TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1050
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....Karnal and accordingly, consequent reassessment order passed, based on such invalid approval is bad in law. 3. Ld.AR for the assessee submits that Ld. Pr. CIT has granted approval without applying his mind on the material placed before him. For this, our attention is invited to page 3 of Paper Book which is the Performa for granting approval wherein column 12, while granting approval, Ld. Pr. CIT observed "yes, I am satisfied it is a fit case for the issue of a notice u/s 148". Ld.AR submits that approval so granted was in mechanical manner wherein Ld. Pr. CIT has not stated the reasons for escapement of income nor stated what material he has referred to reach such conclusion and thus, consequent order passed is deserve to be quashed. He further filed a written submission wherein reliance is placed on the judgement of Hon'ble Delhi High Court in Yum Restaurants Asia Pte Ltd. vs DDIT in WP(C) No.614/2014 dated 31.08.2017. Further reliance is placed on the judgment of Co-ordinate Bench of Delhi Tribunal in the case of Naveen Kumar Gupta vs ITO in ITA No. 592/Del/2020. The written submission so filed by the assessee is reproduced as under:- Merits of the additional Grounds....
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....s 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." Without prejudice to above, the Ld AO missed out the fact that prior to cash deposit of Rs. 95,00,000/- on 13.05.2010/14.05.2010 there had been cash withdrawals of over Rs. 30,00,000/- and the benefit of these cash withdrawals (PB 14) should have been allowed by the Ld AO in addition to the benefit of the sale consideration of Rs. 36,00,500/- allowed by the AO. The above two miscalculation are the outcomes of misapplication or lack of application of mind and the same has been resulted into incorrect quantification of income escaping assessment. From above facts, it is evident clear the reopening is based on incorrect facts, reliance is placed on following decisions: * M/s Synfonia Tradelinks P. Ltd vs ITO W.P.(C) No.12544/2018 dt: 26.03.2021 (Del); * Shamshad Khan vs ACIT ....
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....el/2020 dated 18.06.2025 (Hon'ble JM is party to the decision) The mechanical approval gets further substantiated from the undated approval (PB 3) granted by Ld Pr CIT, Karnal. The co-ordinate Bench in the case of Naveen Kumar Gupta vs ITO ITA No.592/Del/2020 relying on the decisions in ITA No.3309/Mum/2024 in the case of Sukanya Properties P Ltd vs DCIT dated 14.02.2025 and also other decisions cited in para 8 therein dealt with the identical approval granted in the present case. The approval given by the Ld Pr CIT (PB 3) reads as under: "Yes I am Satisfied it's a fit case for issue of notice u/s 148" The above identical remarks coupled with undated sanction shows nonapplication of mind as per the decision of co-ordinate Bench in the case of Naveen Kumar Gupta vs ITO (Supra) relying on the decision in ACIT vs Vikas Strips P Itd ITA No.2811/Del/2024 dated 17.04.2025 in para 14-15 therein. Further, reliance is placed in the following decisions: * Capital Broadways P Ltd vs ITO 2024(10) TMI (Del); * Pr. Commissioner of Income Tax-7 Versus Pioneer Town Planners Pvt. Ltd 465 ITR 356 (Del); * CIT vs. S. Goyanka Lime & Chemica....
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....hat reopening on the basis of such approval is mechanical sanction and is invalid by making following findings :- " 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 Satisfi....
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....ed. 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 quasijudicial function. The order disposing of the objections should deal with each objection 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." 10. The Hon'ble Delhi High Court in the case of CIT vs N.C. Cables Ltd. (supra) 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 assess....
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.... 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. 22. 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 Incometax Act, 1961." (emphasis¹ 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-application of mind to the ingredients of section 147, rendering the ....
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....l 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 selfexplanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons re....
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....25] 475 ITR 360 (Del.) 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 Prin....
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.... 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. 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 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 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. T....
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....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 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 and the conclusions reached. Only in this way can opinions or decisions recorded be shown t....