Mechanical “Approved” Sanction Void – ₹8.11 Cr Additions Deleted by ITAT Delhi

Sobhin Buildwell Private Limited Vs ITO (ITAT Delhi)

Safeguards Not Rituals: ITAT Strikes Down 147 Reopening for Lack of Mindful Approval -ITAT Delhi Quashes ₹8.11 Cr Addition-Reopening Void Due to Mechanical Sanction- Just Writing “Approved” is Not Enough

Background

• AO’s Action: Reopened assessment u/s 147 based on Investigation Wing info that assessee received accommodation entry of ₹10 lakh from Shalini Holdings Ltd. (Jain group).

Additions made: ₹4.26 Cr – share capital u/s 68, ₹3.84 Cr – unsecured loans u/s 68, ₹18,000 – commission on alleged entry.

• CIT(A)/NFAC (03.07.2024): Confirmed reassessment & additions.
• Appeal before ITAT:

Wrongly initiated u/s 147 instead of 153C.

AO mechanically relied on Investigation Wing, no independent application of mind.

Approval u/s 151 by JCIT was mechanical (just wrote “Approved”).

Tribunal’s Findings

1. Proceedings u/s 147 vs. 153C

• Issue covered against assessee by Delhi HC in PCIT v. Naveen Kumar Gupta (168 taxmann.com 574).
• Grounds rejected.

2. Application of Mind by AO

• Reasons vague & contradictory: AO confused whether assessee was “providing” or “taking” accommodation entries.
• No cross-verification of Investigation Wing report.
• AO ignored that Shalini Holdings’ own assessment u/s 153C was completed earlier (28.03.2013) without adverse finding.
• Cited Meenakshi Overseas (395 ITR 677, Del), Rajiv Agarwal (395 ITR 255, Del), Well Trans Logistics (474 ITR 131, Del) – held reopening can’t be based only on borrowed satisfaction.

3. Sanction u/s 151

• JCIT merely signed “Approved” on proforma without reasons.
• ITAT relied on:

PCIT v. N.C. Cables Ltd. (391 ITR 11, Del) – mere “Approved” not valid.