SOBHIN BUILDWELL PRIVATE LIMITED,DELHI vs. INCOME TAX OFFICER, WARD 24(1), DELHI, NEW DELHI

5. On the facts and circumstances of the case, the authorities below have erred in upholding the addition of Rs.4,26,55,000/- allegedly treating the acceptance of share capital during the year as unexplained credit within meaning of section 68 of IT Act ignoring the fact that the initial onus has been discharged by the appellant by submitting relevant documents of the share applicant therefore, such addition is not tenable in law.

6. On the facts and circumstances of the case, the authorities below have erred in upholding the addition of Rs.3,84,90,000/- allegedly treating the unsecured loans from the parties in question as unexplained credit within meaning of section 68 of IT Act ignoring the fact that the initial onus has been discharged by the appellant by submitting relevant documents of the lenders therefore, such addition is not tenable in law.

7. The Ld CIT(A) has erred both in law and circumstances of the case in upholding action of the Ld AO in making addition of Rs.18,000/- being commission paid @1.8% on the alleged accommodation entry of Rs.10,00,000/- taken during year. Such action is arbitrary and without basis therefore needs be quashed.”

In view of the submissions of the Ld. Counsel for the assessee and following the decision of the Jurisdictional High Court in the case of PCIT vs. Naveen Kumar Gupta (supra) ground nos. 1 & 2 of grounds of appeal of the assessee are dismissed.

3.1 Ground no. 3 of grounds of appeal is with respect to challenging the reassessment proceedings initiated u/s 147 of the Act by the Assessing Officer as without application of independent mind on the material provided by the Investigation Wing of the Department and therefore such reassessment is void ab initio and liable to be quashed.

3.2 Ld. Counsel for the assessee submitted that the Assessing Officer solely relied on the report communicated to him by the Investigation Wing and the AO in the reasons is consequently silent about how the report was cross checked by him vis a vis the material relied on by the Investigation Wing. Ld. Counsel submitted that the AO did not even mention the nature of alleged accommodation entry in the reasons, this shows the non application of mind and no information was cross checked by the AO. Ld. Counsel for the assessee placing reliance on the decision of the Jurisdictional Delhi High Court in the case of PCIT vs. Meenakshi Overseas Pvt. Ltd. (395 ITR 677) submitted that the AO cannot simply rely on the report of the Investigation Wing of the Department to reopen the assessment by issue of notice u/s 148 without making any further enquiries. Ld. Counsel for the assessee referring to para 35 of this judgment submitted that the Hon’ble Delhi High Court reiterated its decision in the case of Rajiv Aggarwal vs. CIT (395 ITR 255) that “even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make enquiries and garner further material and such material indicates that income of an assessee has escaped assessment, form a believe that income of the assessee has escaped assessment. There is non-application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment”.

3.3 Ld. Counsel for the assessee referring to para 36 of the judgment submitted that the conclusions of the AO that he has reasoned to believe that income has escaped assessment is on the basis of barrowed satisfaction since it is based on the conclusions in the Investigation report. Ld. Counsel submitted that the Hon’ble Delhi High Court held that reopening u/s 148 cannot be made simply based on the conclusions on the Investigation report without making further enquiries by the AO and applying his independent application of mind by the AO to the tangible materials which forms the basis of the reasons to believe that income has escaped assessment.

3.4 Ld. Counsel for the assessee submitted that the Hon’ble Delhi High Court in the case of Well Trans Logistics India Pvt. Ltd. vs. Addl.

CIT (474 ITR 131) places emphasis on the duty of the AO to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment.

3.5 Ld. Counsel further referring to page 19 of the PB which is the Form for recording the reasons for initiating proceedings u/s 147/148 and for obtaining the approval of the JCIT/CIT, referring to para 2 of the reasons, Ld. Counsel submitted that the AO had stated that the assessee has been providing accommodation entries regularly but whereas in para 3 of the very same reasons the AO stated that the assessee has taken accommodation entry from Shalini Holdings Ltd..

Therefore, Ld. Counsel submitted that the AO himself is not sure whether the assessee is either providing accommodation entries or taking the accommodation entries and this shows that there is non application of mind and no enquiries were made before forming belief that income has escaped assessment.

