The sanction for my reassessment notice is just the word approved on the file. Is that enough under section 151?
No. The Delhi High Court held that section 151 requires the competent authority to apply his mind and form an opinion, and that the mere appending of the expression approved says nothing. He need not record elaborate reasons, but satisfaction must be recorded, which can be reflected in the briefest possible manner; here the exercise was ritualistic and formal rather than meaningful, which defeats the rationale of the safeguard of approval by a higher ranking officer. The Court also upheld the concurrent findings that the Assessing Officer had made only a perfunctory inquiry before adding Rs 1.35 crore under section 68. Both questions were answered in the assessee's favour.
Decided by the High Court (High Court of Delhi at New Delhi - S. Ravindra Bhat and Najmi Waziri JJ; oral judgment by S. Ravindra Bhat J) on 2017-01-11, reported as ITA 335/2015, High Court of Delhi, assessment year 2001-02. It bears on section 151, section 147, section 148, section 68, section 131 of the Income Tax Act 1961, in Reassessment & Reopening and Cash Credits & Unexplained Money matters.
This is the leading short authority on the quality of sanction under section 151, and it is quotable because it fixes both ends of the range. A one word approval is not enough; equally, the sanctioning authority is not required to write a reasoned order, and a brief recording of satisfaction will do. The safeguard exists because a higher ranking officer is meant to look at the proposal, and an approval that is ritualistic and formal fails it. The judgment is equally useful on section 68 in accommodation entry cases. Where the assessee has produced confirmations, permanent account numbers, returns, bank statements and company details, the Assessing Officer cannot rest on an inspector's failure to find the parties at their addresses seven or eight years later; suspicious cash infusions before the subscription are not conclusive, and the officer should have gone into the income tax records to test the volume of trade and the capacity to invest.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 2001-02 the assessee had shown Rs 1,00,00,000 received towards share application money and a further Rs 35,00,000 credited as an advance towards a loan. The original assessment was completed under section 143(3). A reassessment notice issued on 25 March 2008 was dropped on the technical ground that proper sanction had not been obtained, and a fresh notice was issued on 21 April 2008. The reasons recorded, put up by the Income Tax Officer through the Assistant Commissioner for the Commissioner's satisfaction under the proviso to section 151, recited information from the Investigation Wing that the assessee was a beneficiary of accommodation entries from identified entry operators, described the modus operandi of a money laundering scam in which unaccounted money is ploughed back as bogus share capital or capital gains through the entry operators' bank accounts, noted that the operators were mostly absconding, and set out seven specific entries with dates in November 2000 and March 2001. The Commissioner's endorsement on the note was the single word approved with a signature. In reassessment the Assessing Officer added back Rs 1,35,00,000 under section 68. Notices under section 131 to the alleged investors and creditors had brought back the report that a substantial majority were missing or not found at the addresses given, and the bank statements showed cash infusions before disbursement. The Commissioner (Appeals) upheld the legality of the reassessment notice but allowed the appeal on merits, holding that no appropriate inquiry had been made. The Tribunal allowed the assessee's cross objection on the sanction and dismissed the Revenue's appeal on merits.
Both substantial questions of law were answered in favour of the assessee and against the Revenue, and the appeal was dismissed. On sanction, section 151 stipulates that the competent authority who is to authorise the reassessment notice has to apply his mind and form an opinion, and the mere appending of the expression approved says nothing. It is not that elaborate reasons must be recorded for agreeing with the note put up, but satisfaction has to be recorded, and can be reflected in the briefest possible manner. Here the exercise appeared to be ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer, so the Tribunal's findings could not be disturbed. On the addition, the Court found no infirmity in the concurrent findings of the Commissioner (Appeals) and the Tribunal that the Assessing Officer had not conducted an adequate and proper inquiry before invoking section 68.
On the merits the Court weighed what each side had done. The assessee had furnished large amounts of material - confirmations of the amounts paid towards share application or loan, acknowledgements of the returns filed by each party, bank statements and company details, with permanent account numbers. The Assessing Officer had conducted what the Court called a perfunctory inquiry, deputing an inspector to the premises; the absence of the parties after seven or eight years could not by itself lead to the conclusion that they were fictitious or non-existent, and nothing prevented him from inquiring into the returns and permanent account numbers to test his suspicion. The bank statements showing cash infusions before the subscription were suspicious circumstances but not conclusive. Since the Investigation Wing had levelled several allegations, the officer should have carried out a more intensive investigation into the income tax records to discern the volume of trade or commerce of the share applicants and creditors and their inability, if any, to invest or advance the amounts; that failure could not be converted into a failure by the assessee, which had provided the basic information. On sanction, the Court read section 151 as imposing a substantive obligation on the approving authority and measured the endorsement against the purpose of the provision.
The mere appending of the expression 'approved' says nothing.
