Pr.Commissioner Of Income Tax Delhi-04 vs M/S Ganesh Ganga Insvestments Pvt Ltd on 28 February, 2025

Delhi High Court – Orders

Pr.Commissioner Of Income Tax Delhi-04 vs M/S Ganesh Ganga Insvestments Pvt Ltd on 28 February, 2025

1. The Principal Commissioner of Income Tax1 seeks to impugn
the order of the Income Tax Appellate Tribunal2 dated 07
November 2019. We had, after hearing learned counsels for the
respective parties, admitted this appeal by our order dated 30 January
2024 on the following questions of law:-

“(a) Whether examination and analysis of information received
from Investigation Wing and co-relating it with the record
available with the Assessing Officer [„AO’] is not sufficient
application of mind by the AO to issue notice under Section 148 of
the Income Tax Act, 1961 [“Act”]?

(b) Whether the remark of the Principal Commission of Income
Tax |”PCIT”| ”Yes, I am satisfied that it is a fit case for issue of
notice under Section 148 of the Act” shows that the PCIT has not

1
PCIT
2
Tribunal

ITA 25/2022 Page 1 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:50
applied his mind while according sanction for issue of notice under
Section 148 of the Act when all relevant material was before him?”

2. The principal question which stands posited for our
consideration is whether the Assessing Officer3 was justified in
invoking Section 148 of the Income Tax Act, 19614 basis the report
which had been received from the Investigation Wing. The assessee
appears to have principally asserted that this was clearly a case of
“borrowed satisfaction” since full and true disclosures had been made
in the Return of Income5 itself. According to learned counsel for the
assessee, the inclusion of share capital in Assessment Year6 2010-11
had been disclosed by the assessee itself at approximately INR 11
Crores. In view of the aforesaid, it was contended that the estimation
of the income liable to tax which had escaped assessment was wholly
incorrect.

3. It was further averred that the AO had proceeded solely on the
basis of borrowed satisfaction. Learned counsel for the respondent-
assessee submitted that on a plain reading of the reasons which were
recorded, it becomes apparent that the reassessment action was based
solely on the report of the Investigation Wing and absent any
independent application of mind by the AO.

4. Controverting the aforesaid submissions, Mr. Menon, learned
counsel appearing for the appellant, had taken us in detail through the
reasons which were recorded by the AO and which have also been
noticed by the Tribunal while passing the order impugned. According
to Mr. Menon, it would be wholly incorrect for the satisfaction which
constituted the basis for initiating reassessment in the facts of the

3
AO
4
Act
5
ROI

ITA 25/2022 Page 2 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:50
present case as being labelled or viewed as resting on “borrowed
satisfaction” since the report of the Investigation Wing only
constituted material on the basis of which the AO proceeded to
scrutinize the ROI which had been filed.

5. We note that undisputedly this was not a case emanating from a
scrutiny assessment that may have been undertaken by virtue of
Section 143(3) of the Act. The AO, while invoking Section 148, had
recorded the following reasons for reopening:

“M/s. Ganesh Ganga Investments Pvt. Ltd.,
PAN AAACG2710J A.Y. 2010-11

The assessee filed return of income for the A.Y. 2010-
11 on 04.02.2011 declaring loss of Rs.(-) 14,162/-.The
return was processed u/s 143(1).

Information was forwarded to this office through the
Addl. CIT, Range-10, New Delhi that search & seizure
action was conducted by Inv. Wing at the office of Sh.
Himanshu Verma where various incriminating
documents/ materials were seized during the course of
search. During the post search investigation and perusal
of seized documents it was observed that Sh. Himanshu
Verma was engaged in the business of providing
accommodation entries by providing cheques/PO/DD in
lieu of cash to a large number of beneficiary companies
thorough various paper and dummy companies floated
and controlled by them. It was also evidently established
by the Investigation Wing that Sh Himanshu Verma is
known entry providers and is the actual controller of
more than 100 companies/ proprietary firms/ partnership
firms. They control these entities through various persons
by appointing them as directors/partners/proprietors apart
from nominating them as authorized signatories for
maintaining the bank accounts of these entities but in fact
all these persons act only as their stooges. The cash
received from the recipient parties for providing the
accommodation entries was first deposited in the
accounts of these dummy firms/ companies in the
disguise of the cash received against the bogus sales, duly
shown in the books of accounts. From there, this cash

6
AY

ITA 25/2022 Page 3 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:50
was transferred to the different paper companies floated
by Sh. Himanshu Verma through a complex trail of
transactions, so as to hide the actual sources of funds of
the last set of recipient companies of Sh. Himanshu
Verma.

