Third-party search material requires Section 153C, not reassessment under Sections 147 and 148, the text states.

Where proposed income-tax assessment is based on incriminating material seized in the search of a third party, the special procedure under Section 153C applies and overrides reassessment under Sections 147 and 148. The text states that, on these facts, the reassessment route was the wrong statutory mechanism because the material related to a third-party search and indicated cash transactions involving the assessee. The appellate annulment was therefore sustained, and the reassessment was treated as invalid.

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Issues: Whether reassessment proceedings initiated under Sections 147 and 148 of the Income-tax Act, 1961 were valid when the material relied upon was found and seized in the search of a third party, and whether such cases required recourse to Section 153C of the Income-tax Act, 1961.

Analysis: The reassessment was founded on incriminating material unearthed during the search of another group, indicating transactions in cash involving the assessee. On those facts, the special machinery under Section 153C, which governs assessment of income based on material found in a third-party search, was held to be the proper provision and to override the ordinary reassessment route. The appellate order annulling the assessment was supported by the reasoning that the proceedings had been initiated under the wrong statutory route and by the authorities relied upon therein.

Conclusion: The reassessment under Sections 147 and 148 was held invalid and the annulment of the assessment was sustained.

Final Conclusion: The appeal failed, and the assessment annulled by the appellate authority remained undisturbed because the matter was required to be dealt with under Section 153C of the Income-tax Act, 1961.

Ratio Decidendi: Where the basis of proposed assessment is incriminating material seized in the search of a third party, the special procedure under Section 153C, and not reassessment under Sections 147 and 148, is the appropriate statutory route.

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