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Handle my notice → Ask a CA on WhatsAppNo. The Delhi High Court held that section 151 requires the competent authority to apply his mind and form an opinion, and that the mere appending of the expression approved says nothing. He need not record elaborate reasons, but satisfaction must be recorded, which can be reflected in the briefest possible manner; here the exercise was ritualistic and formal rather than meaningful, which defeats the rationale of the safeguard of approval by a higher ranking officer. The Court also upheld the concurrent findings that the Assessing Officer had made only a perfunctory inquiry before adding Rs 1.35 crore under section 68. Both questions were answered in the assessee's favour. This was decided by the High Court (High Court of Delhi at New Delhi - S. Ravindra Bhat and Najmi Waziri JJ; oral judgment by S. Ravindra Bhat J) and bears on section 151, section 147, section 148, section 68, section 131 of the Income Tax Act 1961. It is reported as ITA 335/2015, High Court of Delhi, assessment year 2001-02. This is the leading short authority on the quality of sanction under section 151, and it is quotable because it fixes both ends of the range. A one word approval is not enough; equally, the sanctioning authority is not required to write a reasoned order, and a brief recording of satisfaction will do. The safeguard exists because a higher ranking officer is meant to look at the proposal, and an approval that is ritualistic and formal fails it. The judgment is equally useful on section 68 in accommodation entry cases. Where the assessee has produced confirmations, permanent account numbers, returns, bank statements and company details, the Assessing Officer cannot rest on an inspector's failure to find the parties at their addresses seven or eight years later; suspicious cash infusions before the subscription are not conclusive, and the officer should have gone into the income tax records to test the volume of trade and the capacity to invest. If it applies to you, the first step is this: Call for the sanction file and see what the approving authority actually wrote; a bare approved is a ground of challenge, and so is a signature on a note without any recorded satisfaction.
For assessment year 2001-02 the assessee had shown Rs 1,00,00,000 received towards share application money and a further Rs 35,00,000 credited as an advance towards a loan. The original assessment was completed under section 143(3). A reassessment notice issued on 25 March 2008 was dropped on the technical ground that proper sanction had not been obtained, and a fresh notice was issued on 21 April 2008. The reasons recorded, put up by the Income Tax Officer through the Assistant Commissioner for the Commissioner's satisfaction under the proviso to section 151, recited information from the Investigation Wing that the assessee was a beneficiary of accommodation entries from identified entry operators, described the modus operandi of a money laundering scam in which unaccounted money is ploughed back as bogus share capital or capital gains through the entry operators' bank accounts, noted that the operators were mostly absconding, and set out seven specific entries with dates in November 2000 and March 2001. The Commissioner's endorsement on the note was the single word approved with a signature. In reassessment the Assessing Officer added back Rs 1,35,00,000 under section 68. Notices under section 131 to the alleged investors and creditors had brought back the report that a substantial majority were missing or not found at the addresses given, and the bank statements showed cash infusions before disbursement. The Commissioner (Appeals) upheld the legality of the reassessment notice but allowed the appeal on merits, holding that no appropriate inquiry had been made. The Tribunal allowed the assessee's cross objection on the sanction and dismissed the Revenue's appeal on merits. The matter was decided on 2017-01-11 by the High Court (High Court of Delhi at New Delhi - S. Ravindra Bhat and Najmi Waziri JJ; oral judgment by S. Ravindra Bhat J). On those facts the High Court held as follows. Both substantial questions of law were answered in favour of the assessee and against the Revenue, and the appeal was dismissed. On sanction, section 151 stipulates that the competent authority who is to authorise the reassessment notice has to apply his mind and form an opinion, and the mere appending of the expression approved says nothing. It is not that elaborate reasons must be recorded for agreeing with the note put up, but satisfaction has to be recorded, and can be reflected in the briefest possible manner. Here the exercise appeared to be ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer, so the Tribunal's findings could not be disturbed. On the addition, the Court found no infirmity in the concurrent findings of the Commissioner (Appeals) and the Tribunal that the Assessing Officer had not conducted an adequate and proper inquiry before invoking section 68.
On the merits the Court weighed what each side had done. The assessee had furnished large amounts of material - confirmations of the amounts paid towards share application or loan, acknowledgements of the returns filed by each party, bank statements and company details, with permanent account numbers. The Assessing Officer had conducted what the Court called a perfunctory inquiry, deputing an inspector to the premises; the absence of the parties after seven or eight years could not by itself lead to the conclusion that they were fictitious or non-existent, and nothing prevented him from inquiring into the returns and permanent account numbers to test his suspicion. The bank statements showing cash infusions before the subscription were suspicious circumstances but not conclusive. Since the Investigation Wing had levelled several allegations, the officer should have carried out a more intensive investigation into the income tax records to discern the volume of trade or commerce of the share applicants and creditors and their inability, if any, to invest or advance the amounts; that failure could not be converted into a failure by the assessee, which had provided the basic information. On sanction, the Court read section 151 as imposing a substantive obligation on the approving authority and measured the endorsement against the purpose of the provision. In the words reproduced by the source cited on this page: "The mere appending of the expression 'approved' says nothing."
