SONAL SNEHAL SHAH,MUMBAI V. ITO 19(3)(1), MUMBAI

ITA 1653/MUM/2024

AI Insights

The case involves Sonal Snehal Shah, who appealed against the reassessment order for the assessment year 2012-13, which was initially passed by the Income Tax Officer (ITO) and upheld by the Commissioner of Income Tax (Appeals). The reassessment was based on allegations of bogus long-term capital gains from trading in shares of Banas Finance Limited, a penny stock. The ITO's decision was primarily influenced by reports from the SEBI and the DDIT (Investigation), which indicated manipulation of stock prices and use of these stocks for laundering unaccounted money. The Tribunal found that the reopening of the assessment was not based on independent evaluation but on borrowed satisfaction from other authorities, and the approval for such reopening was granted in a mechanical manner without proper scrutiny.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 27258 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 20-08-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 04-04-2024
• Other Referred Cases: Well Trans Logistics India (P.) Ltd V Addl. Commissioner of Income-tax, Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd., Principal Commissioner of Income-tax-5 V Shodiman Investments (P.) Ltd, Yum! Restaurants Asia Pte. Ltd v. Deputy Director of Income Tax, The Principal Commissioner of Income Tax-7 vs. Pioneer Town Planners Pvt. Ltd., Central India Electric Supply W.P. (C)4303/2017, Meenakshi Overseas Pvt. Ltd. vs. Assistant Commissioner of Income Tax Circle 22(2), Delhi, Ess Adv. (Mauritius) S. N. C. Et Compagnie v. ACIT, CIT Jabalpur vs. S. Goyanka Lime & Chemicals Ltd., Principal Commissioner of Income Tax-6 Vs. Meenakshi Overseas Pvt. Ltd.
• Laws Referred To: The Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: ANIL KSHATRIYA
• Keywords: Set aside; Reassessment proceedings; Cost of acquisition; Reopening of assessment; Accommodation entries; Earning of tax free income; Competent authority; Reason to believe; Tangible material; Borrowed satisfaction; Bogus
• Section: 147; 148; 64; 153; 132; 68; 131; 22; 13; 139; 10; 72; 20

Judgement Text

" Page | 1 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI RAHUL CHAUDHARY, JM ITA No. 1653/MUM/2024 Vs. A.Y.2012-13 Sonal Snehal Shah, 1st Floor, 20 Preyas Building, Dadisethsheth, Road, Babulnath, Mumbai-400007 ITO, 19(3)(1), Mumbai (Appellant) (Respondent) PAN AOFPS 5847C Assessee by Shri Anil Kshatriya Revenue by Mrs. Beena Santosh, Sr.(DR), Date of hearing 20th August, 2024 Date of pronouncement 16 October, 2024 O R D E R PER PRASHANT MAHARISHI, AM: 1. ITA number 1653/M/2024 is filed by Mrs Sonal Snehal Shah [the assessee/appellant] for assessment year 2012 – 13 against the appellate order passed by the National faceless appeal Centre, Delhi (the learned CIT – A) dated 9/2/2024 Page | 2 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai wherein the appeal filed by the assessee against the reassessment order passed under section 143 (3) read with section 147 of The Income Tax Act [ The Act] dated 24/12/2019 passed by The Income Tax Officer – 19 (3) (4), Mumbai (the learned AO), was dismissed. 2. The assessee being aggrieved with the same has preferred this appeal before us raising following grounds: – 1. Reassessment :- i. On the facts and in the circumstances of the case and in law, the learned AO has erred in issuing notice under section 148 of The Income Tax Act and thereby erred in passing the reassessment order under section 143 (3) read with section 147 of The Income Tax Act. ii. The reassessment under section 147 is ab initio void and bad in law as the same was initiated at the satisfaction/instance of the other authority is without any independent evaluation by the learned AO. iii. The learned AO erred in completing the assessment without furnishing copies of the statement or information relied upon by him at the time of issuance of notice under section 148. This was requested for several occasions during the entire reassessment proceedings. No certified copies of the statement were furnished in completion of the reassessment and no opportunity was afforded for cross examination/verification of records and third parties. 2. The learned AO erred in making the impugned addition of Rs. 40,159,405/– purely and solely on the basis of suspicion, surmises, conjectures and preponderance of the probability is submitted Page | 3 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai disregarding the submission based on concrete evidences. 3. The learned AO having accepted the purchase of the said shares order in making the addition of Rs. 393,88,583/– on sale of those shares on recognised stock exchange through Demat accounts upon payment of applicable securities transaction tax and service tax through banking channels. 4. The learned AO erred in relying upon the penalty order dated 27/4/2018 by Sebi on Banas finance limited which has nothing to do with the price of shares of Banas finance limited and as such has conveniently ignored the SEBI appellate tribunal order dated 26/7/2019 quashing the order dated 27/4/2018 of the adjudicating officer of SEBI. 5. The learned CIT – A drawn facts and in as much as he has misunderstood the nature of business carried on by the appellant as financial service providers. 