The reasons recorded just repeat what the Investigation Wing said. Is that enough to reopen?
No. The satisfaction that s.147 requires is the Assessing Officer's own and cannot be borrowed. Reasons that reproduce another authority's conclusions, without showing the link from tangible material to the belief, do not sustain a reopening.
Decided by the High Court (Delhi High Court - Dr. S. Muralidhar and Chander Shekhar, JJ.) on 2017-05-26, reported as [2017] 82 taxmann.com 300 (Delhi) / (2017) 395 ITR 677 (Delhi); IT Appeal No. 692 of 2016. It bears on section 147, section 148, section 68, section 143(1), section 151(1) of the Income Tax Act 1961, in Reassessment & Reopening matters.
Borrowed satisfaction is the most common defect in reopenings that begin with an information report. Read the reasons and ask a simple question: does the officer show any work of their own, or only quote someone else's conclusion?
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee filed its return for assessment year 2004-05 on 30 October 2004 declaring income of Rs. 2,050, and it was processed under s.143(1) on 25 November 2004. Information was later received from the Director of Income Tax (Investigation), New Delhi that the assessee had taken an accommodation entry of Rs. 5,00,000 by an instrument dated 31 March 2004 from an account in the name of Shubham Electronic & Electric. Notice under s.148 was issued on 23/24 March 2011 after approval under s.151(1). The reasons recorded reproduced the tabulated details from the investigation report and then concluded that the instrument was an accommodation entry taken after paying unaccounted cash to a known entry operator. The reassessment order dated 30 November 2011 treated not only that Rs. 5,00,000 but a total of Rs. 74,50,000 of bank credits as unexplained under s.68. The Commissioner (Appeals) dismissed the appeal. Before the Tribunal there were two rounds: its first order invalidating the reopening for want of sanction under s.151 was set aside by the High Court and the appeal restored, and by its order dated 22 March 2016 in ITA No. 3148/Del/2013 the Tribunal quashed the reopening for want of application of mind. The revenue appealed under s.260A.
The question framed - whether the Tribunal erred in quashing the s.147/148 proceedings - was answered in the negative, in favour of the assessee, and the revenue's appeal was dismissed with no order as to costs (para 38). The Court held that the recorded reasons contained not reasons but the Assessing Officer's conclusions one after the other, that there was no independent application of mind to the tangible material, that the conclusions were at best a reproduction of the conclusion in the investigation report - a borrowed satisfaction - and that the reasons therefore failed to demonstrate the link between the tangible material and the formation of the belief (paras 36 and 37). It also held, separately, that because the original return had only been processed under s.143(1) the proviso to s.147 did not apply, so the Assessing Officer did not need to show any failure to disclose material facts even though the reopening was beyond four years (para 25).
The Court dissected the recorded reasons into three parts (paras 19 to 21): a verbatim reproduction of the investigation wing's tabulated details, which by itself is not tangible material; a statement that the information 'has been gone through' followed immediately by the conclusion that the instrument was an accommodation entry, with nothing to show what in the information led to that belief; and the concluding assertion that income had escaped assessment. The crucial link between the material and the formation of belief was therefore absent: reasons must be self-evident and speak for themselves, and while the entire material need not be set out, something in it critical to the formation of the belief must be referred to (para 23). Reopening under s.147 is a potent power that cannot be invoked casually or mechanically, and the tangible material must be evident from the reasons themselves - it cannot be supplied later, either when objections are considered or during the reassessment (para 24). The Assessing Officer is a quasi-judicial authority who must reach a subjective satisfaction independently on objective criteria; the investigation report may be the material on which he forms his belief, but the process of arriving at satisfaction cannot be a mere repetition of that report, and what is required is reason to believe, not reason to suspect (para 26). Applying that, the Court followed Signature Hotels (P.) Ltd. v. ITO [2011] 338 ITR 51 (Delhi), holding the present facts more or less similar and the case covered against the revenue (para 28.4). It expressly contrasted two decisions where reopening was upheld - AGR Investment Ltd. (para 29.3) and CIT v. Highgain Finvest (P.) Ltd. (para 30.2) - because in those cases the Assessing Officer had gone beyond reproducing the report, revealing what in it was specific to the assessee and, in AGR Investment, noting that the information was fresh and had not been disclosed in the return. Here the Assessing Officer made no such effort and did not even examine the return already filed to see whether the entry had been disclosed.
There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'.
