Mere use of expression “Yes, I am satisfied” cannot be considered to be a valid approval u/s 148 – High Court
In a recent judgment, the Hon’ble Delhi Court has held that the mere use of expression “Yes, I am satisfied” for issuance of notice under Section 148 of the Act cannot be considered to be a valid approval as the same does not reflect an independent application of mind.
ABCAUS Case Law Citation:
4271 (2024) (10) abcaus.in HC
In the instant case, the assessee had filed the Writ Petition for quashing of notice issued under Section 148 of the Income Tax Act, 1961 (the Act) on the allegation that there has been an escapement of income.
The case of the petitioner was processed under Section 143(1) of the Act but no assessment order was passed. Subsequently, an information was received from the Investigation Wing of the Department about money laundering operation conducted by few persons through their paper companies by providing accommodation entries to various beneficiaries in the guise of share capital/share premium etc. through the help of various mediators. The name of the assessee appeared in the list of beneficiaries of accommodation entries.
Pursuant to the request of the petitioner, the reasons for reopening the assessment along with proforma for seeking necessary approval of the Principal Commissioner Income Tax (PCIT) were provided to the petitioner.
The principal challenge in the petition was to the grant of sanction under Section 151 of the Act. It was submitted that PCIT, who was the competent authority, had granted sanction without application of mind. It was submitted that PCIT had approved issuance of impugned notice by merely endorsing his signatures on the file in a routine and mechanical manner by simply writing “I am satisfied”. It had been further submitted that if PCIT had delved into the issue, he would have discovered that there is no specific allegation in the “reasons” recorded” qua the petitioner with the information given by Investigation Wing and therefore there was no independent conclusion of the Assessing Officer to believe that income has escaped assessment. It was also submitted that the sanction is vitiated as PCIT was influenced by the sanction of the Additional Commissioner Income Tax and for the said reason, the impugned notice under Section 148 consequent to the grant of approval is liable to be quashed.
The Hon’ble High Court observed that even the bare minimum requirement of the approving authority having to indicate what was the thought process, was missing in the 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.
It wa further observed that while dealing with an identical challenge, the Court had held that the PCIT had failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression “Yes” could be considered to be a valid approval. In fact, the approval was apparently akin to the rubber stamping of “Yes”.
The Revenue had relied upon a judgment of the High Court in which it was held that by writing the words “Yes, I am satisfied” the mandate of Section 151(1) of the Act as far as approval of Additional CIT was concerned, stood satisfied. However, the Hon’ble High Court noted that such finding was arrived at by the Court in light of the fact that Additional CIT addressed a letter to the ITO which clearly reveals that the sanction was accorded after due application of mind and on considering the reasons narrated by the Assessing Officer. However, 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 Assessing Officer.
It was further noted that while dealing with an identical challenge where the competent authority just recorded “Yes I am satisfied”, the Madhya Pradesh High Court held that the mechanical way of recording satisfaction by the Joint Commissioner was clearly unsustainable. The SLP challenging the decision rendered by the Madhya Pradesh High Court was dismissed by the Supreme Court.
The Hon’ble High Court opined that mere repeating of the words of the statute, mere rubber stamping of the letter seeking sanction or using similar words like “Yes, I am satisfied” will not satisfy the requirement of law.
It was held that PCIT had 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 was flawed in law.
Therefore, it was held that approval granted by the PCIT for issuance of notice under Section 148 of the Act was not valid and therefore the impugned notice under Section 148 cannot be sustained.
Accordingly, the impugned notice was set aside.
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