Tulsi Infraheights Pvt. Ltd. Vs DCIT (ITAT Agra)
₹1.71 Crore Addition Collapses—A Mechanical Sanction Cannot Sustain Reopening!
Mechanical Section 151 Sanction Quashes Reassessment
The background: An entry operator’s search triggers reassessment
The assessee company filed its return for AY 2012-13 on 28 September 2012, declaring nil income. Subsequently, a search conducted on 18 November 2015 in the case of Pradeep Kumar Jindal led the Department to identify the company as an alleged beneficiary of accommodation entries amounting to ₹1,67,50,000 from three entities.
Based on this information, the Assessing Officer issued notice under section 148 on 31 March 2019. The company filed its return in response, again declaring nil income.
The Assessing Officer recorded non-compliance with notices and absence of satisfactory explanations regarding the transactions. He added ₹1,67,50,000 as unexplained income from accommodation entries, along with alleged commission at 2.5%, amounting to ₹4,18,750. The total addition was therefore ₹1,71,68,750. The CIT(A) confirmed the assessment.
The company disputed both jurisdiction and the additions
Before the Tribunal, the company challenged the reopening on several grounds. It alleged that the reasons were vague, reflected borrowed satisfaction from the Investigation Wing, and did not establish a live connection between the information received and income escaping assessment.
The company also questioned the disposal of its objections and complained that statements of alleged entry operators had neither been supplied nor subjected to cross-examination.
On merits, it contended that it had actually received only ₹50 lakh as unsecured loans, supported by bank statements, confirmations and affidavits. It disputed the much larger addition and argued that the alleged commission was unsupported by evidence of actual payment.
These were the company’s contentions. The Tribunal ultimately did not decide their correctness, because a preliminary jurisdictional issue disposed of the appeal.
An additional ground strikes at the foundation
Through an application dated 8 July 2026, the company raised an additional legal ground challenging the sanction under section 151 as routine, mechanical and non-speaking.
The Tribunal admitted the ground because it involved a pure question of law, with the relevant facts already available on record. Since the validity of sanction went to the root of reassessment jurisdiction, it examined this issue first.
The approval reproduced in the order recorded satisfaction with the Assessing Officer’s reasons, referred to alleged escaped income of ₹1,71,68,750, and directed issuance of notice under section 148 for AY 2012-13.
The company argued that this endorsement did not demonstrate independent application of mind by the sanctioning authority.
Revenue’s defence: Sanction is an administrative exercise
The Department contended that approval under section 151 was an administrative function and did not require detailed discussion. It relied on PCIT v. Agroha Fincap Ltd., a Delhi High Court decision which, as recorded in the Tribunal’s order, supported the sufficiency of a brief satisfaction endorsement.
The company relied on CIT v. S. Goyanka Lime & Chemical Ltd., where the Madhya Pradesh High Court had held mechanical recording of satisfaction unsustainable. It also cited Agra Tribunal decisions including Govind Sharma, Shashi Sogani, Pawan Agarwal and Banarsi Lal.
The Tribunal thus considered conflicting views of non-jurisdictional High Courts.
Summary dismissal of SLPs does not resolve competing views
The Tribunal noted that SLPs against both competing High Court decisions had been summarily dismissed by the Supreme Court.
It explained that summary dismissal does not attract the doctrine of merger or amount to a declaration of law under Article 141. The two High Court decisions therefore continued to retain their independent character.
Invoking CIT v. Vegetable Products Ltd., 88 ITR 192 (SC), the Tribunal adopted the construction favourable to the assessee where two reasonable interpretations were possible. It also followed the reasoning of the coordinate Bench in Banarsi Lal v. ITO.
Approval must demonstrate meaningful consideration
The Tribunal rejected the suggestion that describing sanction as administrative dispensed with the requirement of reasons. It referred to Supreme Court authorities emphasising reasoned decision-making, accountability and transparency.
Its discussion of N.C. Cables Ltd. and Saraswat Co-operative Bank Ltd. reinforced the purpose of superior approval as a meaningful statutory check. Elaborate reasoning may not be necessary, but the exercise must demonstrate consideration of the relevant facts and law.
The Tribunal concluded that the sanction in this case was mechanical and without application of mind. It accordingly held the approval invalid and quashed the consequential reassessment. The appeal was allowed, and all remaining grounds were left open.