6. On the facts and circumstances of the case the learned CIT – A erred in sustaining the addition of Rs. 3,93,88,583/– under section 68 of The Income Tax Act without issuing specific show cause notice to that effect. 7. The learned CIT – A erred in sustaining the addition made by the AO without understanding the facts fully and correctly. From paragraph number 4 of the appellate order, it appears that the learned CIT – A has mistakenly the issue involved is one of the introduction of sale capital/share premium/share application money or any such amount by whatever Page | 4 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai name called by a company/assessee as provided in the second proviso to section 68 of The Income Tax Act. Further referred to note that the second proviso was introduced only with effect from 1/4/2013 and hence not applicable to the case in hand. 8. The learned CIT – A did not allow exemption under section 10(38) in respect of long-term capital gain on sale of shares of Banas finance limited without any discussion thereon even though all the conditions of the said sections are complied with. 9. The learned CIT – A erred in law in upholding the impugned addition under section 68 as there was no Investment, whether any investment is not recorded in the books of account of the said amount of Rs. 39,388,583/– or any other amount warranting addition under the said section. 10. The learned CIT – A erred in upholding the action of the learned assessing officer in taxing the entire proceeds of the shares of Banas finance limited even without giving any deduction for the purchase cost even though the Honourable ITAT in the said company’s case for assessment year 2011 – 12 has upheld the genuineness of the investment made by the parties as also the amount of premium paid by them and further, in spite of the fact that the provisions to that effect that no deduction in respect of any expenditure or allowance shall be allowed in computing income referred to in section 68 came into effect from 1/4/2013 only and hence not applicable to the year under appeal. Page | 5 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai 11. The learned CIT – A erred in adjudicating the issue involved in this appeal on the basis of some of the submissions erroneously attributed to have been made by the appellant which are in fact not made by the appellant. Thus, some Sr relating to some other case, copied and pasted in the appellate order without application of mind. 12. The learned CIT (A) order in sustaining the addition of Rs. 787,772/– being alleged commission paid to the entry provider without understanding the facts correctly. 3. Though on appreciation of the grounds of appeal, it is apparent that these are argumentative in nature and are elaborate which are against the provisions of The Income Tax Appellate Tribunal Rules 1963, however, the grievance of the assessee is with respect to the (i) reopening of the assessment, (ii) addition under section 68 and (iii) denial of exemption under section 10 (38) to the assessee by the learned lower authorities. 4. The briefly stated the fact shows that that assessee is an individual, who filed her return of income on 29/7/2012 under section 139 (1) of the act declaring total income of Rs. Nil. This return was processed under section 143 (1) of the act at the same income. 5. Subsequently the information received from the DDIT (investigation) – unit – 8 (2), Mumbai wherein it is mentioned that the many assessee have taken a bogus long-term capital gain/short-term capital loss from operators who are doing this business for commission and that the capital gain/loss arising on sale of shares is arranged in colourful transaction. Page | 6 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai Investigation wing summarised this transaction in detail report and also provided list of company/scripts which are being used for creating very huge profits/losses. The long-term capital gain/short-term capital loss are used by the beneficiaries to set off capital gain by booking short-term capital loss or convert unaccounted money into accounted money through capital gain rout. These Scripts companies are penny stock companies which are controlled by few persons. One of the script is Banas Finance Limited and it is seen that the assessee is one of the beneficiary who has availed such entry. There was a reason to believe that the above-mentioned assessee has traded in the scrip during financial year 2011 – 12 and has earned long-term capital gain of Rs. 37,218,541/–. 6. Based on the aforementioned reasons, the case of the assessee was reopened by issuance of notice under section 148 of the act on 27/3/2019. The assessee filed return of income in response to notice under section 148 of the act on 10/4/2019 reiterating the original return. Further statutory notices were also issued under section 143 (2) and 142 (1 along with the questionnaire. The assessee filed detailed submission. 