Borrowed satisfaction cannot sustain reopening, and primary evidence can defeat a section 68 addition when banking records support the transactions.

Reassessment under section 147 was held invalid where the reopening rested on Investigation Wing information and third-party statements without independent inquiry, without furnishing the underlying material to the assessee, and without a live link to escapement of income; the notice under section 148 and the reassessment order were quashed. The addition under section 68 for loans and advances was deleted because the assessee produced confirmations, bank statements, returns and financial statements, the transactions moved through banking channels, and the Revenue did not establish that the transactions were sham or disprove identity, creditworthiness and genuineness.

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Issues: (i) Whether the reassessment initiated under section 147 of the Income-tax Act, 1961 was valid where the reasons were founded on information from the Investigation Wing without independent inquiry and without supplying the underlying material to the assessee; (ii) Whether the addition under section 68 of the Income-tax Act, 1961 in respect of the loans/advances received from the two companies was sustainable.

Issue (i): Whether the reassessment initiated under section 147 of the Income-tax Act, 1961 was valid where the reasons were founded on information from the Investigation Wing without independent inquiry and without supplying the underlying material to the assessee.

Analysis: The reasons recorded were found to rest on information received from the Investigation Wing and statements of third parties, without any independent application of mind or further inquiry by the Assessing Officer. The material relied upon was not furnished to the assessee, and no live link was established between the information and the belief that income had escaped assessment. The reopening was therefore held to be founded on borrowed satisfaction and to lack the legally required tangible material.

Conclusion: The reassessment proceedings under section 147 and the notice under section 148 were held invalid, and the consequential reassessment order was held bad in law.

Issue (ii): Whether the addition under section 68 of the Income-tax Act, 1961 in respect of the loans/advances received from the two companies was sustainable.

Analysis: The assessee produced loan confirmations, bank statements, ledgers, income-tax returns and financial statements of the counterparties, and the transactions were routed through banking channels. The amounts were shown to have been advanced under MOUs for land acquisition and were substantially repaid in later years. The Assessing Officer did not conduct independent verification or establish that the transactions were sham, and the statements of persons who were not associated with the lenders at the relevant time were held to have no evidentiary value against the assessee. On the facts, the assessee was held to have discharged the burden of proving identity, creditworthiness and genuineness.

Conclusion: The addition under section 68 was deleted.

Final Conclusion: The appeal succeeded in full, the reassessment was quashed, and the addition made on account of unexplained cash credits was deleted.

Ratio Decidendi: Reassessment under section 147 cannot rest merely on borrowed satisfaction from third-party information without independent inquiry and a demonstrable nexus between tangible material and escapement of income, and an addition under section 68 cannot be sustained where the assessee substantiates identity, creditworthiness and genuineness through primary evidence and banking records, absent contrary inquiry by the Revenue.

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