Author’s comments: Mentioning the amount is not the same as examining the case
The decision highlights the importance of scrutinising the actual sanction and reopening record before confining an appeal to the additions. An endorsement may identify the assessee, assessment year and alleged escaped income, yet still fail to demonstrate independent consideration.
However, brevity alone does not invalidate approval. The question is whether the record establishes meaningful application of mind.
This ruling also cannot be cited as a finding that the loans were genuine, that only ₹50 lakh was received, or that commission was never paid. Those disputes remained undecided. The entire reassessment fell because its jurisdictional foundation was defective.
Cases Discussed
- CIT v. S. Goyanka Lime & Chemical Ltd., Madhya Pradesh High Court, (2015) 56 taxmann.com 390: Relied upon for the proposition that mechanical recording of satisfaction by the sanctioning authority under section 151 is unsustainable.
- PCIT v. Agroha Fincap Ltd., Delhi High Court, ITA No. 60/2024, dated 06.10.2025: Relied upon by the Revenue for the contention that a brief satisfaction endorsement may satisfy the statutory requirement.
- CIT v. Vegetable Products Ltd., Supreme Court, [1973] 88 ITR 192: Applied by the Tribunal while dealing with conflicting decisions of non-jurisdictional High Courts; where two reasonable constructions are possible, the construction favourable to the assessee was adopted.
- Banarsi Lal v. ITO, ITAT Agra, ITA No. 317/Agr/2025, AY 2014-15, dated 20.03.2026: Followed by the Tribunal on mechanical sanction under section 151 and consequent invalidity of reassessment.
- Govind Sharma v. ITO, ITAT Agra, ITA No. 428/Agr/2025, AY 2015-16, dated 17.04.2026: Referred to as an Agra Bench decision holding that mechanical approval could not constitute approval in the manner known to law.
- Shashi Sogani v. DCIT, ITAT Agra, ITA No. 554/Agr/2025, AY 2013-14, dated 22.06.2026: Referred to on the same principle concerning mechanical sanction.
- Pawan Agarwal v. ITO, ITAT Agra, ITA No. 386/Agr/2025, AY 2020-21, dated 26.11.2025: Referred to in support of invalidating reassessment founded on mechanical approval.
- N.C. Cables Ltd., Delhi High Court, 391 ITR 11: Discussed for the principle that elaborate reasons are unnecessary, but the statutory satisfaction must reflect meaningful application of mind rather than a ritualistic approval.
- Saraswat Co-operative Bank Ltd. v. ACIT & Others, Bombay High Court, [2025] 473 ITR 205: Discussed for the statutory check inherent in section 151 and the requirement that the sanctioning authority apply its mind to the relevant facts and law.
FULL TEXT OF THE ORDER OF ITAT AGRA
1. This appeal is directed against the impugned order dated 04.02.2026 passed in appeal No CIT(A)-IV/KNP/10502/2019-20 by the ld. Commissioner of Income Tax(Appeals), Kanpur-4 [(hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2012-13, wherein ld CIT(A) has dismissed assessee’s appeal, confirming the addition of Rs. 1,71,68,750/- as unexplained income, made vide, assessment order dated 29.12.2019 passed u/s143(3)/147 of the Act.
2. The brief facts of the case are that the assessee filed his return of income for A.Y. 2012-13 on 28.09.2012, declaring total income at nil. In pursuance of a search and seizure operation carried out on 18.11.2015 in the case of Shri Pradeep Kumar Jindal, the assessee company was identified as one of the beneficiaries of accommodation entry amounting to Rs. 1,67,50,000/- from three different entities. The case of assessee was reopened u/s 147 of the Act, by issuance of notice u/s 148 of the Act, dated 31.03.2019 after recording reasons to believe. Assessee filed return in response thereof on 20.07.2019, declaring income @ nil. Various notices u/s 142(1) of the Act were issued and served upon the assessee, seeking details of the aforesaid transaction. Notice u/s 133(6) of the Act was also issued to the assessee, however, assessee did not comply. The assessing officer observed that the assessee did not furnish full and true disclosure of credits, in books of accounts at the time of filing return, hence completed the assessment proceedings for want of assessee’s explanations and added the above sum of Rs. 1,67,50,000/- as unexplained income from accommodation entry and commission @ 2.5% amounting to Rs. 4,18,750/- on above sum and added in the total income of the assessee, vide assessment order dated 29.12.2019 passed u/s 143(3) and 147 of the Act.
3. Aggrieved assessee, preferred an appeal before ld CIT(A), who dismissed assessee’s appeal and confirmed the impugned additions made by the assessing officer.
4. Aggrieved, assessee has raised the following grounds under this second appeal:
“1. BECAUSE, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the validity of reassessment proceedings initiated under section 147/148 of the Act, which are void ab initio and without jurisdiction.
2. BECAUSE, the Ld. CIT(A) has erred in confirming the reopening of assessment on the basis of reasons recorded which are vague, general in nature and based solely on borrowed satisfaction derived from Investigation Wing, without any independent application of mind by the Assessing Officer.
3. BECAUSE, the Ld. CIT(A) has failed to appreciate that the recorded reasons merely indicate a “reason to suspect” and not a legally sustainable “reason to believe”, and hence the assumption of jurisdiction under section 147 is invalid.
4. BECAUSE, the Ld. CIT(A) has erred in law in upholding the reassessment proceedings despite the fact that the objections filed by the appellant against reopening were disposed of in a mechanical, summary and non-speaking manner, without dealing with the specific objections raised by the appellant.
5. BECAUSE, the Ld. CIT(A) has failed to appreciate that the Assessing Officer, while disposing of objections, merely reiterated the contents of the reasons recorded and relied upon general observations and case laws, without addressing the appellant’s contentions or establishing any live nexus between the alleged information and the appellant’s case.
6. BECAUSE, the Ld. CIT(A) has erred in ignoring that no independent inquiry or verification was conducted by the Assessing Officer prior to issuance of notice under section 148 and the entire reopening is based on unverified third-party information.
7. BECAUSE, the Ld. CIT(A) has failed to appreciate that the reopening has been made beyond four years from the end of the relevant assessment year without there being any failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment, and therefore the assumption of jurisdiction is bad in law.
8. BECAUSE, the Ld. CIT(A) has erred in upholding the reassessment ignoring that reliance has been placed on statements of alleged entry operators which were neither provided to the appellant nor subjected to cross-examination, thereby violating principles of natural justice.
9. BECAUSE, the Ld. CIT(A) has erred in sustaining the addition of Rs. 1,67,50,000/-under section 68 of the Act, which is arbitrary, unjustified and contrary to facts, inasmuch as the appellant had in fact received only Rs. 50,00,000/- as unsecured loans through proper banking channels, duly supported by documentary evidences including bank statements, confirmations and affidavits, which have not been found to be false or incorrect.
10. BECAUSE, the Ld. CIT(A) has further erred in sustaining the addition under section 68 ignoring that the appellant had duly discharged the onus cast upon it by establishing the identity, creditworthiness and genuineness of the transactions and no adverse material has been brought on record to rebut the same.
11. BECAUSE, the Ld. CIT(A) has erred in confirming the addition merely on the basis of investigation reports and third-party statements, without bringing any independent corroborative material on record to rebut the evidences filed by the appellant.
12. BECAUSE, the Ld. CIT(A) has failed to appreciate that the addition has been sustained on mere presumptions and surmises and on account of alleged non-compliance of notices under section 133(6), which by itself cannot justify addition under section 68.
13. BECAUSE, the Ld. CIT(A) has further erred in sustaining the addition of Rs. 4,18,750/-on account of alleged commission @2.5%, which is arbitrary, without any evidence of actual payment and based purely on assumptions drawn from third-party statements.
14. BECAUSE, the findings recorded by the Ld. CIT(A) are perverse, contrary to facts on record and based on selective appreciation of material, ignoring the evidences and explanations furnished by the appellant.
15. BECAUSE, the appellant denies liability to pay interest under sections 234A, 234B and 234C of the Act.”
Additional Ground
The additional legal ground was raised by the appellant assessee vide, application dated 08.07.2026 as under:
“Because, the approval under section 151 of the ‘Act’ was accorded in a routine mechanical and non speakingmanner, without any application of mind by the competent authority, vitiating the entire proceedings from inception.”
The above noted additional legal ground relates to the pure question of law and the relevant facts required to adjudicate the same are available on record, hence we admit this legal ground.
5. Perused the records. Heard ld AR for the appellant assessee and ld Sr DR for the respondent revenue.
6. The above referred additional legal ground as preliminary issue raised by the appellant assessee, challenging the validity of the entire assessment proceedings based on the mechanical approval accorded by the competent authority u/s 151 of the Act, goes to the root of the matter, hence, the same is being adjudicated as under.
7. Ld AR for the appellant assessee has submitted that the approval granted by the PCIT-2 Agra, is part of assessee’s un-numbered additional paper book attached alongwith annexure A for reasons recorded, wherein the competent authority has recorded his satisfaction as under:
“I am satisfied u/s 151 on the reasons recorded by DCIT, Circle-2(1)(1) that it is a fit case for issue of notice u/s 148 as income of Rs. 1,71,68,750/- has escaped assessment. Notice u/s 148 to be issued to Tulsi Infraheights for A.Y. 2012-13.”
Further submitting that for initiating action u/s 147 of the Act by issuance of notice u/s 148 dated 31.03.2019, the above referred mechanical approval without application of mind, is no approval in the eye of law, rendering the consequential assessment order dated 29.12.2019as illegal and void ab initio.
8. Ld AR has referred – (i) CIT Jabalpur v. S. Goyanka Lime & Chemical Ltd., (2015) 56 taxmann.com 390 (MP- H.C.), r/w SC order dated 08.07.2025 against the referred MP High Court order in SLP(C) No. 11916/2025, reported in (2015) 64 taxmann.com 313 (SC). The Madhya Pradesh High Court in its order dated 14.10.2014 held that the mechanical way of recording satisfaction by the Joint Commissioner, who accords sanction for issuing notice u/s 148 of the Act, is clearly unsustainable. The aforesaid SLP filed against the order of MP High Court was dismissed by the Apex Court. (ii) ITA No. 428/Agr/2025 (A.Y. 2015-16), Govind Sharma v. ITO, order dated 17.04.2026 (Agra-Trib), (iii) ITA No. 554/Agr/2025 (A.Y. 2013-14), Shashi Sogani v. DCIT, order dated 22.06.2026 (Agra-Trib), (iv) ITA No. 386/Agr/2025 (A.Y. 2020-21), Pawan Agarwal v. ITO, order dated 26.11.2025 (Agra-Trib) and (v) ITA No. 317/Agr/2025 (A.Y. 2014-15), Banarsi Lal v. ITO, order dated 20.03.2026 (Agra-Trib), in support of his submissions.
9. Ld Sr DR has submitted that the approval granted u/s 151 is merely an exercise of administrative power, which requires no detailed discussion and has submitted that the Hon’ble Delhi High Court, vide judgement dated 06.10.2025 passed in ITA 60/2024 PCIT v. M/s Agroha Fincap Ltd., has held that the satisfaction recorded by the competent authority that “yes, I am convinced it is a fit case for reopening the assessment u/s 147 by issuing notice u/s 148” satisfies the mandate of section 151A of the Act. Ld Sr DR has further submitted that the SLP(Civil) No. 20867/2026 filed against the Delhi High Court order dated 06.10.2025 was dismissed summarily by the Supreme Court, vide order dated 05.05.2026. Ld Sr DR, thus, prayed to dismiss the additional legal ground raised by the appellant assessee.
10. We notice that the conflicting decisions given by the M.P. High Court in S. Goyanka Lime & Chemical Ltd. (supra) relied by assessee and Delhi High Court in M/s Agroha Fincap Ltd. (supra), relied by the revenue are both “pertaining to the non jurisdictional High Courts”. The SLPs against both the conflicting decisions have also been summarily dismissed by the Supreme Court. It is settled legal principle that the summary dismissal of SLP by the Supreme Court of India means the Court refuses to interfere with the impugned order under appeal. The doctrine of merger does not apply in such a situation. A summary dismissal does not declare any law under Article 141 of the Constitution. The effect of summary dismissal of SLPs against the conflicting decisions of the non-jurisdictional High Courts order will be that the orders of both the non-jurisdictional High Courts remain entirely independent. In such a fact situation, we take guidance from the decision of the Supreme Court in CIT vs. Vegetable Products Ltd., [1973] 88 ITR 192 (SC), wherein the Apex Court held that if two reasonable constructions of the taxing provision is possible, that construction which favours the assessee must be adopted.
11. We take further guidance from the decision of the co-ordinate bench of the tribunal in Banarsi Lal (supra) which has held as under:
“2. The assessee had raised additional grounds before us challenging the validity of assumption of jurisdiction u/s 147 of the Act. These additional grounds go to the root of the matter and the facts relevant for its adjudication are placed on record. Hence, we admit the additional grounds and take up the same first for adjudication.
3. We have heard the rival submissions and perused the material available on record. The assessee has filed its return of income on 7.6.2016 for AY 2014-15 declaring total income of Rs. 1,85,440/-. This return was treated as non-est by the Id AO. The Ld. AO noted that he had received information that assessee had sold agricultural lands and had derived income from agricultural activities. On the basis of information received, the Ld. AO sought to reopen the assessment of the assessee u/s 147 of the Act vide issuance of notice u/s 148 of the Act on 2.2.2017. The assessee filed return of income on 27.3.2017 in response to notice issued u/s 148 of the Act. The reasons recorded for reopening the assessment together with the approval granted by the Additional CIT, Range 2(2), Firozabad in terms of section 151 of the Act. The approval granted by the Additional CIT, Range 2(2), Firozabad is enclosed in Page 18 of the Paper Book. On perusal of the proforma seeking approval u/s 151 of the Act, we find that the Ld. Addl CIT had merely stated that he is satisfied that this is fit case for reopening. This sort of approval granted u/s 151 of the Act was held to be approval granted without application of mind and construed as mechanical by the Hon’ble Madhya Pradesh High Court in the case of CIT Vs. S. Goyenka Lime and Chemicals Ltd reported in 56 taxmann.com 390 (MP HC). The Special Leave Petition (SLP) filed by the revenue against this decision was dismissed by the Hon’ble Supreme Court reported in 64 taxmann.com 313. Further, we find that the Hon’ble Delhi High court in the case of PCIT Vs. NC Cables Ltd reported in 391 ITR 11 (Del) had also held the same, wherein, the approving authority had merely stated “approved” in the proforma while granting approval in terms of section 151 of the Act. This approval was held by the Hon’ble Delhi High court to be a mechanical approval. The Hon’ble Delhi High Court in the recent decision in the case of SBC Minerals P Ltd. vs ACIT reported in 475 ITR 360 (Del) had also held that similar kind of approval granted in a mechanical manner would vitiate the basic assumption of jurisdiction of the Ld. AO resulting in quashing of reassessment proceedings. Similar view was also taken by the Hon’ble Bombay High Court in the case of Vodafone India Ltd. vs DCIT reported in 464 ITR 385 (Bom).
4. Per Contra, the Ld. DR vehemently relied on the following decisions of Hon’ble High Courts to drive home the point where necessary sanction to issue notice under section 148 of the Act was obtained from Principal Commissioner of Income Tax as per provisions of section 151 of the Act, the Principal Commissioner was not required to provide elaborate reasoning to arrive at a finding of approval when he was satisfied with reasons recorded by Assessing Officer :-
a) Experion Developers P Ltd. vs ACIT reported in 422 ITR 355 (Del HC)
b) Virbhadra Singh vs DCIT reported in 88 taxmann.com 88 (HP HC)
c) Sonia Gandhi vs ACIT reported in 407 ITR 594 (Del HC)
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.”
12. The Agra Bench of this tribunal in Govind Sharma v. ITO Mathura (supra), in Shashi Sogani v. DCIT (supra) and Pawan Agrawal v. ITO Mathura (supra) have also held that the approvals accorded on behalf of the competent authority in a manner referred hereinabove for reopening u/s 147 of the Act, cannot be treated as an approval in a manner known to law, the consequent assessment proceedings on such mechanical approvals were quashed.
13. The order dated 16.01.2026 passed by the ‘B’ bench of ITAT Delhi in Anil Kumar Jain v DCIT, in ITA No. 475/Del/2025 (A.Y 2013-14) read as under:
“7. From the perusal of Performa for granting approval of reopening the assessment, it is observed that there was no mention in Column No. 9 regarding assessment completed passed u/s 143(3) of the Act prior to reopening of assessment. It is further seen that in Column No.17, ld. PCIT has recorded the satisfaction in mechanical manner where it is observed that “on perusal of the reasons recorded satisfied that it is a fit case for notice u/s 148”, however, Ld. PCIT has not referred any material/records before reaching to such satisfaction proceedings u/s 147 of the Act should be initiated though the order u/s 143(3) has already been passed. Further the assessment order u/s 143(3) was passed at a date much later than the date when the survey was carried out at the business premises of the assessee thus it cannot be said that the material found during the survey was fresh material. From the perusal of first para of the reasons recorded we find that AO stated that return of income filed was processed and there is no reference of assessment order passed u/s 143(3) of the Act in the case of the assessee. These facts, clearly suggests that reopening was made without any application of mind.
8. The Hon’ble High Court of Delhi in case cited as SABH Infrastructure Ltd. vs. ACIT in WP (C) 1357/2016 order dated 25.09.2017 has issued guidelines to the Revenue authorities while deciding the issue of reopening u/s 147/148 of the Act. Operative part of which is reproduced as under:-
“19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments:
(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided;
(ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for reopening the assessment – especially in those cases where the first proviso to Section 147 is attracted. 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 quasi-judicial 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.”
9. 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 assessment was completed u/s 143(3)- However, pursuant to reassessment notice, which was dropped due to technical reasons, and later notice was issued and assessments were taken up afresh-After considering submissions of assessee and documents produced in reassessment proceedings, AO added back a sum of Rs.1,35,00,000/- – CIT(A) held against assessee an legality of reassessment notice but allowed assessee’s appeal on merits holding that AO did not conduct appropriate enquiry to conclude that share inclusion and advance received were from bogus entities-Tribunal allowed assessee’s appeal on merits-Revenue appealed against appellate order on merits- Assessee’s cross appeal was on correctness of reopening of assessment- Tribunal upheld, assessee’s cross-objections and dismissed Revenue’s appeal holding that there was no proper application of mind by concerned sanctioning authority u/s Section 151 as a pre-condition for issuing notice u/s 147/148-Held, Section 151 stipulates that CIT (A), who was competent authority to authorize reassessment notice, had to apply his mind and form opinion-Mere appending of expression ‘approved’ says nothing-It was not as if CIT (A) had to record elaborate reasons for agreeing with noting put up-At same time, satisfaction had to be recorded of given case which could be reflected in briefest possible manner-In present case, exercise appears to have been ritualistic and formal rather than meaningful, which was rationale for safeguard of approval by higher ranking officer-Revenue’s appeal dismissed.”
10. Further, reliance placed in the judgement of Hon’ble Bombay High Court in the case of Saraswat CO-operative Bank Ltd. vs ACIT & Others [2025] 473 ITR 205 (Bom.) wherein Hon’ble Bombay High Court has held as under:-
Sanction mechanism under section 151
21. Evidently, the reassessment was first proposed internally on March 24, 2021 by the jurisdictional Assessing Officer, and was recommended by a Range Officer on March 25, 2021, and approved by the Principal Commissioner of Income-tax on the same day all under section 151 of the Act. Therefore, the reassessment has been contemplated and initiated one year after the expiry of four years from the end of the relevant assessment year d (2015-16). Therefore, failure by the petitioner to disclose material facts was a jurisdictional imperative, which was simply incapable of being discerned from the material on record. 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 Income-tax 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 sanction to be arbitrary, calling for intervention by a writ court. Evidently, the proposal, the recommendation and the approval in the instant case was mechanical, without either application of mind to the law and the facts or even a modicum of how the ingredients of the law had been met. In short, the machinery under section 151 completely failed.
24. The imperative requirement of compliance with the ingredients of section 147 and section 148 is underlined in innumerable judgments. However, we note with respect and approval, a judgment of a Division Bench of this court cited on behalf of the petitioner, in the case of Hindustan Lever Ltd. v. R. B. Wadkar (per V. C. Daga and J. P. Devadhar JJ.), and profitably extract the following (page 337 of 268 ITR):
“Reading of the proviso to section 147 makes it clear that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceeding under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reasons of the failure on the part of the assessee to disclose all material facts necessary for his assessment for that assessment year.