7. Based on the above facts the learned assessing officer then reproduced modus operandi of provision of the bogus long- term capital gain as per report of SEBI and Investigation wing that :- i. share price movement of Banas finance limited and found that there is an unusual rise in the share price of the assessee company. ii. financial of the above company and thereafter on the basis of the trade data, there are Page | 7 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai accommodation entry exit providers also who are of no means and they do not carry on actual business. iii. summons under section 131 of the income tax act were issued to several exit providers and their statements were recorded. iv. Securities And Exchange Board Of India has also passed the penalty order dated 27 April 2018 for irregularity in the trading in the same script in violation of the provisions of the SEBI Act, 1992. 8. Based on the above finding of SEBI and Investigation wing the ld AO held that M/S Banas Finance Limited is already proved to be a penny stock in nature and SEBI has done substantial amount of investigation of these Persons. The price rise and fall patterns and the statement recorded of the syndicate members reinforces this premises. 9. Based on the above information he also noted that assessee was allotted 1,00,000 shares at the rate of Rs. 20 on 30/12/2010 and sold the same at a sale consideration of Rs. 39,388,583/- in financial year 2011 – 12 earning the long-term capital gain of Rs. 37,388,583/-. Therefore, a final show cause notice was given to the assessee by issuance of the show cause notice dated 7/12/2019. Assessee submitted a reply on 12/12/2019 submitting several details with respect to share transaction and long term capital gain. 10. The learned assessing officer thereafter referred to the several judicial precedents and made an addition under section 68 of Act of the total sale consideration of Rs. 39,388,583/– treating it as an unexplained taxable income earned during the year and also made an addition at the rate of 2% of the above sale consideration amounting to Rs. 787,772/– as expenditure of Page | 8 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai commission paid to the entry providers based on the premise that Banas Finance Limited is a penny stock. 11. Accordingly reassessment order was passed under section 143 (3) read with section 147 of Act on 24/12/2019 determining the total income of the assessee at Rs. 40,176,360/-. 12. Assessee aggrieved with the same preferred an appeal before the learned CIT – A challenging the reopening of the assessment as well as addition on the merits. Assessee claimed that reopening was made on vague and general information and in a mechanical way, made without making any verification of the record and information. It was further submitted that the addition on the basis of merely the Sebi investigation report without looking into the merits of the evidence produced by the assessee could not have been made. The learned CIT – A summarised his decision in paragraph number 4 of the act wherein he confirmed all the actions of the learned AO by an appellate order dated 9/2/2024. 13. The assessee aggrieved with the same has preferred this appeal raising the above grounds of appeal. The ld. AR submitted that :- i. Reasons were recorded on 19/3/2019 based on information received on 18/3/2019, without application of mind by the ld. AO ii. reasons recorded for reopening of the assessment are based on incorrect information as assessee is never examined either by the investigation wing or by the ld. AO. iii. At time of recording of the reasons as well as at the time of granting section under section 151 of the act there is a non-application of the mind as standard pro forma for Page | 9 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai recording of the reason and for approval of the principal Commissioner of income tax the name of the assessee is written wrongly. iv. At point number 7 whether the provisions of section 147 (a), 147 (b) or 147 (c) are applicable or both the sections are applicable, the provisions of section 147 (a) of the act were mentioned. He submitted that same applies only where no return of income has been furnished by the assessee but despite recording the fact in paragraph 1 of the reasons of the reopening of the assessment that assessee has already filed return of income, the above mentioned of the section is incorrect. v. Ld. AO stated that assessee has traded in the above script of Banas Finance Limited and earned long-term capital gain of Rs 272,18,541/- . vi. On sanction under section 151 of the act and relied on the decision of honourable Delhi High Court in case of the restaurant ACIT tea Ltd versus DCIT (2017) 397 ITR 665 (Delhi) and also of the honourable Bombay High Court in case of punk it jokes versus ITO (2019) 411 ITR 207. vii. The learned assessing officer has not carried out any enquiry before initiating reassessment proceedings. He submits that the reopening has been made on the completely borrowed satisfaction which is not permitted under the law. For this proposition he referred to several judicial precedents. viii. approval granted by the principal Commissioner of income tax – 19, Mumbai on 22/3/2019 was only mentioning ‘yes I am satisfied’ is not proper satisfaction and approval under section 151 of the act. For this Page | 10 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai proposition he also supported his argument with several judicial precedents. ix. in the reasons recorded there is reference by the assessing officer that assessee does not know anything about the script Banas finance limited. He referred to paragraph number 3 of the reasons recorded and stated that when the assessee is not at all examined, how the learned assessing officer would have written this reasons. Therefore the reasons are bad in law as they contained incorrect facts. 