In this way, the reserve & surpluses and the capital
account of a specific set of companies are enhanced with
the help of the unexplained cash received by Himanshu
Verma, which is routed to these companies through their
dummy firm/companies. Once the funds of these
companies have been enhanced sufficiently,
accommodation entries through RTGS/Cheques in the
shape of the share capital, capital gains or loans as per the
specific requirement of the recipient clients were
provided to them in lieu of the cash received from them.
In this way, the chain for providing an accommodation
entry gets completed.

It is noticed from the list of entries that the assessee
M/s Ganesh Ganga Investment P. Ltd. has taken
following accommodation entries during the financial
year 2009-10 :-

S.No. Amount Conduit companies through which
cheque issued.

1. 4000000 Shubh Propbuild P Ltd.,

2. 4000000 Jaguar Softech P. Ltd.,

3. 4000000 Join Fashion P. Ltd.,

4. 4000000 Management Services P. Ltd.,

5. 4000000 Greenvision Construction P. Ltd.,

6. 4000000 USK Exim P. Ltd.,
TOTAL 2,45,00,000/-

On the basis of the reports received from the
Investigation Wing, I have downloaded the return from
the ITD portal and verified the records and it is clear that
the assessee company has not disclosed fully and truly all
material facts necessary for its assessment for the
assessment year under consideration as it emerges that
transactions shown in the return are not genuine. Apart
from the above the assessee company is not doing any
real business and keeping in view the huge investments,
disallowances u/ s 14A read with rule 8D also applicable
in the case. The statement given by Shri Himanshu
Verma also establishes the link with the self-confessed
“accommodation entry providers” whose business is to
help assessees bring back their unaccounted money into

ITA 25/2022 Page 4 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:50
their books of account. Thus, there is a direct link
between the information/ available with the department
and the income escaping assessment.

I have, therefore, reasons to believe that income to the
extent of Rs.2,45,00,000/- has escaped assessment
relevant to A.Y.2010-11. Thus, the same is to be brought
to tax under section 147/148 of the I.T. Act 1961.

Moreover, as the case pertains to a period beyond four
years from the end of relevant assessment year, for
issuing the notice u/s 148, necessary approval/sanction
may kindly be accorded by the Pr. Commissioner of
Income Tax, Delhi-4, New Deli in view of the amended
provision of section 151 w.e.f 01.06.2015. ”

6. As is manifest from the above, quite apart from the material
which had been gathered by the Investigation Wing, the AO also
appears to have independently scrutinized the ROI and verified the
disclosures made therein against the record which was available. This
clearly appears from the listing of entities who were stated to have
made investments in the respondent-assessee in the year in question
and whose particulars stand captured in the table which forms part of
the „reasons to believe‟. The AO had also alluded to the statement of
one Mr. Himanshu Verma, which is stated to have been recorded by
the Investigation Wing and had ultimately come to conclude that there
was a direct link between the information available with the
Department and income having escaped assessment. This is therefore
not a case where the AO has proceeded merely by treating the report
of the Investigating Wing as constituting an ipse dixit and on the basis
of which the requisite opinion was formed. The recordal of reasons in
support of the formation of opinion is clearly demonstrative of due
application of mind.

7. The Tribunal, however, has doubted the invocation of Section
148 of the Act by observing as follows:

ITA 25/2022 Page 5 of 16

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:50
“8.5. The statement of Shri Himanshu Verma is also filed on record
which did not find mention if M/s. Shubh Propbuild Pvt. Ltd., as
mentioned in the reasons belong to Shri Himanshu Verma. There is
no investor exist in the name of M/s. Management Services Pvt.