In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was March 31, 1997 and from that date if four years are counted, the period of four years expired on March 31, 2001. The notice issued is dated November 5, 2002 and received by the assessee on November 7, 2002. Under these circumstances, the notice is clearly beyond the period of four years.
The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all 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 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 recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the court, on the strength of the affidavit or oral submissions advanced.
Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of the proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside.”
(emphasis1 supplied)
25. Having regard to the foregoing and in view of the findings returned by us, the writ petition deserves to be allowed in the following terms:
“(A) The order dated March 25, 2021 sanctioning the reassessment under section 151 of the Act; the impugned notice dated March 30, 2021 issued under section 148 of the Act; the impugned order dated February 25, 2022 rejecting the objections raised by the petitioner are declared to be arbitrary and devoid of valid reasons and, therefore, illegal;
(B) Consequently, the order dated March 25, 2021 sanctioning the reassessment under section 151 of the Act; the impugned notice dated March 30, 2021 issued under section 148 of the Act; the impugned order dated February 25, 2022 and all consequential proceedings in respect of the reassessment are hereby quashed and set aside.”
26. Rule is made absolute in the aforesaid terms, and the writ petition is disposed of accordingly. There shall be no order as to costs.”
14. As regards the arguments of ld Sr DR for the revenue, that the approval granted u/s 151 is merely an exercise of administrative power and requires no detailed discussion, it is well settled that even the administrative orders, are required to be supported with reasons. Hon’ble Supreme Court in State of H.P. V. Mustaque Ahmad, 2007 (58) ACC 382 (SC), has held that it is desirable that even administrative orders should be supported by reasons. Hon’ble Apex Court in State of Rajasthan v. Rohitas and Ors., 2008 (61) ACC 678(SC), has held that orders being supported with reasons is a sign to good governance. Failure to give reasons amount to denial of justice. In Mohinder Singh Gill v. Chief Election Commissioner, AIR 1978 SC 851, Hon’ble Supreme Court held that where validity of an administrative order is challenged, all reasons for passing such an order should be contained in the order itself. If all reasons are not given in the order, they cannot be subsequently supplemented at an after thought by way of an affidavit. Justice Krishna Iyer observed “orders are not like old wine, becoming better as they grow older”. Hon’ble Apex Court, in U Manjunath v. U Chandrasekhar 2017(6) Supreme 19, has held that it is well settled in law that reason is the life of law, it is that filament that injects soul to the judgment, absence of analysis not only evinces non application of mind but mummifies the core spirit of judgement. The absence of reasons in the process of adjudication makes the ultimate decision pregnable. In M/s Kranti Associates Pvt Ltd & Anr v. Masood Ahmed Khan & Ors, (2010) 9 SCC 496, the Supreme Court, while dealing with the requirement of passing a reasoned order by an authority, whether administrative, quasi judicial or judicial, has observed that insistence on reason is a requirement for both judicial accountability and transparency.
15. In the instant case, even if the approval order is treated as purely an administrative order, it is to be supported with reason, which are missing in the approval granted by the ld PCIT for issuance of notice u/s 148 of the Act. The approval u/s 151 of the Act, accorded on a proforma for initiating proceedings u/s 147 of the Act, is part of assessee’s paper book at page no. 10, which clearly shows that ld PCIT (competent authority) has endorsed as “in view of the reasons recorded by the AO, I am satisfied that this is a fit case for issue of notice u/s 148”. This sort of sanction accorded u/s 151 is almost in the similar fashion as has been referred hereinabove. Respectfully following the reasoning given by Hon’ble M.P. High Court in S. Goyanka Lime(supra) and by the coordinate bench of the tribunal in Banarsi Lal (supra) on the basis of Hon’ble Supreme Court’s decision in Vegetable Products Ltd. (supra), we hold that the sanction accorded u/s 151 of the Act, in the present case is accorded in a mechanical manner without application of mind, hence the same is invalid. The consequential reassessment is hereby quashed. Since we have quashed the reassessment order, the other grounds of appeal are rendered academic, hence, not being adjudicated and are left open.
16. In the result, assessee’s appeal is allowed.
Order pronounced in the Open Court on- 30.09.2026
