Shashi Sogani Vs DCIT (ITAT Agra)
Summary: ITAT Agra quashed the reassessment proceedings against Shashi Sogani for Assessment Year 2013-14 after holding that the approval granted by PCIT-1, Agra under Section 151 for issuance of notice under Section 148 was mechanical and invalid. The assessee had challenged reassessment on several grounds, including allegedly incorrect facts in the recorded reasons, absence of independent analysis by the AO, reliance on Investigation Wing inputs, denial of adverse material and cross-examination, addition of Rs.1,75,01,430 under Section 68, and denial of exemption under Section 10(38). At the hearing, however, the assessee pressed the jurisdictional ground concerning Section 151 approval. The sanctioning authority had merely recorded: “In view of reasons recorded by AO, I am satisfied that income has escaped assessment.
It is therefore, a fit case for issue of the notice u/s 148 of the Act.” The Tribunal held that this endorsement did not disclose the independent application of mind required from the prescribed authority. It principally relied upon Capital Broadways (P.) Ltd. v. ITO, where the Delhi High Court held that although elaborate reasons are unnecessary, the satisfaction of the sanctioning authority must be discernible and there must at least be an indication that the authority examined the material before granting approval. Mere repetition of statutory language or expressions such as “Yes, I am satisfied” does not meet the statutory safeguard. The Tribunal also relied on CIT v. S. Goyanka Lime & Chemical Ltd., in which mechanical sanction for reopening was held invalid; the Revenue’s SLP against that decision was dismissed. The Agra Bench further followed its recent decision in Banarsi Lal v. ITO, where conflicting non-jurisdictional High Court decisions were resolved in favour of the assessee by applying CIT v. Vegetable Products Ltd., and referred to Savita Gupta v. ITO, where defective Section 151 approval was held fatal to reassessment.
The assessee had also relied upon State Bank of India, Jagbir Singh, Krishna Print Pack, Santosh Rani, Subhash Chand, Sukumar Buildwell, Anju Daruka, Sandeep Bajaj and Pawan Agarwal. Holding that PCIT-1’s approval was not valid, ITAT Agra allowed the jurisdictional ground and quashed the reassessment. Consequently, the remaining grounds, including the substantive Section 68 and Section 10(38) controversies, were left open without adjudication. The assessee’s appeal was allowed.
Cases Discussed
- Banarsi Lal Vs ITO 2(2)(1), Firozabad (U.P.), ITA No. 317/Agr/2025, order dated 20.03.2026 (ITAT Agra) — Followed. The Tribunal relied on the coordinate Bench decision which, while dealing with conflicting non-jurisdictional High Court decisions concerning Section 151 approval, applied CIT v. Vegetable Products Ltd. and adopted the construction favourable to the assessee.
- Savita Gupta Vs Income Tax Officer, ITA No. 327/Agr/2024, order dated 24.03.2026 (ITAT Agra) — Followed. The Agra Bench had quashed reassessment after holding that the Section 151 approval obtained in that case was not in consonance with the statutory provision and was fatal to assumption of jurisdiction.
- Pawan Agarwal Vs ITO, Mathura, ITA No. 386/Agra/2025, order dated 26.11.2025 (ITAT Agra) — Relied upon by assessee. Cited in support of the challenge that a mechanical statutory sanction cannot validly confer reassessment jurisdiction.
- Santosh Rani (Legal Heir) Vs ITO, 2025 (11) TMI 1050 (ITAT Delhi) — Relied upon by assessee. Cited among the authorities supporting invalidation of reassessment for mechanical approval under Section 151.
- Subhash Chand Vs ITO, 2025 (9) TMI 10 (ITAT Delhi) — Relied upon by assessee. Cited in support of the assessee’s Section 151 jurisdictional objection.
- Sukumar Buildwell Pvt. Ltd. Vs ITO, 2025 (8) TMI 1255 (ITAT Delhi) — Relied upon by assessee. Cited as an authority supporting the requirement of meaningful statutory approval before reopening.
- Anju Daruka Vs ITO, (2025) 173 taxmann.com 91 (ITAT Kolkata) — Relied upon by assessee. Included in the assessee’s authorities challenging mechanical sanction.
- DCIT Vs Sandeep Bajaj, ITA No. 2993/Del/2023, order dated 29.05.2024 (ITAT Delhi) — Relied upon by assessee. Cited among the precedents supporting the challenge to Section 151 approval.