14. On the merits of the case he submitted that i. assessee has procured the shares in preferential allotment and thereafter sold the shares. He submitted that complete information of these were given to the learned assessing officer but none of the evidences were examined and merely on the basis of the same investigation report, the addition was made. ii. when the assessee has produced the complete details about the acquisition of shares, payment for the shares acquired, details of the Demat account where such acquired shares are credited, details of the physical shares, disclosure of the shares in the balance sheet of the assessee in the year of acquisition. Further with respect to the sale of the shares assessee has provided the contract notes, the name of the broker, consideration received through stock exchange pay-outs system, confirmation of the broker, the computation of long-term capital gain exempt under section 10 Page | 11 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai (38) of the act. Thus, the assessee has given complete evidence what could have been given by an investor to the learned assessing officer but the learned assessing officer did not make any investigation on his own and completely following the investigation report of SEBI has made the addition. iii. Completely ignored the order of SAT where the adjudicating officer order of SEBI was quashed. iv. With respect to the order of the learned CIT – A, All evidences produced by assessee were rejected without consideration and no finding given on the validity of reopening of the assessment as well as on the merits of the addition but simply upheld the order of the learned AO. 15. Therefore, the order of the learned assessing officer and the learned CIT – A not sustainable. 16. The learned departmental representative vehemently supported the orders of the learned lower authorities on reopening of the assessment as well as on the issue of the addition on its own merits. It was submitted that the i. script in which the assessee has earned long-term capital gain is found to be a penny stock after the detailed investigation made by the SEBI and the DIT investigation wing Kolkata and based on this it was found that the assessee has indulged in obtaining bogus long-term capital gain. ii. statement of Mr Ramesh H Shah recorded by the investigation Wing where in the whereabouts of the acquisition could not be answered. Page | 12 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai iii. investigation wing has also made an enquiry with the Bombay stock exchange and National stock exchange. iv. Exit providers are examined and their statement recorded, they were found to be persons of no means. v. Based on this prima facie opinion was to be formed by the ld. AO and no conclusive findings are required. vi. On the merits the addition is correct as claim of long-term capital gain is false. 17. Therefore, Ld. DR submitted that there is no infirmity in the reopening of the assessment as well as confirming the addition on the merits of the case. 18. We have carefully considered the rival contention and perused the orders of the learned lower authorities. 19. In this case the information was received by the learned assessing officer on 18 March 2019 by letter number (INV) U – 8 (2)/Reports/SRS/2018 – 19 from The Deputy Director Of Income Tax (Investigation), Mumbai to the learned assessing officer with respect to Shrimati Sonal Snehal Shah having permanent account number of AOFPS5847C as under:- “This office was received an information from PMO in the script of M/s Banas Finance Limited regarding the manipulation of the price movements of the scrip on the stock exchanges to provide accommodation entries of bogus long-term capital gain (LTCG). Initial intelligence gathering against the script was initiated. Trade data of the scrip was called for from Bombay Page | 13 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai stock exchange. From the trade data beneficiaries, operators and exit providers of M/s Banas Finance Limited was identified. Subsequently, a search action u/s 132 of the act was carried out by the unit on 10/1/2019. The details investigation report of the penny script M/S Banas Finance Limited is enclosed as Annexure A. During the search action u/s 132 of the IT act on Banas Finance Limited it is found that Srimati Sonal Snehal Shah is one of the beneficiaries of penny script Banas Finance Limited. Statement of Sri Ramesh H Shah (father in law of Shrimati Sonal Snehal Shah ) u/s 131 of the IT act was recorded on 11/1/2019. Ongoing through the financials of the Smt. Sonal Snehal Shah it was found that she had taken bogus long-term capital gain from Banas penny script amounting to Rs. 372,18,541/– during the financial year 2011 – 12. In the statement Shri Ramesh H shah stated that Shrimati Sonal Snehal Shah also has purchased 1,00,000 Rs. preferential shares at the rate of Rs 20/- per share for 20,00,000/- on 1/1/2011. It is found from the above statement that the assessee does not know anything about the script M/s Banas Finance Limited. No circumstantial evidence was provided by the assessee to explain as to how he came