3.6 Ld. Counsel for the assessee further submitted that the entry provided by Shalini Holdings Ltd. as alleged by the AO, the assessment in this case was completed by the AO u/s 153C which is placed at pages 25 & 26 of the Paper Book and is evident that the AO had made no adverse observations and this assessment was completed on 28.03.2013. Ld. Counsel submitted that in the case of the assessee 147 proceedings were initiated after 2 years i.e. in the month of March, 2015 after completion of assessment u/s 153C in the case of Shalini Holdings Ltd. on 28.03.2013. Ld. Counsel further referring to page 8 of the assessment order submitted that in the reasons recorded the AO referred to Annexure ‘A-13’ to come to the conclusion that assessee has been provided accommodation entries regularly whereas in the assessment order there is no reference to Annexure A-13 while framing the assessment and making additions.

3.7 Ld. Counsel for the assessee further referring to the decision of the Delhi Bench of the Tribunal in the case of ITO vs. M/s J. Gajanan Enterprises Pvt. Ltd. in dated 15.03.2019, submitted that the Tribunal held that when there is no reference of any evidence such as statement or confession of the alleged entry operator against the assessee, that there is absence of any particular fact which the assessee fails to disclose fully and truly regarding the share capital at the time of original assessment, that the satisfaction note of the AO is solely based on information of Investigation Wing and that in the assessments of alleged entry operator group u/s 153C of the Act the returns filed by them stood accepted by the department itself, it was held that the reopening proceedings are void and illegal.

3.8 Ld. Counsel for the assessee further referring to the decision of the Delhi Bench of the Tribunal in the case of M/s More Credit Securities Pvt. Ltd. vs. ITO in 5278/Del/2016 7 & 4704/Del/2014 dated 24.12.2021, submitted that the Hon’ble Delhi Bench considered the assessment order passed by the AO in the case of M/s Shalini Holdings Ltd. u/s 153C/153A dated 28.03.2013, which is also the alleged entry provider in the case of the assessee, held that the AO before recording satisfaction and issue of notice u/s 148 of the Act on 15.04.2013 not at all considered the assessments completed u/s 153C/153A of the Act on 28.03.2013 of the share applicants/investor companies, all these investor companies were assessed to tax u/s 153C/153A of the Act due to the very same search and seizure operation at the premises of Shri S.K. Jain group of companies, therefore, it was held that there is merit in the arguments of the Ld. Counsel for the assessee that had the AO applied his mind to the facts on record he would have come to a different conclusion especially when all the investor companies are assessed to tax u/s 153C/153A of the Act before recording reasons and their assessments are the outcome of the search at the premises of the S.K. Jain group of companies. Ld. Counsel for the assessee further submitted that similar view has been taken by the Delhi Bench in the case of M/s Gaurang Products Pvt. Ltd. vs. ITO in dated 01.02.2021 and Haryana Distillary Ltd. vs. dated 20.11.2018.

4.1 Ld. Counsel for the assessee further submitted that in ground no.4 the assessee challenged the order of the Ld. CIT(Appeals) in upholding the reassessment proceedings ignoring the fact that sanction u/s 151 of the Act as provided with the reason recorded shows mechanical satisfaction by the Addl. CIT and therefore the reassessment made pursuant to such mechanical satisfaction is void ab initio and the same is liable to be quashed. Ld. Counsel for the assessee referring to page 19 of the PB which is the Form for recording the reasons for initiating proceedings u/s 147/148 of the Act and for obtaining the approval of the Ld. JCIT/CIT, submitted that the Ld. JCIT has simply stated that he has “Approved” u/s 151 of the Act for issue of notice u/s 148 of the Act by the Assessing Officer and this approval which simply stated in the Form that he has “Approved” is nothing but mechanical approval and without application of mind. Ld. Counsel submits that the approving authority namely JCIT has not discussed anything about verification of the records so as to satisfy himself to grant an approval for initiation of proceedings u/s 148 of the Act.

4.2 Ld. Counsel for the assessee placing reliance on the decision of the Jurisdictional Delhi High Court in the case of PCIT vs. N C Cables Ltd. (391 ITR 11) submitted that on exactly identical circumstances where the approving authority merely appended the expression “approved” was held to be non-application of mind and not an approval as per the provisions of section 151 of the Act and therefore affirmed the decision of the Tribunal in holding that such an approval is invalid and consequently the assessment framed is also invalid.

