Independent verification supports reassessment, but third-party records need corroboration and fair cross-examination to sustain additions.

Reassessment under section 147 was upheld because the Assessing Officer cross-verified Investigation Wing information with the assessee's balance sheet and formed an independent prima facie view of escapement of income, rather than acting mechanically on borrowed satisfaction. The addition under section 69A for alleged unexplained jewellery purchases was deleted because a third-party excel sheet, without independent corroboration, was insufficient to prove unaccounted investment by the assessee; the relied-upon statements did not conclusively establish the purchase, fair cross-examination was not effectively afforded, and the material also did not match the relevant assessment year. The reassessment stood, but the addition failed.

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Issues: (i) Whether reassessment under section 147 of the Income-tax Act, 1961 was invalid for want of independent application of mind and for alleged borrowed satisfaction based on information from the Investigation Wing; (ii) Whether the addition under section 69A of the Income-tax Act, 1961 could be sustained on the basis of a third-party excel sheet and statements without independent corroboration and effective opportunity of cross-examination.

Issue (i): Whether reassessment under section 147 of the Income-tax Act, 1961 was invalid for want of independent application of mind and for alleged borrowed satisfaction based on information from the Investigation Wing.

Analysis: The reasons recorded by the Assessing Officer showed that the information received from the Investigation Wing was cross-verified with the assessee's balance sheet, and the alleged unaccounted purchase did not appear therein. The reassessment was founded on prima facie belief of escapement of income, not on a conclusive inquiry. The material did not show mere mechanical acceptance of third-party information, and the conditions for invoking section 153C were also not attracted because the material was not seized from a search person with the requisite satisfaction note. In these circumstances, initiation of reassessment under section 147 was held to be valid.

Conclusion: The reassessment proceedings were upheld and the assessee's challenge on jurisdiction failed.

Issue (ii): Whether the addition under section 69A of the Income-tax Act, 1961 could be sustained on the basis of a third-party excel sheet and statements without independent corroboration and effective opportunity of cross-examination.

Analysis: The excel sheet was a third-party record maintained at the premises of the jewellery store and, by itself, did not constitute sufficient evidence of unaccounted investment by the assessee. No independent corroborative material was brought to establish actual cash purchase by the assessee. The assessee's own search had yielded no incriminating material regarding such alleged purchases. The statements of employees explained the alleged modus operandi, but did not specifically and conclusively establish the assessee's cash purchase, and effective cross-examination was not properly afforded. Further, the relied-upon sheet related to April 2016 to November 2016, whereas the addition was made for assessment year 2015-16, creating a mismatch with the year under consideration.

Conclusion: The addition under section 69A was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The reassessment was sustained, but the impugned addition for alleged unexplained jewellery purchases was deleted, resulting in partial relief to the assessee.

Ratio Decidendi: Reassessment may be valid where the Assessing Officer applies independent prima facie mind to third-party information, but an addition based on third-party material requires independent corroboration and cannot be sustained without reliable linkage to the assessee and a fair opportunity of cross-examination where adverse statements are relied upon.

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