Ltd., and no addition in respect of the same company have been
made by the A.O. The A.O, therefore, recorded incorrect facts in
the reasons for reopening of the assessment. Thus the same cannot
be approved under the Law. It is well settled Law if wrong facts
and wrong reasons are recorded for reopening of the assessment,
reopening of the assessment would be invalid and bad in Law. We
rely upon Judgment of Hon’ble Punjab & Haryana High Court in
the case of Atlas Cycle Industries 180 ITR 319 (P&H). It is well
settled Law that note already filed with return disclosing nature of
capital receipt and no other tangible material found, therefore,
reopening of the assessment under section 148 was quashed. We
rely upon Judgment of Hon’ble Delhi High Court in the case of CIT
vs., Atul Kumar Swami [2014) 362 ITR 693 (Del.) and Judgment
of Hon’ble Allahabad High Court in the case of Kanpur Texel P.
Ltd., 406 ITR 353 (Alld.). Similarly, in the case of CIT vs.,
Vardhaman Industries [2014] 363 ITR 625 (Raj.), the Hon’ble
Rajasthan High Court has held that “reasons must be based on new
and tangible materials. Notice based on documents already on
record, 148 not valid.” In the instant case under appeal, the A.O.
has reproduced the information received from Investigation Wing
and reproduced the same in the reasons recorded under section 148
of the IT. Act. This information shows that assessee has received
the amount of credit from 06 parties, but one of the party i.e., M/s.
Management Services Pvt. Ltd. do not exist and that M/s Shubh
Propbuild Pvt. Ltd., do not belong to Shri Himanshu Verma. It,
therefore, appears that A.O. has not gone through the details of the
information and has not even applied his mind and merely
concluded that he has reason to believe that income chargeable to
tax has escaped assessment. In the reasons A.O. has recorded that
assessee has received accommodation entry of Rs.2.45 crores, but,
ultimately made an addition of Rs.11.05 crores without bringing
any material against the assessee. The reasons to believe are,
therefore, not in fact reasons, but, only conclusion of the A.O. In
the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the
reasons has even mentioned that he has gone through the
information received which is lacking in the present case. The A.O.
being a quasi-judicial authority is expected to arrive at subjective
satisfaction independently on his own. The A.O. however, merely
repeated the report of the Investigation Wing in the reasons and
formed his belief that income chargeable to tax has escaped
assessment without arriving at his satisfaction. Thus, there is no
independent application of mind by the A.O. to the report of
Investigation Wing to form the basis for recording the reasons. The
reasons recorded by the A.O. are also incorrect as noted above. The

ITA 25/2022 Page 6 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:50
reasons failed to demonstrate the link between the alleged tangible
material and the formation of reasons to believe that income
chargeable to tax has escaped assessment. The decisions relied
upon by the Learned Counsel for the Assessee in the cases of Pr.
Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396
ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi
Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of
Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.)
and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly
apply to the facts and circumstances of the case. Learned Counsel
for the Assessee also relied upon Order of ITAT, Delhi Bench in
the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on
identical facts reopening of the assessment have been quashed. The
Ld. D.R. relied upon certain decisions in support of the contention
that reopening of the assessment is justified, but, the same are
distinguishable on facts of the present case. Considering the facts
and circumstances of the case in cases in the light of above
discussion and decisions referred to in the Order, we are of the
view that reopening of the assessment is bad in law and that
sanction/approval granted by Pr.Commissioner of Income Tax is
also invalid. We may also note that vide Order sheet Dated
23.08.2019 the case was re-fixed for hearing because the Ld. D.R.
argued that approval have been granted by Commissioner of
Income Tax after due discussion of the matter and perusal of the
relevant information and thereafter approval in prescribed
proforma sent to the A.O. and he has mentioned that I am satisfied.
However, no record was produced. Therefore, this case was re-
fixed for fresh hearing. However, on the date of hearing no such
record have been produced for the inspection of the Bench.
Therefore, satisfaction recorded by the Pr. Commissioner of
Income Tax is invalid and without application of mind. Therefore,
the reopening of the assessment is invalid and bad in Law and
cannot be sustained in Law. We, accordingly, set aside the Orders
of the authorities below and quash the reopening of the assessment
under section 147/148 of the I.T. Act, 1961. Resultantly, all
additions stands deleted. Since we have quashed the reopening of
the assessment, therefore, there is no need to decide the addition on
merit which is left with academic discussion only.”

8. As is apparent from the above, what appears to have weighed
upon the Tribunal was the fact that there was no investor by the name
of M/s Management Services Pvt. Ltd. and which found mention in
the statement of Mr. Himanshu Verma and that ultimately no addition
in respect of the said entity had been made by the AO.