4.3 Ld. Counsel for the assessee placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of SBC Minerals Pvt. Ltd. vs. ACIT (475 ITR 360) submitted that on identical circumstances where the competent authority granted approval by stating that “approved” was held to be invalid approval u/s 151 of the Act to reopen the assessment by issue of a notice u/s 148 of the Act.

4.4 Ld. Counsel also placed reliance on the decision of the jurisdictional High Court in the case of PCIT vs. M/s MDLR Hotels Pvt. Ltd. & Others (2024 (8) TMI 1138). Referring to this decision the Ld. Counsel submitted that the approval granted by the Competent Authority u/s 153D of the Act was granted mechanically and the same is invalid.

4.5 Ld. Counsel for the assessee further referring to page 18 of the Paper Book which is the communication letter issued by the JCIT to the ITO on the approval granted u/s 151 of the Act for reopening the assessments u/s 147 by issuance of notice u/s 148 of the Act to various assessees, submitted that approval has been granted by the JCIT in as many as six cases for reopening of assessment on a single day i.e. on 31.03.2015 which shows there is non application of mind by the Ld. JCIT before granting an approval u/s 151 of the Act. Ld. Counsel for the assessee placing reliance on the decision of the Hon’ble Delhi High Court in the case of Vinod Kumar Solanki vs. ACIT (2024) 475 ITR 208 submitted that the Hon’ble High Court held that the PCIT has failed to satisfactorily record its concurrence and by no stretch of imagination the approval granted by the common order in respect of 111 cases could be considered to be a valid approval.

“Ground No.3 Initiation of reassessment proceedings without application of mind by the Ld AO. The reason recorded (PB 19) highlights the following transaction being trigger point to action u/s 147 of the Act: Entry Bank Chq. No. Date Amount Provider Shalini UTI 080584 01.08.2007 10,00,000/- Holdings Ltd. Total 10,00,000/- i. It is extremely relevant to note that the AO had received the report dated 12.03.2013 from Investigation Wing giving the detailed transaction and of the modus operandi adopted by the Sh.

Surender Kumar Jain Group for providing the accommodation entries by issuing cheques in lieu of cash through the entities owned and managed by the said group. The AO in the reason does not mention how the observation of the investigation wing was examined with reference to the material cited in the report and the material / assessment records of the appellant. The AO has merely reproduced what was communicated to him by the Investigation Wing in the report. The reason does not indicate what sort of verification of the authenticity of information/ report was done by the AO. The AO extensively reproduced in the reason the inferences drawn by the Wing which are opinion of the said authority nothing more nothing less. But such opinion could be in the nature of material in the AO would have occasion to go through the various evidences seized records and the material collected in the post search proceedings by the Wing which have been cited in the report as basis to draw inference of the accommodation entries provided by the said group to the appellant. ii. The AO has followed what had been communicated to him by the Inv. Wing in the report and AO in the reason is conspicuously silent about how the report was cross checked by him vis a vis the material relied on by the Wing. In a way it will not be incorrect if one says that no new specific material was provided to him or used by him which would have been relevant for the AO to form a belief required u/s 147 of the IT Act that the income chargeable to tax as escaped assessment for the relevant assessment year and secondly there was no application of mind by the AO on the material in the form of information which is made out to be the basis of the impugned reassessment proceedings. iii. The Ld AO has not verified the facts to verify the correctness of information before triggering action u/s 147 of IT Act. The Hon'ble Delhi High 12

