Reassessment and accommodation-entry banking transactions: reopening sustained, but additions limited to unexplained balances and business profit.

Reopening under section 148 was upheld because the challenge to approval under section 151 was vague, unsupported by record, and did not displace the presumption that official acts are regularly performed. On the income issue, the Tribunal treated the cash deposits and bank transactions as linked to an accommodation-entry style cheque-issue business, but held that the entire gross deposits could not automatically be taxed as the assessee's income. In the absence of reliable evidence of the claimed business model, the additions were confined to the excess of credits over debits in one account and the unexplained cash deposit in the other, reflecting a limited estimation of real income on the available material.

---

---

Issues: (i) Whether the challenge to the reassessment proceedings and approval under section 151 of the Income-tax Act, 1961 was made out. (ii) Whether the cash deposits and bank-account transactions arising from the alleged cheque-issue business were to be sustained in full, or only to the extent of peak balance and business profit.

Issue (i): Whether the challenge to the reassessment proceedings and approval under section 151 of the Income-tax Act, 1961 was made out.

Analysis: The challenge to reopening was found to be vague and unsupported by record. There was no reliable material showing that the assessee had asked for a copy of the approval, and no basis to displace the presumption that official acts are regularly performed. The notice under section 148 had been issued after stated approval from the appropriate authority, and the objection was not pursued with adequate specificity or supporting record.

Conclusion: The reassessment challenge failed and the reopening was upheld.

Issue (ii): Whether the cash deposits and bank-account transactions arising from the alleged cheque-issue business were to be sustained in full, or only to the extent of peak balance and business profit.

Analysis: The assessee did not adduce reliable evidence to substantiate the claimed business model before the lower authorities. At the same time, the material on record showed that the transactions were linked to an accommodation-entry racket and that the entire cash deposits could not automatically be treated as the assessee's own income. The proper approach was to assess the real income from such activity, with only the unexplained part of the banking transactions and the business profit being brought to tax on the facts available. The Tribunal rejected wholesale reliance on the first appellate order and declined to restore the matter, instead adopting an estimate on the existing record.

Conclusion: The additions were not sustained in full; the income was restricted to the excess of credits over debits in one account and the unexplained cash deposit in the other.

Final Conclusion: The reassessment remained valid, but the quantum of income was modified downward by restricting the additions to the figures determined on the basis of the available banking material, resulting in partial relief to the assessee and partial relief to the Revenue.

Ratio Decidendi: In a case involving accommodation-entry style banking transactions, the entire gross deposits need not be treated as the assessee's income where the available material shows organized business activity and the record permits only a limited, reasoned estimation of unexplained money and business profit.

---