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Handle my notice → Ask a CA on WhatsAppNo. The satisfaction that s.147 requires is the Assessing Officer's own and cannot be borrowed. Reasons that reproduce another authority's conclusions, without showing the link from tangible material to the belief, do not sustain a reopening. This was decided by the High Court (Delhi High Court - Dr. S. Muralidhar and Chander Shekhar, JJ.) and bears on section 147, section 148, section 68, section 143(1), section 151(1) of the Income Tax Act 1961. It is reported as [2017] 82 taxmann.com 300 (Delhi) / (2017) 395 ITR 677 (Delhi); IT Appeal No. 692 of 2016. Borrowed satisfaction is the most common defect in reopenings that begin with an information report. Read the reasons and ask a simple question: does the officer show any work of their own, or only quote someone else's conclusion? If it applies to you, the first step is this: Ask for the recorded reasons in writing, following GKN Driveshafts.
The assessee filed its return for assessment year 2004-05 on 30 October 2004 declaring income of Rs. 2,050, and it was processed under s.143(1) on 25 November 2004. Information was later received from the Director of Income Tax (Investigation), New Delhi that the assessee had taken an accommodation entry of Rs. 5,00,000 by an instrument dated 31 March 2004 from an account in the name of Shubham Electronic & Electric. Notice under s.148 was issued on 23/24 March 2011 after approval under s.151(1). The reasons recorded reproduced the tabulated details from the investigation report and then concluded that the instrument was an accommodation entry taken after paying unaccounted cash to a known entry operator. The reassessment order dated 30 November 2011 treated not only that Rs. 5,00,000 but a total of Rs. 74,50,000 of bank credits as unexplained under s.68. The Commissioner (Appeals) dismissed the appeal. Before the Tribunal there were two rounds: its first order invalidating the reopening for want of sanction under s.151 was set aside by the High Court and the appeal restored, and by its order dated 22 March 2016 in ITA No. 3148/Del/2013 the Tribunal quashed the reopening for want of application of mind. The revenue appealed under s.260A. The matter was decided on 2017-05-26 by the High Court (Delhi High Court - Dr. S. Muralidhar and Chander Shekhar, JJ.). On those facts the High Court held as follows. The question framed - whether the Tribunal erred in quashing the s.147/148 proceedings - was answered in the negative, in favour of the assessee, and the revenue's appeal was dismissed with no order as to costs (para 38). The Court held that the recorded reasons contained not reasons but the Assessing Officer's conclusions one after the other, that there was no independent application of mind to the tangible material, that the conclusions were at best a reproduction of the conclusion in the investigation report - a borrowed satisfaction - and that the reasons therefore failed to demonstrate the link between the tangible material and the formation of the belief (paras 36 and 37). It also held, separately, that because the original return had only been processed under s.143(1) the proviso to s.147 did not apply, so the Assessing Officer did not need to show any failure to disclose material facts even though the reopening was beyond four years (para 25).
The Court dissected the recorded reasons into three parts (paras 19 to 21): a verbatim reproduction of the investigation wing's tabulated details, which by itself is not tangible material; a statement that the information 'has been gone through' followed immediately by the conclusion that the instrument was an accommodation entry, with nothing to show what in the information led to that belief; and the concluding assertion that income had escaped assessment. The crucial link between the material and the formation of belief was therefore absent: reasons must be self-evident and speak for themselves, and while the entire material need not be set out, something in it critical to the formation of the belief must be referred to (para 23). Reopening under s.147 is a potent power that cannot be invoked casually or mechanically, and the tangible material must be evident from the reasons themselves - it cannot be supplied later, either when objections are considered or during the reassessment (para 24). The Assessing Officer is a quasi-judicial authority who must reach a subjective satisfaction independently on objective criteria; the investigation report may be the material on which he forms his belief, but the process of arriving at satisfaction cannot be a mere repetition of that report, and what is required is reason to believe, not reason to suspect (para 26). Applying that, the Court followed Signature Hotels (P.) Ltd. v. ITO [2011] 338 ITR 51 (Delhi), holding the present facts more or less similar and the case covered against the revenue (para 28.4). It expressly contrasted two decisions where reopening was upheld - AGR Investment Ltd. (para 29.3) and CIT v. Highgain Finvest (P.) Ltd. (para 30.2) - because in those cases the Assessing Officer had gone beyond reproducing the report, revealing what in it was specific to the assessee and, in AGR Investment, noting that the information was fresh and had not been disclosed in the return. Here the Assessing Officer made no such effort and did not even examine the return already filed to see whether the entry had been disclosed. In the words reproduced by the source cited on this page: "There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'." The decision followed or applied Signature Hotels (P.) Ltd. v. ITO [2011] 338 ITR 51 / [2012] 20 taxmann.com 797 (Delhi)(HC).