to know about the scrip. No details was provided by the assessee in support of any meeting which was held when she was allotted preferential shares in M/s Banas Finance limited. The whole process of preferential allotment was a prearranged and a managed process so as to allot preferential Shares to Smt. Sonal Snehal Shah which could later be sold by her for booking accommodation entry of bogus LTCG/STCG in the garb of sale proceeds on sale of shares. Page | 14 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai Further, a statement recorded under section 131 of the IT act in about case along with the detail’s investigation report of Banas Finance Limited has been sent for your kind information and necessary action as per IT Act.’ 20. Based on the above information, the learned assessing officer recorded reasons for reopening of the assessment under section 147 read with section 148 of the act on 19/3/2019 as under:- Reasons for of reopening of the assessment under section 147 read with section 148. 1. The assessee has filed the return of income for assessment year 2012 – 13 on 29/07/2012 declaring total income at Rs. Nil. The return was processed under section 143 (1) of the act at income of Rs. Nil. 2. Information is received from the DDIT (INV.), unit 8 (2), Mumbai vide letter number DDIT (INV) U – 8 (2)/REPORTS/SRS/2018 – 19 dated 18/3/2019 that M/S Banas finance limited is a penny stock and the price movement of the scrip on stock exchange has been manipulated. The above-mentioned assessee has traded in the script during financial year 2011 – 12 as following: - Serial number FY script Long-term capital gain (in Rs. ) 1 2011 – 12 M/s Banas finance limited 3,72,18,541 3. Ongoing through the financial of Smt. Sonal Snehal Shah, it was found that she had taken bogus long-term capital gain Page | 15 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai from Banas penny script. In the statement Sri Ramesh H Shah (father-in-law of assessee) stated that she has purchased 1,00,000 preferential shares at rate of Rs. 20 per share for Rs. 20,00,000/– on 1/1/2011. It was found that the assessee does not know anything about the scrip M/s Banas finance limited. No circumstantial evidence was provided by the assessee to explain as to how she came to know about the scrip. No details were provided by the assessee in support of any meeting which was held when she was allotted preferential shares in M/S Banas finance limited. 4. The above-mentioned assessee has traded in the above script and earned long-term capital gain of Rs. 37,218,541/– during the financial year 2011 – 12. The assessee has traded in shares of the penny stock company in the disguise of exempt income/to reduce taxable income. Hence, the transactions carried out by the assessee are not genuine. The trading in such shares is predetermined move which is sole aim to bring unaccounted money with bogus long-term capital gain/short-term capital loss. 5. In view of the above facts and circumstances of the case and after application of my mind, I have reason to believe that income of the assessee, chargeable to tax for the assessment year 2012 – 13 amounting to Rs. 37,218,541/– or any other income chargeable to tax which comes to my notice subsequently in the course of the proceedings for reassessment has escaped assessment of due to failure on the part of the assessee to disclose fully and truly all material facts in this case in terms of provisions of section 147 of the IT act, 1961. Page | 16 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai 6. In this case, return of income was filed for the year under consideration but no scrutiny assessment under section 143 (3) of the act was made. Accordingly, in this case, the only requirement to initiate proceedings under section 147 is reason to believe which has been recorded as above. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration, but no assessment as stipulated under section 2 (40) of the act was made and the return of income was only processed under section 143 (1) of the act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to the facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 7. In this case more than four years seven lapsed from the end of assessment year under consideration. Hence necessary sanction is from the Pr. CIT – 19, Mumbai to issue notice under section 148 of the IT act 1961 is hereby sought as per the provisions of section 151 of the act. Put up for kind perusal and sanction please.’ 21. Based on the above reasons recorded approval was granted by the principal Commissioner of income tax – 19, Mumbai on 22/3/2019 stating that ‘yes I am satisfied.’ 