- Capital Broadways (P.) Ltd. Vs ITO, 2024 (10) TMI 311 (Delhi High Court) — Relied upon and applied. The Tribunal reproduced the principle that the satisfaction of the sanctioning authority must be discernible from the approval. Although elaborate reasons are unnecessary, the record must indicate examination of the material; mere “Yes, I am satisfied” or repetition of statutory language does not satisfy the requirement.
- Jagbir Singh Vs ITO, 2025 (1) TMI 503 (ITAT Delhi) — Relied upon by assessee. Cited as supporting authority against mechanical approval under Section 151.
- Krishna Print Pack Vs ITO, 2019 (10) TMI 843 (ITAT Delhi) — Relied upon by assessee. Cited among the decisions supporting the challenge to the validity of the statutory sanction.
- CIT Vs S. Goyanka Lime & Chemical Ltd., (2015) 56 taxmann.com 390 (Madhya Pradesh High Court); SLP dismissed in (2015) 64 taxmann.com 313 (Supreme Court) — Relied upon. Mechanical recording of satisfaction for issuance of notice under Section 148 was held unsustainable; the Revenue’s SLP was dismissed by the Supreme Court.
- CIT Vs Vegetable Products Ltd., 88 ITR 192 (Supreme Court) — Followed through Banarsi Lal. Applied for the principle that where competing reasonable constructions of a taxing provision or conflicting non-jurisdictional High Court views exist, the construction favourable to the assessee should be adopted.
- State Bank of India Vs ACIT, Writ Petition No. 53 of 2018, judgment dated 20.04.2018 (Bombay High Court) — Relied upon by assessee. Cited for holding that Section 151 sanction is a condition precedent to issuance of the reopening notice and remains open to jurisdictional challenge on the ground of non-application of mind or sanction by an incorrect authority.
- Meenakshi Overseas Pvt. Ltd. (Delhi High Court) — Distinguished in the authority reproduced by the Tribunal. The reproduced reasoning stated that the decision did not apply to the facts where the approval failed to demonstrate independent consideration by the PCIT.
FULL TEXT OF THE ORDER OF ITAT AGRA
1. This appeal is filed by the assesseeagainst the order of the Ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 08.10.2025 for the Assessment Year 2013-14 raising following grounds of appeal:-
“1. BECAUSE, the Ld. CIT(A) erred in sustaining reassessment under section 147 of the Act even though the reasons recorded were based on demonstrably incorrect facts (including the wrong assertion of “short selling”), contained no independent analysis by the AO, and merely reproduced Investigation Wing inputs without any personal application of mind, rendering the assumption of jurisdiction invalid.
2. BECAUSE, the Ld. CIT(A) failed to appreciate that the approval under section 151 of the Act was accorded mechanically, on an erroneous factual foundation, and without demonstrating satisfaction on the correctness or adequacy of the reasons, thereby vitiating the entire reassessment.
3. BECAUSE, the Ld. CIT(A) erred in holding that a generalized Investigation Wing report constitutes valid material for reopening, even though no specific material, no link, no transaction trail, and no adverse finding was ever shown connecting the appellant with any alleged operator or accommodation entry network.
4. BECAUSE, the Ld. CIT(A) failed to appreciate that the AO did not furnish copies of any adverse material relied upon, provide any statement or underlying documents, allow cross-examination of any person allegedly involved, despite repeated requests by the appellant, thereby violating the principles of natural justice and rendering the addition unsustainable.
5. BECAUSE, the Ld. CIT(A) erred in upholding the addition of Rs.1,75,01,430/- under section 68 despite the appellant furnishing complete documentary evidence including payment proof, allotment letter, DMAT statement, contract notes, sale through BSE with SIT, and complete banking trail, all of which establish that the transaction was genuine, transparent, and fully verifiable.
6. BECAUSE, the Ld. CIT(A) erred in sustaining the addition by relying on broad observations about “unusual price movement” or “penny stock activity,” without demonstrating any factual nexus between such observations and the appellant’s own transaction, and without finding any impropriety in the appellant’s conduct or documentation.
7. BECAUSE, the Ld. CIT(A) erred in upholding denial of exemption under section 10(38) of the Act even though the shares were sold through a recognized stock exchange, the transaction was routed through a SEBI-registered broker, STT was duly paid, the entire transaction was through banking channels, and no statutory condition for exemption was violated.
8. BECAUSE, the Ld. CIT(A) failed to appreciate that the AO brought no evidence linking the appellant to any price manipulation, any operator group, or any flow of unaccounted money, making the allegation of accommodation entry purely presumptive.
