Search-based additions must proceed under sections 153A and 153C, not as a regular scrutiny assessment under section 143(3).

Additions based on incriminating material from search and seizure proceedings concerning third parties could not be sustained in a regular scrutiny assessment under section 143(3). The applicable mechanism was the search-assessment framework under sections 153A and 153C, and the pending assessment stood displaced to that extent. On that basis, the assessment order was treated as bad in law and quashed in favour of the assessee.

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Issues: Whether the assessment framed under section 143(3) was without jurisdiction and liable to be quashed because the addition was founded on material arising from search proceedings and the case ought to have been dealt with under sections 153A/153C.

Analysis: The assessment was based on information and material gathered from search and seizure proceedings concerning third parties, and the resultant additions were traceable to that search material. In that situation, the assessment could not properly continue as a regular scrutiny assessment under section 143(3). The legal position, as applied, was that where the assessment is linked to search material concerning another person, the assessment machinery under sections 153A and 153C governs the matter, and pending assessments stand abated to that extent.

Conclusion: The assessment order was held to be bad in law and was quashed; the issue was decided in favour of the assessee.

Ratio Decidendi: Where additions are founded on incriminating material emerging from search proceedings, the assessment must be made under the search-assessment provisions and not as an ordinary scrutiny assessment under section 143(3).

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