The sanctioning authority just wrote 'yes' and signed. Is that a sanction?
No. The officer had set out no reason for concluding it was a fit case, and the Commissioner merely noted the word yes and signed beneath it. Neither s.147 nor s.151 was satisfied, so the officer had no jurisdiction.
Decided by the Supreme Court (K.S. Hegde J, with Shah CJ and Grover J) on 1971-01-21, reported as (1971) 79 ITR 603 (SC); AIR 1971 SC 730; [1971] 3 SCR 342; (1971) 1 SCC 453; Civil Appeal No. 1311 of 1967. It bears on section 147, section 148, section 151 of the Income Tax Act 1961, in Reassessment & Reopening matters.
Sanction is the cheapest ground to check in any reopening, and the defect is usually visible in one line of the file. This is the case that says a one-word approval is not approval.
Binding on every court and authority in India.
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The assessee, a partnership firm holding railway and government construction contracts, was assessed for 1960-61 on its return, having produced its books and a statement naming the parties from whom it had borrowed on hundis during the year, with their full addresses; total income was assessed at Rs. 69,886. On 30 April 1966 the Income-tax Officer submitted a report to the Commissioner seeking sanction to reopen. The report recorded that from a communication of the Directorate of Inspection it 'appears' that the lenders were name-lenders and the transactions bogus, that proper investigation of the loans was necessary, and that the escapement involved amounted to Rs. 1,00,000. Against the printed question whether the Commissioner was satisfied that it was a fit case for issue of notice under s.148, the Commissioner wrote 'Yes' and signed, on 13 May 1966. Notice under s.148 issued on 3 June 1966, more than four but less than eight years after the original assessment. The firm's writ petition under Articles 226 and 227 was dismissed in limine by the Patna High Court, and it appealed by special leave.
The appeal was allowed, the order of the High Court set aside and the notice quashed with costs. The officer's report set out no reason for concluding that this was a fit case for a notice under s.148, did not state the material he had, and rose no higher than a vague feeling that the transactions might be bogus; a conclusion that investigation was necessary is not the same as reasons to issue a notice. The Court was not satisfied that he had any material meeting the requirements of either clause (a) or clause (b) of s.147, so he had no jurisdiction to issue the notice, and the report did not meet s.151(2) either. The Commissioner had accorded permission mechanically, recording no satisfaction of his own. Having accepted this ground, the Court expressly did not examine the assessee's other contentions.
Section 151(2) requires the officer to give reasons for issuing a notice, which means he must have some prima facie grounds before him. What this officer had was a communication he did not describe, from which it 'appeared' that the lenders were name-lenders; he had not even reached a prima facie conclusion that the transactions were not genuine. His own report said that proper investigation of the loans was necessary, and the Court held that a case for investigating the truth of transactions is not the same thing as reasons to issue a notice under s.148. Jurisdiction under s.148 depends on the officer having reason to believe either that income escaped assessment by reason of the assessee's omission or failure to disclose, or, on information in his possession, that income chargeable to tax escaped assessment; on this report neither could be said. As to sanction, the Commissioner recorded no satisfaction of his own: against the printed question he noted 'Yes' and signed, and had he read the report carefully he could never have concluded on that material that it was a fit case. The Court held that the safeguards in ss.147 and 151 had been treated lightly by both officers, who had taken the duties imposed on them as of little importance and substituted form for substance.
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.
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Handle my notice → Ask a CA on WhatsAppNo. The officer had set out no reason for concluding it was a fit case, and the Commissioner merely noted the word yes and signed beneath it. Neither s.147 nor s.151 was satisfied, so the officer had no jurisdiction. This was decided by the Supreme Court (K.S. Hegde J, with Shah CJ and Grover J) and bears on section 147, section 148, section 151 of the Income Tax Act 1961. It is reported as (1971) 79 ITR 603 (SC); AIR 1971 SC 730; [1971] 3 SCR 342; (1971) 1 SCC 453; Civil Appeal No. 1311 of 1967. Sanction is the cheapest ground to check in any reopening, and the defect is usually visible in one line of the file. This is the case that says a one-word approval is not approval. If it applies to you, the first step is this: Ask for a copy of the sanction under s.151, including the proforma and the authority's own words.
