S. 151, brought into force by Finance Act, 2008 was concerned, same only pertained to issuance of notice and not with regard to manner of recording satisfaction-Amended provision did not help Revenue-No question of law involved in matter, that warranted reconsideration-Revenue's Appeals dismissed.”
Hon’ble High Court of Delhi in case cited as SABH Infrastructure Ltd. vs. ACIT in WP (C) 1357/2016 order dated 25.09.2017 has issued guidelines to the Revenue authorities while deciding the issue of reopening u/s 147/148 of the Act, which is reproduced as under:- “19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for reopening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof; (iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons; (iv) the exercise of considering the Assessee’s objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection
Rakesh Divedi vs. Income Tax Officer and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed.”
14. The Hon'ble Delhi High Court in the case of CIT vs N.C. Cables Ltd. reported in (2017) 391 ITR 11 has observed as under:-
"Reassessment-Issuance of Notice-Sanction for issue of Notice-Assessee had in its return for A Y 2001-02 claimed that sum of Rs. 1 Crore was received towards share application amounts and a further sum of Thirty Five Lakhs was credited to it as an advance towards loan-Original assessment was completed u/s 143(3)- However, pursuant to reassessment notice, which was dropped due to technical reasons, and later notice was issued and assessments were taken up afresh-After considering submissions of assessee and documents produced in reassessment proceedings, AO added back a sum of Rs.1,35,00,000/- - CIT(A) held against assessee an legality of reassessment notice but allowed assessee's appeal on merits holding that AO did not conduct appropriate enquiry to conclude that share inclusion and advance received were from bogus entities-Tribunal allowed assessee's appeal on merits- Revenue appealed against appellate order on merits- Assessee's cross appeal was on correctness of reopening of assessment- Tribunal upheld, assessee's cross-objections and dismissed Revenue's appeal holding that there was no proper application of mind by concerned sanctioning authority u/s Section 151 as a pre-condition for issuing notice u/s 147/148-Held, Section 151 stipulates that CIT (A), who was competent authority to authorize reassessment notice, had to apply his mind and form opinion- Mere appending of expression 'approved' says nothing-It was not as if CIT (A) had to record elaborate reasons for agreeing with noting put up-At same time, satisfaction had to be recorded of given case which could be reflected in briefest possible manner- In present case, exercise appears to have been ritualistic and formal rather than meaningful, which was rationale for safeguard of approval by higher ranking officer- Revenue's appeal dismissed."
Hon’ble Bombay High Court in the case of Saraswat CO - operative Bank Ltd. vs ACIT & Others reported in [2025] 473 ITR 205 (Bom.) has held as under:- Sanction mechanism under section 151 21. Evidently, the reassessment was first proposed internally on March 24, 2021 by the jurisdictional Assessing Officer, and was recommended by a Range Officer on March 25, 2021, and approved by the Principal Commissioner of Income-tax on the same day all under section 151 of the Act. Therefore, the reassessment has been contemplated and initiated one year after the expiry of four years from the end of the relevant assessment year d (2015-16). Therefore, failure by the Rakesh Divedi vs. Income Tax Officer petitioner to disclose material facts was a jurisdictional imperative, which was simply incapable of being discerned from the material on record. Therefore, we have no hesitation in holding that the Revenue's bid to initiate reassessment is unfounded and in direct conflict with section 147 of the Act. Therefore, the sanction for reassessment under section 151 could simply not have been given.
The requirement for sanction by a high-ranking official under section 151, is an inherent check and balance in the statutory scheme of the Act. Such officers are expected to apply their mind to the facts and the applicable law and then accord sanction. In the instant case, the proposed reassessment was sanctioned by the Principal Commissioner of Income-tax, with the following remarks: "Yes, I am satisfied with the reasons recorded by the Assessing Officer for issuance of notice under section 148 of the Income-tax Act, 1961." (emphasis supplied) 23. The power to sanction reassessment under section 151, is coupled with a duty to exercise such power reasonably, and not arbitrarily. It is trite law that absence of valid reasons constitutes arbitrariness. In the instant case, the entire process of according sanction demonstrates non-applica-tion of mind to the ingredients of section 147, rendering the sanction to be h arbitrary, calling for intervention by a writ court. Evidently, the proposal, the recommendation and the approval in the instant case was mechanical, without either application of mind to the law and the facts or even a modi-cum of how the ingredients of the law had been met. In short, the machinery under section 151 completely failed.
The imperative requirement of compliance with the ingredients of section 147 and section 148 is underlined in innumerable judgments. How-ever, we note with respect and approval, a judgment of a Division Bench of this court cited on behalf of the petitioner, in the case of Hindustan Lever Ltd. v. R. B. Wadkar (per V. C. Daga and J. P. Devadhar JJ.), and profitably extract the following (page 337 of 268 ITR): "Reading of the proviso to section 147 makes it clear that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reasons of the failure on the part of the assessee to disclose all material facts necessary for his assessment for that assessment year.