22. Therefore, it is apparent that the notice under section 148 of the issued by the learned assessing officer based on the information dated 18th/3/2019 by recording reasons in 19/3/2019 wherein the complete reproduction of the letter dated 18th/3/2019 was made. There is no enquiry made by the learned assessing officer independently on his own to verify that whether the information is correct or not. Page | 17 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai 23. Honourable Delhi High Court in Well Trans Logistics India (P.) Ltd V Addl. Commissioner of Income-tax [2024] 166 taxmann.com 72 (Delhi) has categorically held that: - 24. We may note that the Assessing Officer after reproducing the information received from DDIT, (Investigation) Unit, drew the conclusion of escapement of income. In the case of Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316/291 ITR 500 (SC), the Supreme Court had explained that expression \"reason to believe\" would mean justification to know or suppose that income had escaped assessment. While it is correct that it is not necessary for the Assessing Officer to finally ascertain whether income had escaped assessment, nonetheless, the Assessing Officer must have sufficient cause to believe that it has. 25. In the present case, as may be seen, there is no \"close nexus\" or \"live link\" between tangible material and the reason to believe that income has escaped assessment. The information received from the Investigating Unit of the Revenue cannot be the sole basis for forming a belief that income of the assessee has escaped assessment. Having received information from the Investigating Wing, it was incumbent upon the Assessing Officer to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. 26. Clearly, in this case, the Assessing Officer has not acquired any material to form such belief. There is not even a line of reason which may justify the formation of the belief. Consequently, we are satisfied that reopening of assessment for the assessment year in question by the Assessing Officer does not satisfy the requirement of law in terms of Section 147 & 148 of the Act. 24. Honourable Bombay High Court in Principal Commissioner of Income-tax-5 V Shodiman Investments (P.) Ltd [2018] 93 taxmann.com 153 (Bombay) has held that :- 13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even do not indicate the amount which according to the Assessing Officer, has Page | 18 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai escaped Assessment. This is evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. 25. Based on the above judicial precedents as well as on the facts of the case we are unable to find better example of a borrowed satisfaction by the learned assessing officer reopening of the assessment of the assessee. 26. Even while recording the reasons, the learned assessing officer did not utter a word differently than the communication of the DDIT (investigation) as it is apparent on reading paragraph number 3 of the reasons recorded it is an admitted fact that assessee was never examined, the learned assessing officer did not have any material to say that the assessee did not know anything about the company or about the acquisition of the shares. Without examining the assessee, these findings in paragraph number three could not have been possible. 27. It is also apparent that the information was received on 18 March 2019 and reasons for reopening were recorded on the very next day on 19/3/2019 therefore even otherwise the assessing officer did not have any time available for making any enquiry. Therefore, even otherwise he was forced to record the reasons for reopening on borrowed satisfaction. 28. It is also interesting to note that in paragraph number 6 of the reasons recorded, the learned assessing officer is categorically noted that that the reopening of the assessment is possible in view of explanation 2(b) to section 147 of the act. However, in paragraph number 7 being form for recording the reasons for Page | 19 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai initiating proceedings under section 148 and for obtaining the approval of principal Commissioner of income tax, it is mentioned as section 147 (a) of the act. It is an admitted fact that assessee has filed the return of income. On this form, the learned joint Commissioner of income tax range 19 (2), Mumbai and principal Commissioner of income tax – 19, Mumbai has granted the approval. Therefore, it is apparent that neither they have read the reasons recorded as well as the form for approval. It is also very strange that the assessing officer who recorded the reasons also signs this form with this infirmity. 29. The approval granted by the learned principal Commissioner of income tax – 19, Mumbai is in the manner by writing ‘yes I am satisfied’. Honourable Delhi High court in case of capital Broadways Limited V ITO W.P.(C) 4303/2017 dated 3/10/2024 has held as under :- “10. Section 151(1) of the Act categorically provides that no notice shall be issued under Section 148 by the Assessing Officer, after expiry of period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Commissioner or Principal Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. In the present case, since reopening was beyond the period of four years, it was for the PCIT to record satisfaction for reopening the assessment. In the case of SBC Minerals Pvt. Ltd. vs. Assistant Commissioner of Income Tax Circle 22(2), Delhi, WP (C) 7885/2023, we had clearly held that prescribed Page | 20 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai authority referred to in Section 151 must be “satisfied” on the reasons recorded by the Assessing Officer that it is a fit case for the issuance of such notice and therefore the satisfaction of the prescribed authority is a sine qua non for a valid approval. We had also held that the competent authority must apply its mind independently on the basis of material placed before it before grant of the sanction. 