It was decided by the High Court on 2017-05-26 and is reported as [2017] 82 taxmann.com 300 (Delhi) / (2017) 395 ITR 677 (Delhi); IT Appeal No. 692 of 2016. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 147, section 148, section 68, section 143(1), section 151(1), 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 question framed - whether the Tribunal erred in quashing the s.147/148 proceedings - was answered in the negative, in favour of the assessee, and the revenue's appeal was dismissed with no order as to costs (para 38). The Court held that the recorded reasons contained not reasons but the Assessing Officer's conclusions one after the other, that there was no independent application of mind to the tangible material, that the conclusions were at best a reproduction of the conclusion in the investigation report - a borrowed satisfaction - and that the reasons therefore failed to demonstrate the link between the tangible material and the formation of the belief (paras 36 and 37). It also held, separately, that because the original return had only been processed under s.143(1) the proviso to s.147 did not apply, so the Assessing Officer did not need to show any failure to disclose material facts even though the reopening was beyond four years (para 25). It arises in Reassessment & Reopening matters, on section 147, section 148, section 68, section 143(1), section 151(1) of the Income Tax Act 1961, and was decided by Delhi High Court - Dr. S. Muralidhar and Chander Shekhar, JJ.. 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. Read them for the officer's own analysis — not for the strength of the allegation. File objections that identify precisely where the reasons stop being reasons and become a copied conclusion.
Superseded by amendment. The judgment construes the pre-2021 s.147/148 scheme — 'reasons to believe', reasons recorded, and the Sabh Infrastructure-style link between tangible material and formation of belief. That entire scheme was replaced from 1 April 2021 (s.148A, 'information which suggests') and replaced again by the Finance (No.2) Act 2024 from 1 September 2024, under which s.148A(1)-(4) governs, the information must accompany the show cause notice, and search cases move to block assessment under ss.158BA-158BI. The underlying doctrine survives in substance: ITAT Kolkata in DCIT v Siddheshwari Vyapaar Pvt Ltd, ITA No. 2280/Kol/2025 (23 December 2025, AY 2012-13), quashed a reopening based only on Investigation Wing inputs 'without independent application of mind'. That finding was checked against a published source, which is linked on this page, on 2026-08-25. 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.
This is an old-regime 'reason to believe' case, decided before the Finance Act 2021 replaced that standard with 'information which suggests'. How far the borrowed-satisfaction principle carries into the s.148A regime must be argued, not assumed. Two things in the judgment should be quoted accurately. First, the much-repeated line that the reasons to believe are 'not in fact reasons but only conclusions, one after the other' appears at para 22 prefaced by 'As rightly pointed out by the ITAT': it is the Tribunal's formulation which the Court adopted, and the Court states the point in its own words at para 36. Second, the decision does not hold that information from the Investigation Wing can never found a reopening. The Court expressly contrasted AGR Investment Ltd. (para 29) and CIT v. Highgain Finvest (P.) Ltd. (para 30), where the Assessing Officer had set out what in the report was specific to the assessee and, in the former, that the information was fresh and undisclosed in the return; reopening was sustained in those cases. What sank this reopening was reproduction without more. A further point the entry did not carry: because the original return was only processed under s.143(1), the proviso to s.147 did not apply, so the 'failure to disclose fully and truly' recital in the recorded reasons was surplusage (para 25). The judgment does not record the outcome of the reassessment on the balance of Rs. 74,50,000 beyond quashing the initiation, and does not state whether the revenue took the matter further. 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 question framed - whether the Tribunal erred in quashing the s.147/148 proceedings - was answered in the negative, in favour of the assessee, and the revenue's appeal was dismissed with no order as to costs (para 38). The Court held that the recorded reasons contained not reasons but the Assessing Officer's conclusions one after the other, that there was no independent application of mind to the tangible material, that the conclusions were at best a reproduction of the conclusion in the investigation report - a borrowed satisfaction - and that the reasons therefore failed to demonstrate the link between the tangible material and the formation of the belief (paras 36 and 37). It also held, separately, that because the original return had only been processed under s.143(1) the proviso to s.147 did not apply, so the Assessing Officer did not need to show any failure to disclose material facts even though the reopening was beyond four years (para 25).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
My return was only processed under 143(1). Does that stop the department reopening it later?
How much am I actually required to disclose — and can they reopen because the officer drew the wrong conclusion?
The sanctioning authority just wrote 'yes' and signed. Is that a sanction?
A reassessment was done in between. Does the two-year clock for s.263 restart from it?