Documents seized from third party premises require assessment under section 153C, not sections 147/148

ITAT held that when documents are seized during search proceedings under section 132 at third party premises and allegedly belong to other assessees, assessment can only be made under section 153C of the Income Tax Act, not under sections 147/148. The tribunal ruled that section 153C provisions supersede sections 147 and 148 due to the non obstante clause. Notices issued under section 148 and proceedings under section 147 were declared illegal and void ab initio when documents seized from third party search belong to other persons. The assessment must follow section 153C procedures specifically designed for such situations where seized documents belong to persons other than the searched party. Assessee's appeal was allowed.

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Issues Involved:

1. Validity of reassessment proceedings under Section 147.
2. Applicability of Section 153C over Section 147/148 in cases involving documents seized during search operations at third-party premises.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:

The primary issue revolves around whether the reassessment proceedings initiated under Section 147 of the Income Tax Act were valid. The assessees contested the jurisdiction of the Assessing Officer in initiating these proceedings, arguing that the basis for reassessment was documents seized during a search at a third party's premises, which allegedly belonged to the assessees. The Tribunal found that the reassessment was based on documents (LPS 11 & 12) seized during a search operation at the premises of third parties, namely Shri Deepak Kalani and Shri Pankaj Kalani. The Assessing Officer had initially initiated proceedings under Section 153C but later dropped them and issued notices under Section 148. The Tribunal concluded that the reassessment proceedings under Section 147 were illegal and void ab initio because the documents in question were seized during a search operation, which should have been addressed under Section 153C.

2. Applicability of Section 153C over Section 147/148:

The Tribunal emphasized that Section 153C of the Income Tax Act supersedes Sections 147 and 148 when documents seized during a search operation belong to a person other than the one searched. The Tribunal noted that the provisions of Section 153C are specifically designed for assessing income related to documents or assets seized from a third party during a search. It was highlighted that Section 153C contains a non-obstante clause, indicating its overriding nature over other sections, including Sections 147 and 148. The Tribunal referred to various judicial pronouncements to support the view that once documents belonging to a person other than the one searched are seized, the only valid course of action is to initiate proceedings under Section 153C. Consequently, the Tribunal held that the initiation of proceedings under Section 147/148 in this case was improper, as the conditions for invoking Section 153C were met, and thus, the reassessment orders were quashed.

In conclusion, the Tribunal allowed the cross-objections filed by the assessees, determining that the reassessment proceedings under Section 147 were invalid due to the overriding applicability of Section 153C in the context of documents seized during a search at third-party premises.

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