Rakesh Divedi vs. Income Tax Officer In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was March 31, 1997 and from that date if four years are counted, the period of four years expired on March 31, 2001. The notice issued is dated November 5, 2002 and received by the assessee on November 7, 2002. Under these circumstances, the notice is clearly beyond the period of four years. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the court, on the strength of the affidavit or oral submissions advanced. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of the proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside." (emphasis supplied) 25. Having regard to the foregoing and in view of the findings returned by us, the writ petition deserves to be allowed in the following terms:
Rakesh Divedi vs. Income Tax Officer "(A) The order dated March 25, 2021 sanctioning the reassessment under section 151 of the Act; the impugned notice dated March 30, 2021 issued under section 148 of the Act; the impugned order dated February 25, 2022 rejecting the objections raised by the petitioner are declared to be arbitrary and devoid of valid reasons and, therefore, illegal; (B) Consequently, the order dated March 25, 2021 sanctioning the reassessment under section 151 of the Act; the impugned notice dated March 30, 2021 issued under section 148 of the Act; the impugned order dated February 25, 2022 and all consequential proceedings in respect of the reassessment are hereby quashed and set aside."
Rule is made absolute in the aforesaid terms, and the writ petition is disposed of accordingly. There shall be no order as to costs.”
16. Hon’ble Delhi High Court in the case of SBC Minerals Pvt. Ltd. vs ACIT [2025] 475 ITR 360 (Del.) has held as under:- 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 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. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the g 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 Rakesh Divedi vs. Income Tax 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 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.
A 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 March 20, 2023. The Principal Chief Commissioner of Income-tax granted the approval the same day. The approval accorded by the Principal Chief Commissioner of Income-tax in column 22 is extracted below: 22 Reasons for according Remarks: Approved under approval/rejection by the specified section 148A(d) as a fit case. authority to order under section Name: Rajat Bansal 148A(d) and/or issuance of notice Designation : PCCIT, Delhi under section 148 of the Income- Date-20.03.2023 tax Act, 1961? 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 Principal Chief Commissioner of Income-tax while granting approval under section 151 to the reopening under section 148 is not enough. While the Principal Chief Commissioner of Income- tax is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is f 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. The grant of approval by the Principal Chief Commissioner of Income-tax in the printed format without any line of reason does not fulfil the requirement of section 151 of the Act.
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 the Pr. CIT v. Pioneer Town Planners Pvt. Ltd., wherein, we had held as follows (page 361 of 465 ITR): "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 Rakesh Divedi vs. Income Tax Officer Act. Reference can be drawn from the decision of this court in Pr. CIT v. N. C. Cables Ltd.¹, wherein, the usage of the expression 'approved was considered to be merely ritualistic and formal rather than meaningful. The relevant paragraph of the said decision reads as under (page 17 of 391 ITR): '11. Section 151 of the Act clearly stipulates that the Commissioner of Income-tax (Appeals), who is the competent authority to authorise 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 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 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 (page 245 of 333 ITR): 'In respect of the first plea, if the judgments in Chhugamal Rajpal v. S. P. Chaliha, Chanchal Kumar Chatterjee v. ITO and Govinda Choudhury and Sons v. ITO are examined, the absence of reasons by the Assessing Officer does not exist. This is so as along with the pro-forma, 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. 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 set-ting 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. Mohan Lal Capoor¹ 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 Rakesh Divedi vs. Income Tax Officer is that it is a general description of the process adopted in arriving at a conclusion.
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 v. S. P. Chaliha³, the hon'ble Supreme Court refused to consider the affixing of signature along with the noting Yes' as valid approval and had held as under (page 608 of 79 ITR): '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 b 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. 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.' 20. This court, while following Chhugamal Rajpal v. S. P. Chaliha in the case of Ess Advertising (Mauritius) S. N. C. Et Compagnie v. Asst. CIT (International Taxation), wherein, while granting the approval, the Assistant Commissioner of Income-tax has written: This is fit case for issue of notice under section 148 of 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.”
Looking to the aforesaid facts of the case and the approval granted by Ld. PCIT, we find that the Ld. PCIT has not applied his mind and given approval by observing “Yes, I am satisfied” which appears to be a mechanical approval given without referring to any material available before him. Therefore, we hold the said
Rakesh Divedi vs. Income Tax Officer approval as mechanical approval and the re-assessment proceedings initiated based on such approval as bad in law and consequent notice u/s 148 is hereby quashed. Accordingly, the entire proceedings culminated based on such incorrect/improper approval and consequent order passed u/s 147 of the Act is quashed. Ground of appeal No. 3 & 4 of the assessee are thus allowed.
Since we have allowed assessee’s grounds of appeal No. 3 & 4 of the assessee and quashed the reassessment order passed u/s 147 of the Act thus the remaining grounds of appeal are not adjudicated.
In the result, appeal of the Assessee is allowed. Order is pronounced in the Open Court 09.01.2026