Borrowed satisfaction and mechanical approval vitiate tax reopening; tribunal quashed reassessment for lack of independent verification.

Reopening of assessment was quashed because the assessing officer relied solely on information from a foreign authority without independent verification, thereby amounting to borrowed satisfaction and lacking application of mind; outcome: reopening set aside. Separately, the recorded higher authority approval consisted of a one word endorsement and lacked any recorded independent consideration, rendering the approval mechanical and jurisdictionally defective; outcome: approval invalidated and reopening unsustainable. The Tribunal concluded both defects independently vitiated the reassessment.

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Issues: (i) Whether the reopening of assessment under Section 147 read with Section 148 of the Income-tax Act, 1961 was invalid being based on borrowed satisfaction and without application of mind; (ii) Whether the approval under Section 151 of the Income-tax Act, 1961 was mechanical and without application of mind and thus vitiated the reopening.

Issue (i): Whether reopening under Section 147/148 of the Income-tax Act, 1961 was invalid as based on borrowed satisfaction and without independent verification.

Analysis: The reasons recorded show reliance solely on information received from a foreign authority without independent verification by the assessing officer. The assessing officer did not apply mind to reconcile the assessee's documented purchases, payments by account payee cheques, and cost computation which supported the declared capital gains. The material before the authority therefore demonstrates that the reopening proceeded on borrowed satisfaction rather than on a reasoned application of mind to the available facts.

Conclusion: The reopening of assessment under Section 147 read with Section 148 of the Income-tax Act, 1961 is quashed as being based on borrowed satisfaction and lacking application of mind in favour of the assessee.

Issue (ii): Whether the approval under Section 151 of the Income-tax Act, 1961 was mechanical and therefore invalidating the reopening.

Analysis: The recorded approval by the higher authority consists of a one-word endorsement without any recorded satisfaction or independent consideration of the reasons and materials. Such mechanical approval fails the jurisdictional requirement that the higher authority apply independent mind to the reasons recorded and the material available before granting approval for reopening after four years.

Conclusion: The approval under Section 151 of the Income-tax Act, 1961 is invalid as mechanical and without application of mind, and therefore the reopening cannot be sustained, in favour of the assessee.

Final Conclusion: Both grounds succeed and the reopening of assessment is quashed; the appeal is allowed.

Ratio Decidendi: Reopening of assessment under Section 147/148 of the Income-tax Act, 1961 is vitiated where it is founded on borrowed satisfaction without independent verification and where the requisite approval under Section 151 of the Income-tax Act, 1961 is mechanical and lacks recorded application of mind.

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