The assessee, a partnership firm holding railway and government construction contracts, was assessed for 1960-61 on its return, having produced its books and a statement naming the parties from whom it had borrowed on hundis during the year, with their full addresses; total income was assessed at Rs. 69,886. On 30 April 1966 the Income-tax Officer submitted a report to the Commissioner seeking sanction to reopen. The report recorded that from a communication of the Directorate of Inspection it 'appears' that the lenders were name-lenders and the transactions bogus, that proper investigation of the loans was necessary, and that the escapement involved amounted to Rs. 1,00,000. Against the printed question whether the Commissioner was satisfied that it was a fit case for issue of notice under s.148, the Commissioner wrote 'Yes' and signed, on 13 May 1966. Notice under s.148 issued on 3 June 1966, more than four but less than eight years after the original assessment. The firm's writ petition under Articles 226 and 227 was dismissed in limine by the Patna High Court, and it appealed by special leave. The matter was decided on 1971-01-21 by the Supreme Court (K.S. Hegde J, with Shah CJ and Grover J). On those facts the Supreme Court held as follows. The appeal was allowed, the order of the High Court set aside and the notice quashed with costs. The officer's report set out no reason for concluding that this was a fit case for a notice under s.148, did not state the material he had, and rose no higher than a vague feeling that the transactions might be bogus; a conclusion that investigation was necessary is not the same as reasons to issue a notice. The Court was not satisfied that he had any material meeting the requirements of either clause (a) or clause (b) of s.147, so he had no jurisdiction to issue the notice, and the report did not meet s.151(2) either. The Commissioner had accorded permission mechanically, recording no satisfaction of his own. Having accepted this ground, the Court expressly did not examine the assessee's other contentions.
Section 151(2) requires the officer to give reasons for issuing a notice, which means he must have some prima facie grounds before him. What this officer had was a communication he did not describe, from which it 'appeared' that the lenders were name-lenders; he had not even reached a prima facie conclusion that the transactions were not genuine. His own report said that proper investigation of the loans was necessary, and the Court held that a case for investigating the truth of transactions is not the same thing as reasons to issue a notice under s.148. Jurisdiction under s.148 depends on the officer having reason to believe either that income escaped assessment by reason of the assessee's omission or failure to disclose, or, on information in his possession, that income chargeable to tax escaped assessment; on this report neither could be said. As to sanction, the Commissioner recorded no satisfaction of his own: against the printed question he noted 'Yes' and signed, and had he read the report carefully he could never have concluded on that material that it was a fit case. The Court held that the safeguards in ss.147 and 151 had been treated lightly by both officers, who had taken the duties imposed on them as of little importance and substituted form for substance. In the words reproduced by the source cited on this page: "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."
It was decided by the Supreme Court on 1971-01-21 and is reported as (1971) 79 ITR 603 (SC); AIR 1971 SC 730; [1971] 3 SCR 342; (1971) 1 SCC 453; Civil Appeal No. 1311 of 1967. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 147, section 148, section 151, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed, the order of the High Court set aside and the notice quashed with costs. The officer's report set out no reason for concluding that this was a fit case for a notice under s.148, did not state the material he had, and rose no higher than a vague feeling that the transactions might be bogus; a conclusion that investigation was necessary is not the same as reasons to issue a notice. The Court was not satisfied that he had any material meeting the requirements of either clause (a) or clause (b) of s.147, so he had no jurisdiction to issue the notice, and the report did not meet s.151(2) either. The Commissioner had accorded permission mechanically, recording no satisfaction of his own. Having accepted this ground, the Court expressly did not examine the assessee's other contentions. It arises in Reassessment & Reopening matters, on section 147, section 148, section 151 of the Income Tax Act 1961, and was decided by K.S. Hegde J, with Shah CJ and Grover J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the approval is a bare 'yes' or a tick, quote it verbatim in your objection. Read it with S. Goyanka Lime, which applies the same rule to 'Yes, I am satisfied'.
Still good law. Applied by the Delhi High Court in Pr. CIT-7 v. Pioneer Town Planners (P.) Ltd. [2024] 160 taxmann.com 652 (Delhi), decided 20 February 2024, which refused to treat a signature paired with a 'Yes' notation as a valid approval under s.151. Section 151 was itself recast by the Finance Act 2021, but the requirement of demonstrable satisfaction continues to be enforced. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The Court decided the case on the s.151(2) and s.147 jurisdiction points alone and expressly declined to consider the assessee's other grounds, so it is authority on the quality of the reasons and the sanction, not on anything else argued. One small oddity in the record: the narrative gives the original assessment as Rs. 69,886, while item 5 of the officer's own report records the income originally assessed as Rs. 73,604. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed, the order of the High Court set aside and the notice quashed with costs. The officer's report set out no reason for concluding that this was a fit case for a notice under s.148, did not state the material he had, and rose no higher than a vague feeling that the transactions might be bogus; a conclusion that investigation was necessary is not the same as reasons to issue a notice. The Court was not satisfied that he had any material meeting the requirements of either clause (a) or clause (b) of s.147, so he had no jurisdiction to issue the notice, and the report did not meet s.151(2) either. The Commissioner had accorded permission mechanically, recording no satisfaction of his own. Having accepted this ground, the Court expressly did not examine the assessee's other contentions.
TaxSphere, “Chhugamal Rajpal v S.P. Chaliha”, https://taxnotice.vittsphere.com/caselaw/case/chhugamal-rajpal-v-sp-chaliha/ (validity last checked 2026-08-19)
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Is 'Yes, I am satisfied' enough for the sanctioning authority to write?
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The reassessment notice was issued in the name of my old private limited company, which had already been converted into an LLP and dissolved. I am told that makes the notice void. Is that always right?
I disclosed my hundi loans in the return and the officer accepted them. He now says the same lenders were bogus in the next year. Can he reopen?