Court in the case of Well Trans Logistics India Pvt. Ltd. Versus Addl. Commissioner of Income Tax & Ors 474 ITR 131 (Del) places emphasis on the duty of the AO to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. Reliance is also placed in Sh Rajiv Agarwal vs ACIT 395 ITR 0255 (Del) held that “even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment form a belief that income of the Assessee has escaped assessment. There is non- application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment.” iv. The reason is opaque and incoherent as is evident from the fact that the reason does not spell out the nature of accommodation entry taken by the appellant company from the said Sh. Surender Kumar Jain Group. The AO did not identify in the reason which type or types of the accommodation entries were taken by the appellant. In the absence of this vital aspect of the transaction being absent in the reason, it cannot be said that application of independent mind by the AO could have been established even remotely. Therefore, the information which is not complete and which is not supported by any material such as statement of some person or some documentary evidence or the seized records referred in the reason, cannot be basis for formation of belief in the normal course of the escapement of income of the appellant for the assessment year under appeal. v. The reasons to believe has to be that of the Ld AO and further there have to be application of mind 13 by him. In the absence of the nature of transactions attributable to the appellant being questionable in nature, the Assessing Officer was in no position to take action based on such vague information unless effort was made by the AO to look into the return of the assessee which was available with him. It is a settled position of law that there must be material for formation of a belief that income has escaped assessment. Further reasons referred to must demonstrate process of reasoning by which the Assessing Officer holds reason to believe. There must be nexus between such material and belief. Further and most importantly the reasons referred to must show application of mind by the Assessing Officer. It is also a settled law that the validity of the initiation of the reassessment proceeding is to be judged with reference to the material available with the Assessing Officer at the point of time of the issue of notice under section 147 of the Act. vi. The fact of non-application of mind is more conspicuous from the fact that in para 2 of the reasons recorded in the last two lines which are extracted below highlights the mechanical application of mind by the AO: “Various other seized annexures including A- 53, etc also clearly indicate to the fact that the assessee is providing accommodation entry regularly" vii. If the above highlighted portion is carefully perused, it can be noticed that the term “assessee” used in the above portion refers to appellant assessee not the entry provider namely Sh. Surender Kumar Jain and Virender Kumar Jain as these terms has been used for the present appellant elsewhere in the reasons recorded such as in the heading of the reasons, in para 3 and in para 4. So, from the above extract, the AO has after going through the seized annexures has given an observation that the assessee is providing accommodation entry regularly. How that finding came to be recorded from the seized annexure from Sh. Surender Kumar Jain and Sh. Virender Kumar Jain is something which is shrouded in mystery and the second part of this observation is that the focus of the reason recorded is acceptance of accommodation entries from the group belonging to Sh. Surender Kumar Jain and Sh. Virender Kumar Jain. So, from the above extracted portion of the reason it can be safely inferred that Ld. AO is confused whether the assessee has provided accommodation entries for which there is no material sighted except the seized annexures or the assessee has accepted accommodation entries as mentioned in para 3. These two contrary facts in para 2 and 3 shows that the Ld. AO has not applied his mind while perusing the investigation report. viii. Further, the AO of the entity in question, in the course of assessment u/s 153C/153A after examining ail the material incriminating or otherwise, has passed the order whereby no adverse observation made regarding the activities of the company in question and the material gathered in search which was used for reaching satisfaction of escapement of income. The AO in the assessment vide order dated 28.03.2013 had also verified the source of investment made by the respective assesses during the year under consideration. Once the assessment is completed in the hands of shareholders by their jurisdictional AO, there remains no reason to reopen the appellant’s case. Reliance is placed in the co- ordinate Bench decision of ITO Vs M/s Jai Gajanan Enterprises P Ltd) dt: 15.03.2019 (Para 7 and 8), Natraj Products P Ltd vs ITO M/s Nishit Fincap P Ltd ITA 2323/Del/2017 dt: 16.09.2020 (Para 8 & 11), M/s Gaurang Products P Ltd ITA No.5196/Del/2019 dt: 01.02.2021 (Para 6.4), More Credit Securities P ltd vs ITO ITA No.5318/Del/2016 and M/s Haryana 15 dt: 20.11.2018 (Para 11). ix. AO does not discuss how the prima facie belief of accommodation entry is reached when no evidence/ material regarding the payment of cash in lieu of cheques to the searched group is discussed. The role of middle man is not discussed and nor is there any indication that he is examined by the Investigation Wing or by the AO. The conclusion that the companies involved are paper companies is another conclusion, which is not supported by any material cited in the reason recorded. The Hon’ble Delhi Bench of ITAT in the case of ITO vs Jai Gajanan Enterprises P Ltd ITAT No.4861 /Del/2015 dt: 15.03.2019 in para 7 & 8 held that where the reasons recorded don’t refer evidence or any confessional statement of entry provider, cash payment by the assessment/payment of commission etc sc as to support his belief that assessee was beneficiary of entry operating racket, such reasons were held to be solely based on information of the investigation wing. x. The reason, therefore, are vague, opaque and non-communicative leaving the noticee clueless of the background of satisfaction in the reason that the transactions in question are being accommodation entries. In the case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. 395 ITR 677 (Del), it was held that reproduction of information without showing how the material referred in therein does not show application of mind by the AO in absence of any specific discussion on the material on the basis of which independent prima facie belief is reached that income has escaped assessment. To support the above proposition of law regarding non-application of mind by the AO on the reasons recorded, the reliance is placed on following decisions:

• Pr. CIT vs. RMG Polyvinyl (I) Ltd., (2017) 396 ITR 5 (Del); • Pr. CIT v. G&G Pharma India Ltd 384 ITR 147 (Del.);

• CIT vs Independent Media Pvt Ltd in ITA 108/2015 (Del);

• Signature Hotels P. Ltd. Vs. /TO - [2011] 338 ITR 0051 (Del); • CIT Vs. SFIL Stock Broking Ltd. 325 ITR 285 (Del);

• Sarfhak Securities Co. P. Ltd. Vs. /TO 329 ITR 110 (Del); • CIT Vs. Supreme Polypropolene (P) Ltd.ITA No.266/2011 (Del);

• CIT vs. Multiplex Trading & Industrial Co. Ltd 378 ITR 351 (Del.); • Hindustan Lever Ltd. Reported in [2004] 137 TAXMAN 479 (BOM.);

• CIT vs. Greenworld Corporation 314 ITR 81 (SC);

• M/s Synfonia Tradelinks P Ltd vs ITO W.P.(C) No.12544/2018 dt: 26.03.2021 (Del)

Ground No.4 Mechanical Approval by Addl CIT The remarks of the Ld Addl. CIT (Approved) while granting sanction u/s 151 (PB 19) shows the granting sanction was mechanical and ritualistic. The confusion regarding the nature of transactions and regarding the fact whether it is a case of receiving credit or providing credit further confirms the fact that the both the authorities i.e. the AO recording reason and 17 the Ld Addl. CIT granting sanction have not applied their respective minds. Had either of the authorities being alive to the above anomalies in the reason, such anamolies could have been rectified not forming part of the reason. Such a sanction by the appropriate authority which does not demonstrate the due application of mind is invalid and not sustainable. Reliance is placed on the decisions of Capital Broadways P Ltd vs ITO 2024(10) TMI (Del), PCIT vs Pioneer Town Planners (P) Ltd 465 ITR 356 (Del), Pr. CIT vs. N. C. Cables Ltd ITA 335/2015 dated 11.01.2017 (Del), Chhugamal Rajpal v. S P Chaliha 5 (1971) 1 SCC 453 approved in UOIvs Rajiv Bansal 469 ITR 46 (SC) in para 31 therein, Sanjay Kumar Versus ACIT & Anr 458 ITR 548 (Del), Pr CIT vs MDLR Hotels P Ltd dated 30.07.2024 (Del), SBC Minerals vs ACIT 475 ITR 360 (Del), Dy CIT vs Sandeep Bajaj and Ors and Naveen Kumar Gupta vs ITO ITA No.592/Del/2020. Further, the approval granted vide letter dated 31.03.2015 was granted through combined letter in six cases (PB 18) which shows general order of approval in all six cases. There is not even a whisper as to what material had weighed in the grant of approval in the present case. The Hon’ble Delhi High Court in the case of Vinod Kumar Solanki vs ACIT W.P.(C) No.4196/2022 vide order dated 14.08.2024 relying on the decision of PCIT vs Pioneer Town Planners (P) Ltd (supra) has quashed the reassessment proceedings.”

7.1 It is the contention of the Ld. Counsel for the assessee that the approval granted u/s 151 of the Act by the Ld. JCIT to the AO to issue notice u/s 148 for reopening the assessment is mechanical, without application of mind since the approving authority the Ld. JCIT has simply appended “Approved” on the Form for reasons recorded for initiating proceedings u/s 147/148 and for obtaining the approval of the JCIT/CIT. We have perused the Form for obtaining the reasons for initiating proceedings u/s 147/148 and for obtaining the approval of the JCIT/CIT which is placed at page 19 of the Paper Book, which is as under:

As could be observed from the above sanction granted u/s 151 of the Act by the Ld. JCIT, has simply stated that he has “Approved” the Assessing Officer to initiate proceedings u/s 148 of the Act for the reasons stated therein. We observed that whether the approval granted by the competent authority simply mentioning that “Approved” to initiate proceedings for reopening of assessment u/s 147 of the Act is a valid approval or not in terms of the provisions of section 151 of the Act has been decided by the Hon’ble Jurisdictional High Court in the case of PCIT vs. M/s N.C. Cables Ltd. (supra).

