S. 147/ 151: Merely writing “approved” in the sanction form without recording satisfaction renders the reopening void

The AO issued a notice u/s 147 and reopened the assessment on the ground that the assessee was the beneficiary of hawala entries in the form of loans, expenses & gifts. He alleged that the assessee had deposited unaccounted cash and received cheques in the form of loans, expenses, gifts. The CIT granted sanction u/s 151 to the reopening by writing the words “approved”. The assessee challenged the reopening on the ground that as satisfaction was not recorded by the CIT the sanction was without application of mind and void. HELD by the Tribunal allowing the appeal:

S. 147 and 148 are a charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. S. 151 guards that the sword of S. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of S. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording his reasons, howsoever briefly, the Commissioner is of the opinion that the AO’s belief is well reasoned and bona fide, he is to accord his sanction to the issue of notice u/s 148 of the Act. In the instant case, we find from the perusal of the order sheet which is on record, the Commissioner has simply put “approved” and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction (Chhugamal Rajpal 79 ITR 603 (SC) & United Electrical Co 258 ITR 317 (Del) followed)