Mechanical sanction for reassessment invalidated reopening, and unsupported bogus-sales addition under section 69A was deleted.

Approval for reassessment under section 151 must show real satisfaction and application of mind to the recorded reasons; a bare pro forma endorsement such as "Yes" is insufficient, so the notice under sections 147/148 was invalid and the reopening failed. A further addition treating sales as bogus and invoking section 69A could not stand where the books were not rejected and accepted sales, purchases, inventory and net profit showed no discrepancy; in the absence of supporting material, the presumption of undisclosed funds was unjustified and the addition was deleted.

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Issues: (i) Whether the sanction granted for issue of notice under section 148 was vitiated for being mechanical and without proper application of mind; (ii) Whether the addition made by treating the sales as bogus and invoking section 69A could be sustained.

Issue (i): Whether the sanction granted for issue of notice under section 148 was vitiated for being mechanical and without proper application of mind.

Analysis: The approval recorded by the competent authority merely used the expression "Yes" in the prescribed pro forma. The governing principle is that approval under section 151 must reflect discernible satisfaction and an application of mind, and a mere rubber-stamp endorsement does not satisfy that requirement. On the facts, the approval was found to be mechanical and unsupported by any meaningful indication of satisfaction.

Conclusion: The approval was invalid and the assumption of jurisdiction under sections 147/148 was vitiated, in favour of the assessee.

Issue (ii): Whether the addition made by treating the sales as bogus and invoking section 69A could be sustained.

Analysis: The assessment was founded on a presumption that the assessee must have routed its own funds, although the books were not rejected and the accepted sales, purchases, inventory and net profit did not disclose any discrepancy. In the absence of supporting material, the addition was not justified.

Conclusion: The addition could not be sustained and the Revenue's challenge failed, in favour of the assessee.

Final Conclusion: The reassessment was held to be without valid sanction and the consequential addition was also not upheld, resulting in allowance of the assessee's appeal and dismissal of the Revenue's appeal.

Ratio Decidendi: Approval for reassessment under section 151 must demonstrate real satisfaction and application of mind on the recorded reasons; a bare endorsement such as "Yes" is insufficient to validate the reopening.

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