It was decided by the High Court on 2017-01-11 and is reported as ITA 335/2015, High Court of Delhi, assessment year 2001-02. 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 151, section 147, section 148, section 68, section 131, 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. Both substantial questions of law were answered in favour of the assessee and against the Revenue, and the appeal was dismissed. On sanction, section 151 stipulates that the competent authority who is to authorise the reassessment notice has to apply his mind and form an opinion, and the mere appending of the expression approved says nothing. It is not that elaborate reasons must be recorded for agreeing with the note put up, but satisfaction has to be recorded, and can be reflected in the briefest possible manner. Here the exercise appeared to be ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer, so the Tribunal's findings could not be disturbed. On the addition, the Court found no infirmity in the concurrent findings of the Commissioner (Appeals) and the Tribunal that the Assessing Officer had not conducted an adequate and proper inquiry before invoking section 68. It arises in Reassessment & Reopening and Cash Credits & Unexplained Money matters, on section 151, section 147, section 148, section 68, section 131 of the Income Tax Act 1961, and was decided by High Court of Delhi at New Delhi - S. Ravindra Bhat and Najmi Waziri JJ; oral judgment by S. Ravindra Bhat 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. Do not overstate the point - the answer to a brief but genuine recording of satisfaction is not this case, so look for whether the authority engaged with the proposal at all. On the merits of a share application or loan credit, put on record the confirmations, permanent account numbers, returns and bank statements of each investor, and then press the department to make its own inquiry from those records. Meet the missing at the address point with the passage of time and with the material you filed; on this judgment that failure of inquiry cannot be turned into a failure by the assessee to provide basic information.
Still good law. Five later decisions cite this judgment. It is applied at Tribunal level - in Maverick Electronics (P) Ltd v ITO (Delhi Tribunal, 21 March 2017) the Bench itself relied on it at para 5.2 (printed there as 'Pr.CIT vs. C.Cables Ltd. in ITA no.335/2015, judgement dt. 11.01.2017'), adopting the holding that 'the mere appending of the expression approved say nothing' when sanction is granted under section 151, and quashed the reopening as bad in law; Miss Himshika v ITO (Delhi Tribunal, 23 January 2017) is to the same effect. BUT A PRACTITIONER MUST READ IT WITH THE DELHI HIGH COURT'S LATER GLOSS. In Pr CIT-1 v M/s Agroha Fincap Ltd (Delhi High Court, 6 October 2025) a later Bench of the same Court held the judgment inapplicable and set aside the Tribunal's reliance on it, reasoning at paras 13 to 20 that in N.C. Cables 'the Court was concerned with the word approved. It was in that context ... merely appending the expression approved says nothing', and that 'the satisfaction has to be recorded, which can be reflected in the briefest possible manner. So the judgment of this Court in N.C. Cables (supra) is clearly distinguishable.' The Revenue's appeal was allowed. The judgment is not overruled and remains authority for its own facts, but the argument that any short-form sanction is mechanical will not now succeed in Delhi on N.C. Cables alone. No Supreme Court decision cites it and no pending challenge is traceable. 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 judgment is short and oral. It does not set out the reasoning of the Tribunal or of the Commissioner (Appeals) in any detail, and does not say what, beyond the single word approved, would have sufficed - only that a brief recording of satisfaction would do. The reasons recorded and the table of entries are reproduced on the harvested page in a partly garbled form, with column headings and figures run together, so the individual entries cannot be read with confidence; nothing in this record depends on them. The judgment refers throughout to the CIT (A) where the sanctioning authority under section 151 is meant, which appears to be a slip. The batch line gave no reporter citations, so the appeal number is used. 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.
Both substantial questions of law were answered in favour of the assessee and against the Revenue, and the appeal was dismissed. On sanction, section 151 stipulates that the competent authority who is to authorise the reassessment notice has to apply his mind and form an opinion, and the mere appending of the expression approved says nothing. It is not that elaborate reasons must be recorded for agreeing with the note put up, but satisfaction has to be recorded, and can be reflected in the briefest possible manner. Here the exercise appeared to be ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer, so the Tribunal's findings could not be disturbed. On the addition, the Court found no infirmity in the concurrent findings of the Commissioner (Appeals) and the Tribunal that the Assessing Officer had not conducted an adequate and proper inquiry before invoking section 68.
TaxSphere, “PCIT v N.C. Cables Ltd”, https://taxnotice.vittsphere.com/caselaw/case/pcit-v-n-c-cables-ltd/ (validity last checked 2026-08-29)
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