ITA 25/2022 Page 7 of 16

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:51

9. In our considered opinion, the reasoning as assigned by the
Tribunal is clearly untenable. Firstly, the question of whether the
power to reassess was rightly and justifiably invoked, could not have
been tested basis the ultimate order of assessment that came to be
drawn. What the Tribunal needed to principally bear in consideration
was whether the AO had merely adopted and blindly followed the
report of the Investigation Wing or whether it had treated the same as
constituting relevant information for the purpose of formation of
opinion that income chargeable to tax had escaped assessment. As we
view the reasons which were recorded by the AO, we come to the firm
conclusion that this could not have justifiably been characterized as a
case of borrowed satisfaction. As is ex facie manifest from a reading
of the reasons so recorded, it is apparent that the report of the
Investigation Wing only prompted the AO to scrutinize the ROI and
the reassessment power was thereafter exercised basis the
commonality of entities which were found in the return as submitted
and the report of the Investigation Wing. The AO also appears to have
borne in consideration the statement of Mr. Himanshu Verma which
was recorded in the course of investigation and the fact that some of
the accommodation entry providers whose particulars were disclosed
in that statement, were also found to be investors in the respondent.
On an overall conspectus of the aforesaid, we are of the considered
opinion that the Tribunal clearly erred in interfering with the exercise
of power conferred by Section 148 by the AO.

10. Insofar as the issue of borrowed satisfaction is concerned and
when the invocation of the reassessment power could be said to be
unjustified, we deem it apposite to allude to the following
observations as appearing in Pr. Commissioner of Income Tax v.

ITA 25/2022 Page 8 of 16

This is a digitally signed order.

“24. The reopening of assessment under section 147 is a potent
power not to be lightly exercised. It certainly cannot be invoked
casually or mechanically. The heart of the provision is the
formation of belief by the Assessing Officer that income has
escaped assessment. The reasons so recorded have to be based on
some tangible material and that should be evident from reading the
reasons. It cannot be supplied subsequently either during the
proceedings when objections to the reopening are considered or
even during the assessment proceedings that follow. This is the
bare minimum mandatory requirement of the first part of section
147(1) of the Act.

xxxx xxxx xxxx

26. The first part of section 147(1) of the Act requires the
Assessing Officer to have “reasons to believe” that any income
chargeable to tax has escaped assessment. It is thus formation of
reason to believe that is subject matter of examination. The
Assessing Officer being a quasi-judicial authority is expected to
arrive at a subjective satisfaction independently on an objective
criteria. While the report of the Investigation Wing might
constitute the material on the basis of which he forms the reasons
to believe the process of arriving at such satisfaction cannot be a
mere repetition of the report of investigation. The recording of
reasons to believe and not reasons to suspect is the pre-condition to
the assumption of jurisdiction under section 147 of the Act. The
reasons to believe must demonstrate link between the tangible
material and the formation of the belief or the reason to believe that
income has escaped assessment.

27. Each case obviously turns on its own facts and no two cases are
identical. However, there have been a large number of cases
explaining the legal requirement that requires to be satisfied by the
Assessing Officer for a valid assumption of jurisdiction under
section 147 of the Act to reopen a past assessment.

28. 28.1 In Signature Hotels Pvt. Ltd. v. ITO (supra), the reasons
for reopening as recorded by the Assessing Officer in a pro forma
and placed before the Commissioner of Income-tax for approval
read thus (page 56 of 338 ITR):

“11. Reasons for the belief that income has escaped
assessment.– Information is received from the DIT (Inv.-
I), New Delhi that the assessee has introduced money

7
2017 SCC OnLine Del 8691

ITA 25/2022 Page 9 of 16
This is a digitally signed order.

Details are contained in annexure. As per the
information amount received is nothing but
accommodation entry and assessee is a beneficiary.”
28.2 The annexure to the said pro forma gave the name of the
beneficiary, the value of entry taken, the number of the instrument
by which entry was taken, the date on which the entry was taken,
name of the account holder of the bank from which the cheque was
issued, the account number and so on.

28.3 Analysing the above reasons together with the annexure, the
court observed (page 59 of 338 ITR):

“The first sentence of the reasons states that
information had been received from Director of Income-
tax (Investigation) that the petitioner had introduced
money amounting to Rs. 5 lakhs during the financial year
2002-03 as per the details given in the annexure. The said
annexure, reproduced above, relates to a cheque received
by the petitioner on October 9, 2002 from Swetu Stone PV
from the bank and the account number mentioned therein.
The last sentence records that as per the information, the
amount received was nothing but an accommodation entry
and the assessee was the beneficiary.

The aforesaid reasons do not satisfy the requirements
of section 147 of the Act. The reasons and the information
referred to is extremely scanty and vague. There is no
reference to any document or statement, except the
annexure, which has been quoted above. The annexure
cannot be regarded as a material or evidence that prima
facie shows or establishes nexus or link which discloses
escapement of income. The annexure is not a pointer and
does not indicate escapement of income. Further, it is
apparent that the Assessing Officer did not apply his own
mind to the information and examine the basis and
material of the information. The Assessing Officer
accepted the plea on the basis of vague information in a
mechanical manner. The Commissioner also acted on the
same basis by mechanically giving his approval. The
reasons recorded reflect that the Assessing Officer did not
independently apply his mind to the information received
from the Director of Income-tax (Investigation) and arrive
at a belief whether or not any income had escaped
assessment.”

28.4 The court in Signature Hotels Pvt. Ltd. v. ITO (supra) quashed
the proceedings under section 148 of the Act. The facts in the

ITA 25/2022 Page 10 of 16
This is a digitally signed order.

29. 29.1 The above decision can be contrasted with the decision in
AGR Investment Ltd. v. Asst. CIT (supra), where the “reasons to
believe” read as under (page 151 of 333 ITR):

“Certain investigations were carried out by the
Directorate of Investigation, Jhandewalan, New Delhi in
respect of the bogus/ accommodation entries provided by
certain individuals/companies. The name of the assessee
figures as one of the beneficiaries of these alleged bogus
transactions given by the Directorate after making the
necessary enquiries. In the said information, it has been
inter alia reported as under:

Entries are broadly taken for two purposes:

1. To plough back unaccounted black money for the
purpose of business or for personal needs such as purchase
of assets etc., in the form of gifts, share application
money, loans, etc.

2. To inflate expense in the trading and profit and loss
account so as to reduce the real profits and thereby pay
less taxes.

It has been revealed that the following entries have
been received by the assessee : . .. .”

29.2 The details of six entries were then set out in the above
“reasons”. These included name of the beneficiary, the
beneficiary’s bank, value of the entry taken, instrument number,
date, name of the account in which entry was taken and the account
from where the entry was given the details of those banks. The
reasons then recorded:

“The transactions involving Rs. 27,00,000, mentioned
in the manner above, constitutes fresh information in
respect of the assessee as a beneficiary of bogus
accommodation entries provided to it and represents the
undisclosed income/income from other sources of the
assessee-company, which has not been offered to tax by
the assessee till its return filed.

On the basis of this new information, I have reason to
believe that the income of Rs. 27,00,000 has escaped
assessment as defined by section 147 of the Income-tax
Act. Therefore, this is a fit case for the issuance of the
notice under section 148.”

29.3 The court was not inclined to interfere in the above
circumstances in exercise of its writ jurisdiction to quash the
proceedings. A careful perusal of the above reasons reveals that the

ITA 25/2022 Page 11 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:51
Assessing Officer does not merely reproduce the information but
takes the effort of revealing what is contained in the investigation
report specific to the assessee. Importantly he notes that the
information obtained was “fresh” and had not been offered by the
assessee till its return pursuant to the notice issued to it was filed.
This is a crucial factor that went into the formation of the belief. In
the present case, however, the Assessing Officer has made no
effort to set out the portion of the investigation report which
contains the information specific to the assessee. He does not also
examine the return already filed to ascertain if the entry has been
disclosed therein.

30. 30.1 In CIT v. Highgain Finvest (P.) Ltd. (2008) 304 ITR 325
(Delhi) ; (2007) 164 Taxman 142 (Delhi) relied upon by Mr.
Chaudhary, the reasons to believe read as under (page 327 of 304
ITR):

“It has been informed by the Additional Director of
Income-tax (Investigation), Unit VII, New Delhi, vide
letter No. 138 dated April 8, 2003 that this company was
involved in the giving and taking bogus
entries/transactions during the financial year 1996-97, as
per the deposition made before them by Shri Sanjay
Rastogi, CA during a survey operation conducted at his
office premises by the Investigation Wing. The particulars
of some of the transaction of this nature are as under:

Date Particulars of cheque Debit amount Credit Amount
18-11-96 305002 5,00,000

Through the Bank Account No. CA 4266 of M/s.
Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road,
New Delhi.

