Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 against the order dated 07.07.2023 passed by the Income Tax Appellate Tribunal for Assessment Year 2009–10. The Assessing Officer had reopened the assessment based on information from the Investigation Wing alleging that the assessee had received accommodation entries of ₹25,00,000 from the S.K. Jain Group in the form of share capital and share premium. The reassessment culminated in an order dated 28.11.2016 making additions under Section 68. The reassessment proceedings were approved by the competent authority using the language “Yes, I am convinced it is a fit case for re-opening of assessment u/s 147 by issuing notice u/s 148.” The ITAT quashed the reassessment holding that the approval was mechanical and invalid, relying on the decision in N.C. Cables Ltd.

Issues Involved

Whether the approval granted under Section 151 using the language “Yes, I am convinced it is a fit case for reopening” satisfies the statutory requirement of application of mind, whether the ITAT was justified in treating such approval as mechanical, and whether the reassessment proceedings were valid in law.

Petitioner’s Arguments

The Revenue argued that the ITAT erred in quashing the reassessment by misapplying the ratio of N.C. Cables Ltd. It was contended that the competent authority had clearly recorded satisfaction in its own words, which meets the requirement of Section 151. Reliance was placed on the Delhi High Court judgment in PCIT vs. Meenakshi Overseas Pvt. Ltd., where similar language was held to constitute valid approval. It was further argued that the assessee was involved in bogus accommodation entry transactions and the reassessment was lawfully initiated.

Respondent’s Arguments

The assessee supported the ITAT’s order and contended that the approval was granted in a ritualistic and mechanical manner without due application of mind. It was argued that mere affirmation that the case was fit for reopening does not satisfy the safeguard envisaged under Section 151, and reliance on N.C. Cables Ltd. was justified.

Court Order / Findings

The Delhi High Court analysed the language used by the approving authority and held that the expression “Yes, I am convinced it is a fit case for re-opening of the assessment u/s 147 by issuing notice u/s 148” goes beyond a mere “approved” or rubber-stamp endorsement. The Court distinguished N.C. Cables Ltd., observing that in that case the approval was limited to the word “approved”, whereas in the present case satisfaction was expressly recorded. Relying on PCIT vs. Meenakshi Overseas Pvt. Ltd., the Court held that such recording of satisfaction fulfils the mandate of Section 151. The Court concluded that the ITAT erred in holding the approval to be mechanical and in quashing the reassessment proceedings.

Important Clarification

The Court clarified that while elaborate reasoning is not required at the approval stage under Section 151, there must be clear indication of application of mind and satisfaction by the competent authority, which can be reflected in brief language. Each case must be examined on the specific wording and context of the approval granted.

Final Outcome

The appeal filed by the Revenue was allowed. The impugned order dated 07.07.2023 passed by the Income Tax Appellate Tribunal was set aside. The substantial question of law was decided in favour of the Revenue and against the assessee, thereby restoring the validity of the reassessment proceedings. No order as to costs was passed.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769505657_PR.COMMISSIONEROFINCOMETAX1VsAGROHAFINCAPLTD..pdf

 

 

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