Before the Hon’ble High Court the Revenue framed the following question:

“(a) Did the Tribunal fall into error in holding that the Commissioner of Income Tax (CIT) did not in fact record satisfaction u/s 151 of the I.T. Act, 1961 for issuing notice u/s147, in the circumstances of the case”? In this case, the competent authority granted approval u/s 151 of the Act by appending “Approved” on the reasons for issuing notice u/s 148 granting approval to reopen the assessment u/s 148 of the Act on identical circumstances similar to the assessee before us. The Hon’ble High Court held as under:

“11. Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed.

12. The substantial questions of law framed are answered in favour of the assessee and against the Revenue. The appeal is dismissed.”

7.2 Similarly the Hon’ble Jurisdictional High Court in the case of SBC Minerals Pvt. Ltd. vs. ACIT (475 ITR 360) considering various decisions of High Courts including the decision in the case of N.C.

Cables Ltd. (supra) and the decision of the Hon’ble Supreme Court in the case of Chhugamal Rajpal (79 ITR 603) held as under:

“11. Section 151 of the Act, as it stood prior to the substitution by Act of 13 of 2001 is reproduced hereunder: - "157. 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 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."

14. Perusal of the record reveals that the request for approval under Section 151 of the Act i printed format was placed before the Principal Chief Commissioner of Income Tax ["PCCIT"] 20.03.2023. PCCIT granted the approval the same day. The approval accorded by the PCCIT Column No. 22 is extracted below:-

22. Reasons for according Remarks: Approved u/s approval/rejection by the 148A(d) a fit case. specified authority to order u/s Name: RAJAT BANSAL 148A(d) and/or issuance of notice u/s 148 of the Income Tax Act, Designation: PCIT, Delhi 1961? 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 24 have weighed in the grant of approval. The mere appending of the word "approved" by the PCCIT while granting approval under Section 151 to the re-opening under Section 148 is not enough. While the PCCIT is not required to record elaborate reasons, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. The reasons are the link between material placed on record and the conclusion reached by the authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. Our opinion in this regard is fortified by the decision of the Apex Court in Union of India vs. ML Kapoor [AIR 1974 SC 87]. The grant of approval by PCCIT in the printed format without any line of reason does not fulfill the requirement of Section 151 of the Act.

16. We note that dealing with an identical challenge of approval having been accorded mechanically and without due application of mind had arisen for our consideration in the case of The Principal Commissioner of Income Tax-7 vs. Pioneer Town Planners Pvt. Ltd. (2024) SCC Online Del 1685, wherein, we had held as follows:- "13. The primary grievance raised in the instant appeal relates to the manner of recording the approval granted by the prescribed authority under Section 757 of the Act for reopening of assessment proceedings as per Section 148 of the Act. xxxx xxxx xxxx

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 25 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."

18. Further, this Court in the case of Central India Electric Supply Co. Ltd. v. ITO [2011 SCC OnLine Del 472] has taken a view that merely rubber stamping of "Yes" would suggest that the decision was taken in a mechanical manner. Paragraph 19 of the said decision is reproduced as under: - "19. In respect of the first plea, if the judgments in Chhugamal Rajpal (1971) 79 ITR 603 (SC), Chanchal Kumar Chatterjee (1974) 93 ITR 130 (Cal) and Govinda Choudhury and Sons case (1977) 109 ITR 370 (Orissa) are examined, the absence of reasons by the Assessing Officer does not exist. This is so as along with the proforma, reasons set out by the Assessing Officer were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by an Under Secretary underneath a stamped Yes against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the Income-tax Officer was to be agreed upon, the least which is expected is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the 26

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. M. L. Kapoor, AIR 1974 SC 87, 97 wherein it was observed as under: "27….. We find considerable force in the submission made on behalf of the respondents that the 'rubber stamp' reason given mechanically for the supersession of each officer does not amount to 'reasons for the proposed supersession'. The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. 28.... If that had been done, facts on service records of officers cons, 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 matter for a decision whether it is purely administrative or quasi- ji should reveal a rational nexus between the facts considered and the reached. Only in this way can opinions or decisions recorded be s manifestly just and reasonable." (emphasis supplied) 19. In the case of Chhugamal Rajpal, the Hon'ble Supreme Court refused to c affixing of signature a long with the noting "Yes" as valid approval and had held as under: - "5. — Further the report submitted by him under Section 151 (2) does not mi 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 me accorded permission. He did not himself record that he was satisfied that 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 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 car 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 pro 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 the, those provisions as of little importance. They have substituted the form substance."

20. This Court, while following Chhugamal Rajpal in the case of Ess Adv. (Mauritius) S.N. C. Et Compagnie v. ACIT [2021 SCC OnLine Del 3613], wherein, while granting the approval, the ACIT "This is fit case for issue of notice under section 148 of-has writ Income-tax Act, 1961. Approved", had held that the said approval would only amount to endorsement of language used in Section 151 of the Act and would not reflect any independent application of mind. Thus, the same was considered to be flawed in law.

21. The salient aspect which emerges out of the foregoing discussion is that the satisfaction arrived at by the prescribed authority under Section 151 of the Act must be c 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" doe: appropriately align with the mandate of Section 151 of the Act as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose.

22. So far as the decision relied upon the Revenue in the case of Meenakshi Overseas Pvt. ~ltd. is concerned, the same was a case where the satisfaction was specifically appended in the proforma in "Yes, I am satisfied". Moreover, paragraph 16 of terms of the phrase the said decision distinguishes the approval granted using the expression "Yes" by citing Central India Electric Supply, which has already been discussed above. The decision in the case of 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.

23. 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.”

17. The decision in Pioneer Town Planners (supra) case has been followed by this Court in number of other cases including the recent case of Principal Commissioner of Income Tax, Central Circle-02 vs. M/s. MDLR Hotels Pvt. Ltd. [ITA 593/2023].

18. As noticed aforesaid, we are of the firm opinion that the PCCIT has failed to satisfactorily record its concurrence. By no stretch of imagination, the mere use of expression "approval" could be considered to be a valid approval as the same does not reflect any independent application of mind. Grant of approval in such manner in this case is flawed in law.

19. Hence, for the reasons stated above, we are of the view that the approval granted by the PCCIT for issuance of order under Section 148A (d) is not valid. Consequently, the order passed under Section 148A (d) and the notice under Section 148 issued pursuant to order under Section 148A (d) are set aside and quashed.”

7.3 The Hon’ble Jurisdictional High Court in the case of PCIT vs. Pioneer Town Planners Pvt. Ltd. (465 ITR 356) 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.

Chatterjee (1974) 93 ITR 130 (Cal) and Govinda Choudhary & Sons case (1977) 109 ITR 370 (Orissa) are examined, the absence of reason Assessing Officer does not exist. This is so as along with the proforma, reasons set 0 Assessing Officer were, in fact, given. However, in the instant case, the manner the proforma was stamped amounting to approval by the Board leaves mu 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 setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the apex court in Union of India v. M. L. Capoor, AIR 1974 SC 87, 97 wherein it was observed as under: "27.... We find considerable force in the submission made on behalf of the respondents that the 'rubber stamp' reason given mechanically for the supersession of each officer does not amount to 'reasons for the proposed supersession'. The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. 28.... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject- matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered 32 and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable, "(emphasis supplied)"

The decision relied on by the Ld. DR is distinguishable on facts and cannot come to the rescue of the Department. Thus, respectfully following the decisions of the Jurisdictional High Court (supra), we hold that the approval granted by the Ld. JCIT u/s 151 of the Act is mechanical, without application of mind and not a valid approval.

Consequently the assessment framed u/s 143(3) r.w.s. 147 of the Act based on such invalid approval is bad in law and void ab initio and the same is hereby quashed. Ground no.4 of grounds of appeal of the assessee is allowed.

9. Since we have quashed the reassessment framed by the AO allowing ground no.4, all other technical grounds and the grounds on merits raised by the assessee are not adjudicated as it would be of only academic at this stage and therefore they are left open.

Order pronounced in the open court on 12.09.2025