9. BECAUSE, the appellant furnished all primary documents required to establish genuineness, and the AO did not rebut any document with contrary material, the Ld. CIT(A) erred in sustaining additions based merely on assumptions, probabilities, and theoretical possibilities rather than objective facts.
10. BECAUSE, the Ld. CIT(A) erred in not considering that in the appellant’s Husband’s case on identical facts, the addition was deleted by the Ld. CIT(A)-IV, Jaipur vide order ITBA/APL/M/250/2019-20/101946231O(1) on 09.10.2019. The appeal filed by Revenue was dismissed by Hon’ble ITAT, Jaipur Bench ‘B’ in ITA No. 63/JP/2020, thereby ignoring a directly comparable factual precedent and resulting in inconsistent treatment of identical transactions.
11. BECAUSE, the Ld. CIT(A) erred in sustaining interest charged under section 234A and 234B of the Act without correct re-computation of income after allowing the cost of acquisition and without addressing the specific objections raised by the appellant.”
2. At the time of hearing, ld. AR of the assessee challenged the Ground No.2 which is against the mechanical approval sustained by the ld. CIT under section 151 of the Income-tax Act, 1961 (for short ‘the Act’). He submitted 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 are bad in law and liable to be quashed. He further submitted that the purported approval u/s. 151 of the Act is illegal, bad in law and also without application of mind.
3. In this regard, ld. AR submitted written submissions as under:-
2. The statute vide section 151 of the Act mandates that “No Notice shall be issued” under section 148 by the Assessing officer, after the expiry of a period of four years from the end of relevant assessment year, unless the Principal Commissioner is satisfied on the reasons recorded by the Assessing officer that it is fit case for the issue of Notice under section 148 of the Act. From the bare reading of the section as exists on the book it is apparent that section 151 is not a provision which enables the Revenue to do something. It is a restriction on the Revenue prohibiting it from doing something. It is a guidance to do such things in the manner provided in section 151. This is a provision to protect the interest of the Assessee. That section 151 puts a restriction on the issue of a re assessment notice by the Assessing Officer, which requires the satisfaction of the higher authorities in the cases covered thereby.
3. Thus, act of granting sanction is not a mere ritual or idle formality but it is a jurisdictional requirement non-compliance of which would render Notice to held without jurisdiction in view of the clear language of the section under consideration. The legislature has therefore, provided certain safeguards by way of compulsory Sanction to be accorded by a high-ranking officer in order to prevent arbitrary exercise of power by the AO, particularly when extended period of limitation is being utilized for making the assessment by the revenue.
4. Thus, the power vested in Sanctioning authority which in the case under consideration is Principal Commissioner of Income Tax under the provision to section 151(1) to grant or not to grant approval carries with itself a duty an obligation of being independently satisfying himself with the proposed action. The Principal Commissioner of Income Tax instead of merely endorsing the proposal to issue Notice by the AO, is mandatorily required to apply his mind to the proposal put up to him in the form of ‘Reasons Recorded’, information contained in the Form on which approval is sought and to granted in the light of the material relied upon by the Assessing officer.
5. A specific provision provided under the Act can never be made dependent on the discretion of the executive unless the statute specifically provides for conferring of such discretion. Therefore, the sanction granted by the PCIT should show that it has been not been accorded as idle formality, but after due application of mind and that facts of the case, based on his ‘satisfaction’ warrant issuance of notice under section 148 of the Act. The approval may be brief but does not mean to be briefest, it should be self-speaking so that due application of mind can be read therefrom and upon being challenged the test of application of mind by the sanctioning authority can be satisfactorily met.
6. The Hon’ble Bombay High Court recognizing this legal right of the assessee to challenge the validity of sanction on the ground of non-application of mind in the case of State Bank of India Vs ACIT in Writ Petition No. 53 of 2018 vide Judgment dated 20th April 2018 has held that “Similarly, the sanction under Section 151 of the Act is also a condition precedent to issue the reopening notice. Therefore, the Assessee is entitled to ask the Revenue whether or not, the condition precedent for reopening the assessment, i.e. date of posting of the notice and a copy of the sanction order from the superior authority as provided under Section 151 of the Act.However, this attitude of not supplying copy of the necessary sanction to the Petitioner when asked for, is not justified in the least. This is more so as it would be open to the Petitioner also to challenge that the Sanctioning Authority had not applied his mind while granting the sanction, making the reopening notice bad. Besides, also whether it has obtained from the specific authority provided in Section 151 of the Act can also be subject of jurisdictional challenge to the reopening notice.
