TaxTMI 
TaxTMI 
2025 (11) TMI 1672
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....under Section 151 of the Act. Since the assessee has raised the legal issue under Rule 27, therefore we are inclined to decide the legal issue first. 2.1. The facts in brief are that the assessee filed the return of income on 16-9-2011 declaring income of Rs. 1,49,290/-. The case of the assessee was selected for scrutiny on the basis of information in the possession of the AO under Section 147 of the Act by issuing notice on date 27-3-2018 which was complied with by the assessee by filing the return of income on 19-4-2018 declaring the same income. Thereafter, notice under Section 143(2) and 142(1) of the Act, were issued along with questionnaire and were duly replied by the assessee. The learned AO referred to the information received from ld. PCIT, Investigation, Kolkata vide letter dated 27-4-2015 that assessee had taken short-term capital loss of Rs.2,95,99,250/- in the script JMD Telefilms Ltd. Thereafter, during the course of assessment proceedings, the learned AO noted that assessee has also claimed the short-term capital gain / short-term loss on transactions with Nivyah Infrastructure and Telecom Services Ltd. a penny Stock Listed on BSE with Script Code (517534) involv....
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....ing by the ld. AO an already settled assessment is being unsettled and therefore, ld. AO is required to exercise the power with utmost care at the time of recording the reasons and place factual data/details on record. ld. AO submitted that assessee has claimed business loss of Rs.2,60,64,495 while the figures stated by the ld. AO of Rs.2,95,99,250 pertains to the purchase consideration of script of JMD Telefilms Ltd. Whereas the AO has mentioned that the assessee has claimed short-term capital loss of Rs.2,95,99,250/- in the script of JMD Telefilms Ltd. Similarly, the ld. AR referred to the order of the ld. AO, wherein the ld. AO noted that the assessee had incurred short term capital loss of Rs.36,59,500/- on sale of share of Nivyah Infrastructure and Telecom Services Ltd., whereas as a matter of fact, the said amount represented the sales consideration of the script and the actual loss incurred was Rs.55,66,855/- as all these details were available in the return of income filed by the assessee. The ld. AR therefore, submitted that the reopening of assessment itself is bad in law and deserves to be quashed including the assessment framed. 2.4. The ld. AR relied on the decision....
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.... details of persons / entity from whom the money was received by the assessee. 11. Similarly, the approval has been granted in a mechanical manner, wherein it was only mentioned in the approval status as approved. In our opinion, in the case of the assessee, such an approval is mechanical approval and cannot be considered as valid approval. In our opinion, the PCIT has to record the reasons and the satisfaction for having granted such approval. In our opinion, the reopening of assessment on the basis of said approval is bad in law. Case of the assessee find force from the decision of Capital Broadways Pvt. Ltd. Vs. ITO (supra), wherein Hon'ble HC has held that the approval granted by the ld. PCIT by just using the words like 'yes, I am satisfied' will not satisfied the requirement of law and accordingly, the notice was set aside. The operative part of the decision is extracted below:- "10. Section 151(1) of the Act categorically provides that no notice shall be issued under Section 148 by the Assessing Officer, after expiry of period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Commissioner or Principal....
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....ed on the reasons recorded by AO that it is a fit Case for the issue of notice u/s 148. I am satisfied Sd/- (G.G. Kamei) Addl. CIT, Range-5, New Delhi Dated 22.03.2017 12. Whether the Pr. Commissioner is satisfied: On the reasons recorded by the AO that it is a fit case for the issue of notice u/s 148. Yes I am satisfied Sd/- P.K. Gupta) Pr. Commissioner of Income Tax-2, New Delhi Dated: 22.03.2017" 13. The satisfaction arrived at by the concerned Officer should be discernible from the sanction order passed under Section 151 of the Act. However, as may be seen, the approval order is bereft of any reason. There is no whisper of any material that may have weighed for the grant of approval. 14. Even the bare minimum requirement of the approving authority having to indicate what the thought process was, is missing in the afore- mentioned approval order. While elaborate reasons may not have been given, at least there has to be some indication that the approving authority has examined the material prior to granting approval. Mere appending the expression "Yes I am satisfied" says nothing. The entire exercise appears to have b....
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....cal 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 be....
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....t 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." 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 written the 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 clearly 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....
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....asons 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 Pvt. Ltd. (supra), is therefore not applicable to the facts and circumstances of the present case. 18. 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 Jabalpur vs. S. Goyanka Lime & Chemicals Ltd. ITA 82/2012, 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 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 ....