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TMI Blog2025 (4) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee is a beneficiary of accommodation entries of bogus long term capital gain. The assessee complied with the said notices by filing the return of income on 07.05.2019, declaring income of Rs. 2,02,150/-. Thereafter, statutory notices along with questionnaire were duly issued and served upon the assessee. The assessee also complied with the said notices. Thereafter during the course of assessment proceedings, the ld. AO observed that the assessee has shown Long Term Capital Gain from sale of 6,400/- equity shares of M/s BSR Finance & Construction Ltd. to the tune of Rs. 11,87,522/-, which was claimed as exempt. The ld. AO also noted that the assessee has purchased 400 shares off market of M/s Sensitive Merchandise Private Limited in physical form of Rs. 1 lac vide cheque dated 22.02.2011. Thereafter amalgamation happened with above said company with M/s BSR Finance & Construction Ltd. and assessee was allotted 6,400 equity shares. Thereafter, the ld. AO noted the modus operandi of how the price of the said share went up and finally the ld. AO treated the entire sale proceeds as bogus and added the same u/s 69A of the Act to the income of the assessee thereby making an ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the ld. AR relied on the decisions of Hon'ble Delhi High Court in the case of CIT Vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi) and Commissioner of Income-tax vs. Atul Jain [2008] 299 ITR 383 (Delhi)[23-05-2007]. Further the ld. AR while referring to page no. 91 of the Paper Book which is the approval granted by the PCIT, to reopen the assessment, submitted that it is only mentioned in the approval column as 'yes it is fit case'. Therefore, such approval granted by the ld. PCIT is not valid as he has not recorded his satisfaction to the reasons recorded recorded by the ld. AO as placed before him. Therefore, reopening of assessment based on the said approval is also bad in law. The ld. AR in defence of his arguments relied on the decision of Hon'ble Delhi High Court in the case of Capital Broadways (P.) Ltd. vs. Income-tax Officer [2024] 167 taxmann.com 533 (Delhi)/[2024] 301 Taxman 506 (Delhi)[03-10- 2024], wherein Hon'ble Court has held that the Pr. CIT approving the issuance of reopening notice by merely endorsing his signatures on file in routine and mechanical manner by simply writing 'Yes, I am satisfied' is not valid as he is failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of ITO Vs. Shri Anil Kumar Loharua, in ITA No. 1315/Kol/2016 vide order dated 28.08.2019, therein the decision of the Calcutta High Court has been distinguished by the Tribunal. The other decisions relied upon by the ld. DR are clearly distinguishable on facts and are not applicable. 08. We have heard the rival contentions and perused the materials available on record. The undisputed facts are that the case of the assessee was reopened u/s 147 read with section 148 of the Act after recording reason to believe u/s 148(2) of the Act by the AO. The above reopening was done after the ld. AO received information from the DIT (Investigation) Kolkata that assessee is beneficiary of accommodation entries in the form Long Term Capital Gain. The reasons recorded are available at page no. 42 of the paper book, which has been challenged by the assessee to be vague, scanty and ambiguous. For the sake of ready reference same is extracted below:- "(i) The assessee has filed its return of income for the Assessment Year 2013- 14 disclosding total income of Rs. 2.02,150/- on 23/07/2013. During the A.Y.2013-14 the assessee has disclosed income from business & profession amount to Rs. 2,55,874/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above reasons it is revealed that the ld. AO has only recorded the facts of the assessee as to the return of income and source of income. Thereafter, he noted the information received from the DIT. Thereafter, the ld. AO noted that the assessee is beneficiary of bogus Long Term Capital Gain/ Short Term Capital Gain and has earned Rs. 11,87,522/- in the script of M/s BSR Finance & Construction Ltd. The ld. AR then concluded that he has reason to believe that the income the income has escaped assessment. 010. In our option, the above reasons are not complete as the details of transactions, such as date of transactions, the person from whom the money has been received and where the transactions have been transacted and how the assessee is beneficiary of bogus Long Term Capital Gain. We find merit in the contention of the assessee that the reopening has been made on the basis of vague reasons as it the reasons mentioned only that the assessee is beneficiary of Long Term Capital Gain of Rs. 11,87,522/- in the script of M/s BSR Finance & Construction Ltd. and no other details were mentioned and therefore, the reasons recorded were not sufficient as the AO has not recorded his sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. They are not clear and unambiguous but suffer from vagueness. The reasons recorded by the AO do not disclose the AO's mind as to what was the nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year. The reasons recorded by the AO also do not disclose his mind as to when and in what mode or way the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know what was the amount and nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. In so far as the basis for the reasons is concerned, even this is absent. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer has not even recorded his satisfaction about the correctness or otherwise of the information or his satisfaction that a case has been made out for issuing a notice under section 148 of the Act. Read in this light, what has been recorded by the Assessing Officer as his "reasons to believe" is nothing more than a report given by him to the Commissioner of Income-tax. As held by the Supreme Court in Chhugamal Rajpal [1971] 79 ITR 603, the submission of a report is not the same as recording of reasons to believe for issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. 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. 15. This Court in the case of The Principal Commissioner of Income - tax v. Pioneer Town Planners Pvt. Ltd. (2024) SCC OnLine Del 1685/[2024] 160 taxmann.com 652/465 ITR 356 (Delhi) while dealing with an identical challenge of approval, having been accorded mechanically, had held as under:- "13. The primary grievance raised in the instant appeal relates to the manner of recording the approval granted by the prescribed authority under Section 151 of the Act for reopening of assessment proceedings as per Section 148 of the Act. xxxxxxxxxxxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the Income-tax Officer was to be agreed upon, the least which is expected is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the apex court in Union of India v. M. L. Capoor, AIR 1974 SC 87, 97 wherein it was observed as under: "27.... We find considerable force in the submission made on behalf of the respondents that the 'rubber stamp' reason given mechanically for the supersession of each officer does not amount to 'reasons for the proposed supersession'. The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. 28.... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct must be clearly discernible from the expression used at the time of affixing its signature while according approval for reassessment under Section 148 of the Act. The said approval cannot be granted in a mechanical manner as it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase "Yes" does not appropriately align with the mandate of Section 151 of the Act as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose. 22. So far as the decision relied upon the Revenue in the case of Meenakshi Overseas Pvt. Ltd. is concerned, the same was a case where the satisfaction was specifically appended in the proforma in " Yes, I am satisfied\ Moreover, paragraph 16 of-terms of the phrase the said decision distinguishes the approval granted using the expression "Yes" by citing Central India Electric Supply, which has already been discussed above. The decision in the case of Experion Developers P. Ltd. would also not come to the rescue of the Revenue as the same does not deal with the expression used in the instant appeal at the time of granting of approval. 23. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material. 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration." 19. The SLP challenging the decision rendered by the Madhya Pradesh High Court was dismissed by the Supreme Court CIT) v. S. Goyanka Lime & Chemical Ltd. [2015] 64 taxmann.com 313/237 Taxman 378 (SC). 20. As explained in the above cases, mere repeating of the words of the statute, mere rubber stamping of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view this factual position prevalent in the said case, it was held by the Hon'ble Jurisdictional High Court that the mere fact that the Additional Commissioner did not record his satisfaction in so many words should not render invalid the satisfaction granted under section 151(2) of the Act when the reason on the basis of which sanction was sought for could not be assailed. In the present case, the facts involved, however, are materially different, inasmuch as, the validity of reopening of assessment was challenged by the assessee on various grounds by making a detailed submission and the relevant judicial pronouncements in support of the said submission were also cited before the ld. CIT(Appeals). As rightly contended by the ld. Counsel for the assessee, the decision of the Hon'ble Calcutta High Court in the case of the Prem Chand Shaw (Jaiswal) (supra) thus is not applicable in the present case being distinguishable on facts. On the other hand, the ratio of the judicial pronouncements cited on behalf of the assessee in the submission made before the ld. CIT(Appeals) in support of his case on this issue is squarely applicable and keeping in view the same, we do not find any inf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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