7. In this background of the matter, inviting attention to the case under consideration, it is submitted that in the Form for obtaining approval of Principal Commissioner of Income Tax, the approving authority has stated ‘In view of reasons recorded by AO, I am satisfied that income has escaped assessment. It is therefore, a fit case for issue of the notice u/s 148 of the Act’ for granting of approval. Such an approval has been held to be granted in mechanical manner and vitiated in law.
8. In this regard, assessee placed reliance on the following decisions:-
a) CIT v. S. Goyanka Lime & Chemical Ltd. (2015) 56 taxmann.com 390 (MP HC) SLP Dismissed by Hon’ble Supreme Court in (2015) 64 taxmann.com 313
b) Capital Broadways (P) Ltd. v. ITO 2024 (10) TMI 311 (Delhi High Court)
c) Jagbir Singh v. ITO 2025 (1) TMI 503 (ITAT Delhi)
d) Krishna Print Pack v. ITO 2019 (10) TMI 843 (ITAT Delhi)
e) Santosh Rani (Legal Heir) v. ITO 2025 (11) TMI 1050 (ITAT Delhi)
f) Subhash Chand v. ITO 2025 (9) TMI 10 (ITAT Delhi)
g) Sukumar Buildwell Pvt. Ltd. v. ITO 2025 (8) TMI 1255 (ITAT Delhi)
h) Anju Daruka v. ITO (2025) 173 taxmann.com 91 (ITAT Kolkata)
i) DCIT Vs Sandeep Bajaj ITA No.2993/Del/2023, Order dated 29/05/2024 j) Pawan Agarwal v. ITO, Mathura ITA No. 386/Agra/2025, Order dated 26.11.2025 (ITAT Agra Bench)
9. The law is fairly well settled to deal with a situation where conflicting High Court views exist, it is settled law that where two views exist, the view favourable to the Assessee must be adopted. It is respectfully submitted that the issue of preference in case of conflicting High Court decisions stands settled by a consistent line of authority. The Hon’ble Supreme Court in CIT v. Vegetable Products Ltd.88 ITR 192 (SC) has laid down the binding principle that where two reasonable interpretations of a taxing provision are possible, the interpretation favourable to the Assessee must be adopted.
10. Accordingly, in the present case, where no binding jurisdictional High Court decision exists and divergent views of non-jurisdictional High Courts are available, the interpretation favourable to the Assessee deserves to be preferred and applied.
11. ITAT Agra Bench in ITA No. 317/Agr/2025 in the case of Banarsi Lal Vs ITO 2(2)(1), Firozabad (U.P) vide order dated 20.03.2026
12. ITAT Mumbai Bench was recently followed by the ITAT, Agra Bench in the case of Savita Gupta VsIncome Tax Officer in ITA No. 327/Agr/2024 (Pages-27-37) wherein vide order dated 24.03.2026 it was held that:
4. In the light of the aforesaid settled legal position, ld. AR submitted that the so-called sanction accorded by the learned Principal Commissioner of Income Tax-1, Agra under section 151, containing a bald endorsement “In view of reasons recorded by AO, I am satisfied that income has escaped assessment. It is therefore, a fit case for issue of the notice u/s 148 of the Act”, neither discloses independent satisfaction nor reflects application of mind to the reasons recorded by the Assessing Officer. He submitted that such a ritualistic and non-speaking approval strikes at the very root of jurisdiction and defeats the mandatory safeguard engrafted by the Legislature under section 151 of the Act. He further submitted that Hon’ble Courts consistently held that sanction is a condition precedent and not a procedural formality, and its non-compliance renders the notice under section 148 void ab initio. Consequently, he submitted that the assumption of jurisdiction itself being invalid, the impugned reassessment proceedings and the assessment order passed in pursuance thereof are liable to be quashed as without authority of law. He accordingly prayed that the appeal may be allowed and quash the assessment order.
5. On the other hand, ld. DR of the Revenue relied on the orders of the authorities below.
6. Considered the rival submissions and material placed on record. We find that in the instant case approval for issue of notice u/s. 148 was granted in a mechanical manner by the PCIT-1, Agra by only mentioning the words “In view of reasons recorded by AO, I am satisfied that income has escaped assessment. It is therefore, a fit case for issue of the notice u/s 148 of the Act” which is bad in law and resultantly the re-assessment proceedings initiated based on such approval is bad in law. Our aforesaid view is fortified by the following decisions:- Capital Broadways Pvt Ltd. vs ITO 2024 (10) TMI 311 (DHC). Wherein, it has been held that the satisfaction arrived at by the concerned officer should be discernible from the sanction order passed u/s. 151. However, as may be seen, the approval order is bereft of any reason. There is no whisper of any material that may have weighted for the grant of approval. Even the bare minimum requirement of the approving authority having to indicate what the thought process was, is missing in the aforementioned 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 been ritualistic and formal rather than meaningful, which should be the rationale for the safeguard of an approval by a high ranking official. Reasons are the link between material placed on record and the conclusion reached by the authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. 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 AO. The decision rendered in Meenakshi Overseas Pvt Ltd. [2015 [12] TMI 1905 – DHC is therefore not applicable to the facts and circumstances of the present case. Mere repeating of the words of the statue, mere rubber stamping of the letter seeking sanction or using similar rods like “Yes, I am satisfied” will not satisfy the requirement of law. Hence, we are of the firm view that PCIT has failed to satisfactorily record his concurrence. The mere use of expression “Yes, I am Satisfied” cannot be considered to be a valid approval as the same does not reflect an independent application of mind. The grant of approval in such manner is thus flawed in law. Approval granted by the PCIT for issuance of notice u/s. 148 of the Act is not valid. Assessee appeal allowed.”
- In the case of CIT vs. Goyanka Lime & Chemical Ltd. (2015) 64 taxmann.com 313 (SC) the Hon’ble Supreme Court examined the identical issue as to according the sanction for reopening the assessment u/s 148 of the Act by merely recording “Yes. I am satisfied” and held that re-opening on the basis of mechanical sanction is invalid.
- ITAT Agra Bench in ITA No. 317/Agr/2025 in the case of Banarsi Lal Vs ITO 2(2)(1), Firozabad (U.P) vide order dated 20.03.2026 (Pages-22-26) faced with a situation of conflicting High Court Judgements on issue of approval under section 151 of the Act, resolving the issue in favour of the Assessee held as under:
“5. We find that the various decisions quoted by both the Ld. AR as well as the Ld. DR are non-jurisdictional high courts giving conflicting decisions. We find that the Hon’ble Supreme Court in the case of CIT vs Vegetable Products Ltd reported in 88 ITR 192 (SC) had held that when there are conflicting decisions of non-jurisdictional high courts on the same issue, then the construction that is favourable to the assessee need to be adopted. Respectfully following the same, we hold that the reopening has been made in the instant case by not taking approval u/s 151 of the Act from the competent authority in the manner known to law. Accordingly, the entire reassessment proceedings are hereby quashed. Hence, one of the additional grounds challenging the validity of assumption of jurisdiction u/s 147 of the Act is allowed in the above-mentioned terms. Since the reassessment is quashed, the other legal grounds raised by the assessee as well as the grounds raised by the assessee on merits need not be adjudicated and they are left open.
6. In the result, the appeal of the assessee is allowed.”
- The decision of the Hon’ble Mumbai Bench was recently followed by the Hon’ble ITAT, Agra Bench in the case of Savita Gupta Vs Income Tax Officer in ITA No. 327/Agr/2024 (Pages-27-37) wherein vide order dated 24.03.2026 it was held that:
6. Respectfully following the aforesaid decision of Mumbai Tribunal, which in turn relied upon the decision of Hon’ble Bombay High Court and Hon’ble Delhi High Court supra, we hold that the reopening has been made in the instant case by taking approval u/s 151 of the Act from both the Additional CIT as well as Principal CIT which would not be in consonance with the provisions of section 151 of the Act and hence would become fatal to the entire assumption of jurisdiction and consequential framing of reassessment proceedings by the learned AO. Accordingly, the entire reassessment proceedings are hereby quashed. Hence, one of the facets of Ground No.4 challenging the validity of assumption of jurisdiction u/s 147 of the Act is allowed in the above mentioned terms. Since the reassessment is quashed on this technical issue, the other legal grounds raised by the assessee as well as the grounds raised by the assessee on merits need not be adjudicated and they are left open.
7. In the result, the appeal of the assessee is allowed.”
7. We find that in view of the aforesaid precedents, the approval granted by the PCIT-1, Agra for issuance of notice u/s. 148 of the Act is not valid. Therefore, respectfully following the aforesaid binding precedents, we allowed the legal ground raised by the assessee and quash the reassessment accordingly.
8. Since we have already observed that notice issued u/s. 148 is not valid and resultantly we quashed the reassessment, hence, the remaining grounds need not be adjudicated upon and kept the same open
8. In the result, the appeal of the assessee is allowed in the above terms.nd
Order pronounced in the open court on this 22 day of June, 2026.
