Borrowed satisfaction and genuine loan evidence can defeat reassessment and related additions in income-tax proceedings.

Reassessment based only on Investigation Wing information, without independent inquiry by the AO, was treated as borrowed satisfaction and therefore unsustainable. The discussion also accepted the lender's creditworthiness and the genuineness of the loan where financial statements, business profile, advances reflected in accounts, and routing through banking channels supported the transaction; the addition was not sustained on a mere misplaced doubt about financial capacity. No Rule 46A violation was made out on the stated facts. The Revenue's challenge thus failed and the assessee's relief remained undisturbed.

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Issues: Whether the reassessment notice and assessment were vitiated for want of independent application of mind by the Assessing Officer, whether the lender's creditworthiness and the genuineness of the loan transaction could be doubted, and whether any violation of Rule 46A of the Income-tax Rules, 1962 was made out.

Issue (i): Whether the reassessment notice and assessment were vitiated for want of independent application of mind by the Assessing Officer.

Analysis: The reasons recorded and the reassessment action were found to be founded mainly on information received from the Investigation Wing. The assessment record showed that the Assessing Officer had not undertaken an independent inquiry into the underlying transaction before proceeding, and the reopening was treated as based on borrowed satisfaction.

Conclusion: The reassessment was rightly held to be based on borrowed satisfaction and no interference was called for.

Issue (ii): Whether the lender's creditworthiness and the genuineness of the loan transaction could be doubted.

Analysis: The lender's financial statements, the advances reflected in its accounts, the nature of its business, and the fact that the loan was routed through banking channels were accepted as supporting the transaction. The addition was founded on an erroneous assumption that the lender lacked financial credibility, without appreciating its business profile and source of funds.

Conclusion: The findings accepting the lender's creditworthiness and the genuineness of the loan were upheld and the addition was not sustained.

Final Conclusion: The Revenue's challenge failed in full and the relief granted to the assessee remained undisturbed.

Ratio Decidendi: Reassessment cannot be sustained where the Assessing Officer acts on borrowed satisfaction without independent inquiry, and a loan transaction supported by financial records and banking channels cannot be rejected merely on a misplaced doubt about the lender's financial capacity.

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