JIYA EXIM PRIVATE LIMITED,KOLKATA vs. ITO, WARD 5(1),, KOLKATA

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 proceedings as per Section 148 of the Act. xxxxxxxxxxxx 17. Thus, the incidental question which emanates at this juncture is whether simply penning down "Yes" would suffice requisite satisfaction as per Section 151 of the Act. Reference can be drawn from the decision of this Court in N. C. Cables Ltd., wherein, the usage of the expression "approved" was considered to be merely ritualistic and formal rather than meaningful. The relevant paragraph of the said decision reads as under:- "11. Section 151 of the Act clearly stipulates that the Commissioner of Income-tax (Appeals), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression "approved" says nothing. It is not as if the Commissioner of 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."

In the case of Chhugamal Rajpal, the Hon"ble Supreme Court refused to consider the affixing of signature alongwith the noting "Yes" as valid approval and had held as under:- "5. – Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this 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. 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."

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."

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 Jiya Exim Private Limited 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.

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."

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.

Hence, for the aforesaid reasons, we are of the view that the approval granted by the PCIT for issuance of notice under Section 148 of the Act is not valid and therefore the impugned notice under Section 148 dated 24.03.2017 cannot be sustained. Accordingly, the impugned notice is set aside.

We also note that in this case the reliance made by the ld. DR in the case of Prem Chand Shaw (Jaiswal) vs. Assistant Commissioner (supra), wherein the Hon'ble Calcutta High Court has held that the sanction granted under section 151(2), when reasons on basis of which sanction was sought for, could not be assailed and the said decision of the Hon'ble High Court has been distinguished by the Tribunal in the case of ITO Vs. Shri Anil Kumar Loharua, in vide order dated 28.08.2019, wherein the Tribunal vide para no.6 held as under:- “6. We have heard the arguments of both the sides and also perused the relevant material available on record. In support of the revenue’s case on the issue under consideration, the ld. D.R. has relied on the decision of the Hon’ble Calcutta High Court in the case of Prem Chand Shaw (Jaiswal) –vs.- ACIT [383 ITR 597]. He has contended that the said decision of the Hon’ble Jurisdictional High Court is squarely applicable in the present case as it was held by Their Lordships that the mere fact that the Additional Commissioner did not record his satisfaction in so many words should not render invalid the satisfaction granted under section 151(2) of the Act. However, as rightly contended by the ld. Counsel for the assessee, the said case cited by the ld. D.R. is distinguishable on facts, inasmuch as, the assessee in the said case had restricted his challenge to the validity of notice under section 148 only on the ground that sanction under section 151 was not valid and the basis for reasons furnished by the Assessing Officer in the notice under section 148 was never in Jiya Exim Private Limited dispute. Keeping in view this factual position prevalent in the said case, it was held by the Hon’ble Jurisdictional High Court that the mere fact that the Additional Commissioner did not record his satisfaction in so many words should not render invalid the satisfaction granted under section 151(2) of the Act when the reason on the basis of which sanction was sought for could not be assailed. In the present case, the facts involved, however, are materially different, inasmuch as, the validity of reopening of assessment was challenged by the assessee on various grounds by making a detailed submission and the relevant judicial pronouncements in support of the said submission were also cited before the ld. CIT(Appeals). As rightly contended by the ld. Counsel for the assessee, the decision of the Hon’bleCalcutta High Court in the case of the Prem Chand Shaw (Jaiswal) (supra) thus is not applicable in the present case being distinguishable on facts. On the other hand, the ratio of the judicial pronouncements cited on behalf of the assessee in the submission made before the ld. CIT(Appeals) in support of his case on this issue is squarely applicable and keeping in view the same, we do not find any infirmity in the impugned order of the ld. CIT(Appeals) cancelling the assessment made by the Assessing Officer under section 147/143(3) by holding the same to be invalid on the ground that the required approval under section 151(2) was granted by the concerned ld. CIT without recording her satisfaction. We accordingly uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss this appeal filed by the Revenue.”

Considering the above facts and circumstances, we are of the view that the reopening of assessment has been invalidly made on two grounds (1) reasons recorded were vague and scanty and (2) the approval has been granted mechanically and is invalid. Consequently we quash the re-opening of assessment as well as assessment framed by the AO.”

Even otherwise Section 151 of the Act mandates recording of satisfaction by the approving authority. In this case the satisfaction was mechanical and in fact a rubber stamp was used to state "Yes I am satisfied". The revenue could not and cannot controvert the above factual finding recorded by the Tribunal. It is clear from the finding recorded by the Tribunal that the assessing officer abdicated the statutory responsibility in not disposing of the two objections raised by the assessee for the re-opening proceedings. Thus, we find there is no question of law much less substantial question of law arising for consideration in this appeal. Accordingly, the appeal (ITAT/90/2022) stands dismissed.”

Therefore, respectfully following the above decisions, we quash the approval granted u/s 151 of the Act by the Ld. PCIT , the notice issued u/s 148 of the Act and the assessment framed by the AO. Consequently, appeal of the assessee is allowed.