Note : It is noted that there might be more such entries
apart from the above.

The return of income for the assessment year 1997-98
was filed by the assessee on March 4, 1998 which was
accepted under section 143(1) at the declared income of
Rs. 4,200. In view of these facts, I have reason to believe
that the amount of such transactions particularly that of
Rs. 5,00,000 (as mentioned above) has escaped the
assessment within the meaning of the proviso to section
147 and clause (b) to Explanation 2 of this section.

Submitted to the Additional Commissioner of Income-
tax, Range- 12, New Delhi for approval to issue notice
under section 148 for the assessment year 1997-98, if
approved.”

ITA 25/2022 Page 12 of 16

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:51
30.2 The Assessing Officer was not merely reproducing the
information received from the investigation but took the effort of
referring to the deposition made during the survey by the chartered
accountant that the assessee-company was involved in the giving
and taking of bogus entries. The Assessing Officer thus indicated
what the tangible material was which enabled him to form the
reasons to believe that income has escaped assessment. It was in
those circumstances that in the case, the court came to the
conclusion that there was prima facie material for the Assessing
Officer to come to the conclusion that the assessee had not made a
full and true disclosure of all the material facts relevant for the
assessment.

31. In Principal CIT v. G and G. Pharma India Ltd. (supra) there
was a similar instance of reopening of assessment by the Assessing
Officer based on the information received from the DIT (I). There
again the details of the entry provided were set out in the “reasons
to believe”. However, the court found that the Assessing Officer
had not made any effort to discuss the material on the basis of
which he formed prima facie view that income had escaped
assessment. The court held that the basic requirement of section
147 of the Act that the Assessing Officer should apply his mind in
order to form reasons to believe that income had escaped
assessment had not been fulfilled. Likewise in CIT v. Independent
Media P. Limited (supra) the court in similar circumstances
invalidated the initiation of the proceedings to reopen the
assessment under section 147 of the Act.

32. In Oriental Insurance Co. v. CIT (2015) 378 ITR 421 (Delhi) it
was held that “therefore, even if it is assumed that, in fact, the
assessee’s income has escaped assessment, the Assessing Officer
would have no jurisdiction to assess the same if his reasons to
believe were not based on any cogent material. In absence of the
jurisdictional pre-condition being met to reopen the assessment, the
question of assessing or reassessing the income under section 147
of the Act would not arise”.

33. In Rustagi Engineering Udyog (P.) Limited (supra), it was held
that “.. . the impugned notices must also be set aside as the
Assessing Officer had no reason to believe that the income of the
assessee for the relevant assessment years had escaped assessment.
Concededly, the Assessing Officer had no tangible material in
regard to any of the transactions pertaining to the relevant
assessment years. Although the Assessing Officer may have
entertained a suspicion that the assessee’s income has escaped
assessment, such suspicion could not form the basis of initiating
proceedings under section 147 of the Act. A reason to believe–not

ITA 25/2022 Page 13 of 16
This is a digitally signed order.

34. Recently in Agya Ram v. CIT (supra), it was emphasised that
the reasons to believe “should have a link with an objective fact in
the form of information or materials on record. . .” It was further
emphasised that “mere allegation in reasons cannot be treated
equivalent to material in eyes of law. Mere receipt of information
from any source would not by itself tantamount to reason to believe
that income chargeable to tax has escaped assessments”.

35. In the decision of this court dated March 16, 2016, in W. P. (C)
No. 9659 of 2015 (Rajiv Agarwal v. Asst. CIT (2017) 395 ITR 255
(Delhi)) it was emphasised that “even in cases where the Assessing
Officer comes across certain unverified information, it is necessary
for him to take further steps, make inquiries and garner further
material and if such material indicates that income of an assessee
has escaped assessment, form a belief that income of the assessee
has escaped assessment”.

36. In the present case, as already noticed, the reasons to believe
contain not the reasons but the conclusions of the Assessing
Officer one after the other. There is no independent application of
mind by the Assessing Officer to the tangible material which forms
the basis of the reasons to believe that income has escaped
assessment. The conclusions of the Assessing Officer are at best a
reproduction of the conclusion in the investigation report. Indeed it
is a “borrowed satisfaction”. The reasons fail to demonstrate the
link between the tangible material and the formation of the reason
to believe that income has escaped assessment.”

11. That only leaves us to examine whether the approval as granted
would satisfy the requirements of Section 151 of the Act. Learned
counsel for the respondent has commended for our consideration the
decision of the Court in Capital Broadways (P) Ltd. v. Income Tax
Officer Ward 5(3) Delhi8 to contend that the reasons as recorded by
the PCIT, while according approval, would clearly establish that the
same lacked an independent evaluation of whether reassessment was
warranted. We find ourselves unable to sustain that submission for the

8
2024 SCC OnLine Del 7059

ITA 25/2022 Page 14 of 16
This is a digitally signed order.

12. It would be appropriate to firstly notice what the PCIT had
come to record while conferring approval to the proposed action of the
AO. This has been duly captured by the Tribunal in para 8.1 of its
order and which is reproduced hereinbelow:

“8.1 PB-29 is the sanction granted by Pr. Commissioner of
Income Tax for reopening of the assessment in which it is
mentioned as under:

                                                            Whether          the       Pr.                        Yes I am satisfied
                                                            Commissioner of I. Tax is                             that it is a fit case for
                                          13.               satisfied on the reasons                              issue of notice u/s.
                                                            recorded by the ITO that it                           148 of the I.T. Act,
                                                            is a fit case for the issue of                        1961.
                                                            notice u/s.148.


                                                                                                           Sd/ -S.K. Mittal,
                                                                                   Pr. Commissioner of I. Tax, New Delhi."

13. It is relevant to note that Capital Broadways was concerned
with a case where all that the PCIT had chosen to pen was ”Yes, I am
satisfied”. That is clearly not the position which obtains here. Regard
must also be had to the consistent position that our Court has taken in
this respect and where it has held that it is only where the approving
authority merely appends its signature or accords approval treating
that exercise to be an empty formality or where it may have failed to
discharge the salutary obligation placed upon it and acted as a mere
rubber stamp that courts have struck down the approval accorded.
Regard must also be had to the fact that while according approval, the
PCIT is neither obliged nor expected to pen a detailed order in support
of the view expressed by the AO. An approval even if succinctly
expressed would suffice provided it is demonstrative of due

ITA 25/2022 Page 15 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:51
application of mind. Tested on those precepts, we find ourselves
unable to sustain the arguments canvassed at the behest of the assessee
on this score. We are, thus of the firm opinion that the Tribunal
committed a manifest error in interfering with the view formed by the
AO.

14. We would thus answer question (a) as posited by holding that
the formation of opinion by the AO was demonstrative of due
application of mind and cannot be characterized as based on
“borrowed satisfaction”. We answer question (b) holding that the
approval accorded was compliant with the requirement of Section 151
of the Act.

15. The appeal shall consequently stand allowed. The impugned
order of the Tribunal dated 07 November 2019 is hereby set aside. The
original assessment, in consequence, shall stand restored.

YASHWANT VARMA, J

HARISH VAIDYANATHAN SHANKAR, J
FEBRUARY 28, 2025/akc

ITA 25/2022 Page 16 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/03/2025 at 23:52:51

Source link

Agriculture Insurance Company Of India … vs The National Consumer Disputes … on 18 February, 2025

Bhilai Steel Plant vs Shri T. Appa Rao on 27 February, 2025

Cabcon India Limited vs Godha Cabcon And Insulation Limited on 5 March, 2025

Ramesh Kumar Kejriwal & Ors vs Mamesh Kumar Kejriwal & Ors on 3 March, 2025

Vimal Arora vs State Of Nct Of Delhi on 19 February, 2025

Agriculture Insurance Company Of India … vs The National Consumer Disputes … on 18 February, 2025

Bhilai Steel Plant vs Shri T. Appa Rao on 27 February, 2025

Cabcon India Limited vs Godha Cabcon And Insulation Limited on 5 March, 2025

Ramesh Kumar Kejriwal & Ors vs Mamesh Kumar Kejriwal & Ors on 3 March, 2025

Vimal Arora vs State Of Nct Of Delhi on 19 February, 2025

Pr.Commissioner Of Income Tax Delhi-04 vs M/S Ganesh Ganga Insvestments Pvt Ltd on 28 February, 2025

Delhi High Court – Orders