11. While dealing with the scope and requirement under Section 151 of the Act for initiating proceedings under Section 147 read with 148 of the Act, this Court in the case of Yum! Restaurants Asia Pte. Ltd v. Deputy Director of Income Tax (2017) 397 ITR 665, held as under: - “11. The purpose of Section 151 of the Act is to introduce a supervisory check over the work of the AO, particularly, in the context of reopening of assessment. The law expects the AO to exercise the power under Section 147 of the Act to reopen an assessment only after due application of mind. If for some reason, there is an error that creeps into this exercise by the AO, then the law expects the superior officer to be able to correct that error. This explains why Section 151 (1) requires an officer of the rank of the Joint Commissioner to oversee the decision of the AO where the return originally filed was assessed under Section 143 (3) of the Act. Further, where the reopening of an assessment is sought to be made after the expiry of four years from the end of the relevant AY, a further check by the further superior officer is contemplated.” 13. We take note that request for approval under Section 151 of Act in a printed format (Annexure P-6) was placed before Page | 21 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai the ACIT, who after according his satisfaction, placed the same before the PCIT. PCIT granted the approval on the very same day. The approval accorded by the ACIT and PCIT in Column No. 11 & 12 are extracted below: - “11. Whether the Addl. CIT is satisfied on the reasons recorded by AO that it is a fit Case for the issue of notice u/s 148. I am satisfied Sd/- (G.G. Kamei) Addl. CIT, Range-5, New Delhi Dated 22.03.2017 12. Whether the Pr. Commissioner is satisfied: On the reasons recorded by the AO that it is a fit case for the issue of notice u/s 148. Yes I am satisfied Sd/- P.K. Gupta) Pr. Commissioner of Income Tax-2, New Delhi Dated: 22.03.2017” 13. The satisfaction arrived at by the concerned Officer should be discernible from the sanction order passed under Section 151 of the Act. However, as may be seen, the approval order is bereft of any reason. There is no whisper of any material that may have weighed for the grant of approval. 14. Even the bare minimum requirement of the approving authority having to indicate what the thought process was, is missing in the aforementioned 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 Page | 22 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai 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-7 vs. Pioneer Town Planners Pvt. Ltd. (2024) SCC OnLine Del 1685, 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. xxxx xxxx xxxx 17. Thus, the incidental question which emanates at this juncture is whether simply penning down “Yes” would suffice requisite satisfaction as per Section 151 of the Act. Reference can be drawn from the decision of this Court in N. C. Cables Ltd., wherein, the usage of the expression “approved” was considered to be merely ritualistic and formal rather than meaningful. The relevant paragraph of the said decision reads as under:- “11. Section 151 of the Act clearly stipulates that the Commissioner of Income-tax (Appeals), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression \"approved\" says nothing. It is not as if the Commissioner of Income-tax (Appeals) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have Page | 23 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the court is satisfied that the findings by the Income-tax Appellate Tribunal cannot be disturbed.” 18. Further, this Court in the case of Central India Electric Supply W.P. (C)4303/2017 Page 7 of 11 Co. Ltd. v. ITO [2011 SCC OnLine Del 472] has taken a view that merely rubber stamping of “Yes” would suggest that the decision was taken in a mechanical manner. Paragraph 19 of the said decision is reproduced as under: - “19. In respect of the first plea, if the judgments in Chhugamal Rajpal (1971) 79 ITR 603 (SC), Chanchal Kumar Chatterjee (1974) 93 ITR 130 (Cal) and Govinda Choudhury and Sons case (1977) 109 ITR 370 (Orissa) are examined, the absence of reasons by the Assessing Officer does not exist. This is so as along with the proforma, reasons set out by the Assessing Officer were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by an Under Secretary underneath a stamped Yes against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this court as it suggests 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 Page | 24 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai 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 links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subject- matter for a decision whether it is purely administrative or quasi-judicial. They should reveal a rational nexus between the facts considered and the conclusions reached. Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable.\"(emphasis supplied).” 