Sun Itech And Broadcast Private Limited Vs ITO (ITAT Delhi)
Reassessment Quashed for Mechanical Sanction u/s 151 – Mere “Approved” Not a Valid Application of Mind
The Delhi ITAT allowed the assessee’s appeal and quashed the entire reassessment for AY 2011-12 on the ground that the mandatory approval under Section 151 for reopening was granted in a purely mechanical manner. The Tribunal found that the PCIT had granted sanction by merely writing “Approved / Yes, I am satisfied” without recording any reasons or demonstrating independent application of mind.
Relying on binding precedents including Capital Broadways Pvt. Ltd. (Delhi HC) and the Supreme Court decision in Goyanka Lime & Chemical Ltd., the Tribunal held that such ritualistic approval defeats the statutory safeguard built into Section 151 and renders the assumption of jurisdiction invalid. Since the reopening itself was bad in law, the entire reassessment, including additions of ₹7 crore under Section 68 and commission addition under Section 69C, was quashed without examining merits.
Accordingly, the reassessment was held void ab initio and the appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi, [hereinafter referred to as “NFAC”], vide order dated 26.05.2025 pertaining to A.Y. 2011-12 arising out of the assessment order dated 27.12.2008 passed by the Assessing Officer under Section 147/143(3) of the Income Tax Act, 1961 [hereinafter referred as ‘the Act’]. The assessee has raised as many as 11 grounds of appeal on jurisdiction as well as on merits. But, only argued the legal issue raised vide ground no. 6 which reads as under:-
“6. (i) On the facts and circumstances of the case, Ld. CIT(A) has erred both on facts and in law, despite the fact that the reassessment proceedings initiated by the AO without obtaining valid statutory prior approval of the prescribed authority as per section 151 of the Act is bad in law and liable to be quashed.
(ii) That the purported approval u/s. 151 of the Act is illegal, bad in law and also without application of mind.
2. The brief facts of the case are that the assessee filed its return of income for assessment year 2011-12 on 18.11.2011 declaring nil income. The return was processed u/s. 143(1) of the Income Tax Act, 1961 on 21.01.2012. AO noted that his office has received a letter from DDIT (Inv.)-I, Gurugram which stated that “M/s Sun Itech and Broadcast Pvt. Ltd. Had received loan / advance worth Rs. 7,00,00,000/- from M/s Passion Realtech Ltd. It is also stated that M/s Passion Realtech Pvt. Ltd. Is nothing but dummy / benami companies of M3M Group and no actual business is being done by these companies. After conducting enquiry of the registered address, directors and shareholders, allegations leveled were found prima facie true. Shri Virjesh Kumar Singh and Shri Nagendra Kumar are the directors of the company and do not file any return and even no income is shown by the company (M/s Passion Realtech Pvt. Ltd.) as well, statement of Shri Vrijesh Kumar Singh one of the directors of M/s Passion Realtech Pvt Ltd. was also recorded during the search conducted on M3M group wherein Shri Vrijesh Kumar Singh admitted the he works as security guard in M3M since last 8 years for salary @Rs. 8750/- per month. Accordingly, requisite statutory show notices were issued to the assessee and in response thereof, the assessee filed his reply. After considering the same, AO noted that the assessee has failed to establish that the loan / advance received by the assessee company is a fair business transaction, which establishes that these transactions were not genuine transactions but sham transactions wherein the company M/s Sun Itech and Broadcast Pvt Ltd. has brought back its own unaccounted money with the help of entry provider in the loan / advances having modus operandi of circulating unaccounted money by the complex web of circular transactions to make it legitimate. He observed that assessee has failed to establish the identity, genuineness and creditworthiness of the transactions of receiving Rs. 7,00,00,000/- in the fork of loan / advance. Accordingly, he added the addition of Rs. 7,00,00,000/- u/s. 68 of the Act in the hands of the assessee and also added the entry operators charged commission @2% to provide these accommodation entries amounting to Rs. 14,00,000/- u/s. 69C of the Act.
