Section 153C safeguards required for third-party search material; regular assessment without those steps was quashed for lack of jurisdiction.

Search material found from a third party and used against an assessee had to be dealt with under section 153C, not by a regular assessment under section 143(3). The Tribunal held that, where the seized papers belonged to or pertained to the assessee, the Assessing Officer was required to follow the statutory safeguards of handing over the material, recording satisfaction and issuing notice under section 153C; section 153C(2) could not bypass those threshold requirements. It also held that the relevant year fell within the six-year block covered by section 153C. The assessment and consequential appellate proceedings were quashed as without jurisdiction.

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Issues: Whether the assessment for assessment year 2012-13, based on material found in the search of a third party, could validly be framed under section 143(3) of the Income-tax Act, 1961 instead of section 153C of the Income-tax Act, 1961, and whether the resulting assessment and appellate order were without jurisdiction.

Analysis: The assessment was founded on material seized during the search of another person and used against the assessee as an "other person" within the meaning of section 153C. The Tribunal held that, once the seized material belonged to or pertained to the assessee, the proper course was to invoke section 153C, with the requisite handing over of material, recording of satisfaction, and issuance of notice in accordance with that provision. The Tribunal rejected the Revenue's reliance on section 153C(2) to bypass the threshold requirements of section 153C(1), and held that the year in question also fell within the six-year block to be dealt with under section 153C. It further held that the prior survey on the assessee did not authorize the Assessing Officer to use search material from the third party without following section 153C.

Conclusion: The assessment framed under section 143(3) and all consequential proceedings were quashed as being without jurisdiction; the assessee succeeded on the jurisdictional grounds.

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