19. In the case of Chhugamal Rajpal, the Hon‟ble Supreme Court refused to consider the affixing of signature alongwith the noting “Yes” as valid approval and had held as under:- Page | 25 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai “5. --- Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads “whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section 148”, he just noted the word “yes” and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under Section 148. The important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance.” 20. This Court, while following Chhugamal Rajpal in the case of Ess Adv. (Mauritius) S. N. C. Et Compagnie v. ACIT [2021 SCC OnLine Del 3613], wherein, while granting the approval, the ACIT “This is fit case for issue of notice under section 148 ofhas written the Income- tax Act, 1961. Approved”, had held that the said approval would only amount to endorsement of language used in Section 151 of the Act and would not reflect any independent application of mind. Thus, the same was considered to be flawed in law. W Page | 26 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai 21. The salient aspect which emerges out of the foregoing discussion is that the satisfaction arrived at by the prescribed authority under Section 151 of the Act 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. Therefore, it is seen that the PCIT has 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 in the instant case is apparently akin to the rubber Page | 27 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai stamping of “Yes” in the case of Central India Electric Supply.” 16. In the case of Principal Commissioner of Income Tax-6 Vs. Meenakshi Overseas Pvt. Ltd. ITA 651/2015, while reiterating that the satisfaction has to be accorded on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice, the Court noted 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, we may take note that such finding was arrived at by the Court in light of the fact that Additional CIT addressed a letter to the ITO stating as under:- “In view of the reasons recorded under Section 148(2) of the IT Act, approval for issue of notice under Section 148 is hereby given in the above-mentioned case, you are, accordingly directed to issue notice under Section 148 and submit a compliance report in this regard at the earliest.” 17. Such letter sent by the Additional CIT to the ITO 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. The decision rendered in Meenakshi Overseas Pvt. Ltd. (supra), is therefore not applicable to the facts and circumstances of the present case. 18. Dealing with an identical challenge where the competent authority just Page | 28 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai recorded “Yes I am satisfied”, the Madhya Pradesh High Court in the case of CIT Jabalpur vs. S. Goyanka Lime & Chemicals Ltd. ITA 82/2012, held as under:- “7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so “Yes, I am satisfied”. In the case of Arjun Singh (supra), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- “The Commissioner acted, of course, mechanically 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 [(2015) 64 Taxman.com 313 (SC)]. Page | 29 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai 20. As explained in the above cases, 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. Hence, we are of the firm view that PCIT has 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 is thus flawed in law. 21. Hence, for the aforesaid reasons, we are of the view that the approval granted by the PCIT for issuance of notice under Section 148 of the Act is not valid and therefore the impugned notice under Section 148 dated 24.03.2017 cannot be sustained. Accordingly, the impugned notice is set aside.” 30. Therefore respectfully following the decision of the honourable Delhi High Court we also find that the approval is granted by the learned principal Commissioner of income tax – 19, Mumbai in the similar manner which was held by the honourable Delhi High Court is not proper approval. Therefore we do not find any reason to uphold the reasons recorded for reopening of the assessment as well as the manner of granting of the approval. Accordingly, the reopening of the assessment in this case is quashed. 31. Even otherwise on the merits of the case, the learned assessing officer was confronted with all the evidences available with the assessee of purchase, dematerialisation, sale, transaction by cheque. The names of all the persons from boom the assessee has purchased the shares, the manner of purchasing the shares and how assessee has sold the shares and through which Page | 30 ITA No.1653/M/2024 A Y : 2012–13 Sonal Snehal Shah Versus ITO, Mumbai broker assessee has sold the shares are provided to the assessing officer. The learned assessing officer did not make any enquiry and merely on the basis of the report of investigation wing confirmed the addition under section 68 of the act. Therefore according to us the assessee has discharged his onus under section 68 of the act by proving the nature and source of the amount received. It is for the learned assessing officer to throw back onus on the assessee which the learned assessing officer has failed to do so. Therefore, in the circumstances even the addition under section 68 on the merits of the case is not sustainable. 32. Accordingly, appeal of the assessee is allowed as indicated above quashing the reassessment proceedings as well as deleting the addition on the merits. Order pronounced in the open court on 16/10/2024. Sd/- Sd/- Sd/- Sd/- (RAHUL CHAUDHARY) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 16.10.2024 Dragon Copy of the Order forwarded to : The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai "