Section 153C compliance required when seized material belongs to another person; failure vitiates the assessment.

Assessment based on seized material belonging to another person must proceed under section 153C after the Assessing Officer records satisfaction and issues the statutory notice. Where the record shows that no notice under section 153C was issued and the mandatory transfer-and-satisfaction procedure was not followed, the defect is not cured by reliance on scrutiny-selection instructions. The assessment framed under section 143(3) was therefore bad in law and unsustainable.

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Issues: Whether the assessment framed under section 143(3) of the Income-tax Act, 1961 was sustainable when the addition was founded on seized material belonging to another person but no notice under section 153C was issued.

Analysis: The seized documents from the search in another entity's premises were used against the assessee. In such a situation, the statutory scheme required the Assessing Officer to record satisfaction and proceed under section 153C after handing over the material to the Assessing Officer having jurisdiction over the other person. The record did not show issuance of notice under section 153C or compliance with the mandatory procedure, and the reliance on scrutiny-selection instructions could not cure that defect.

Conclusion: The assessment framed under section 143(3) without issuing notice under section 153C was held to be bad in law and unsustainable, and the Revenue's challenge failed.

Ratio Decidendi: Where assessment is made on the basis of seized material belonging to a person other than the searched person, compliance with section 153C by recording satisfaction and issuing notice is mandatory, and failure to do so vitiates the assessment.

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