Third-party seized material required section 153C procedure, making section 153A assessments and consequential interest additions invalid.

Assessments under section 153A cannot rest solely on incriminating material seized in a third-party search where no incriminating material was found in the assessee's own search. Lenders' ledgers and related statements obtained from the third party required recourse to section 153C, including satisfaction and transfer of the relevant material. A statement recorded under section 132(4), without supporting seized material, did not constitute incriminating material. As section 153C proceedings were not initiated, the section 153A assessments and loan-based additions were legally invalid; the consequential interest addition could not survive.

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Issues: Whether assessments under section 153A based solely on incriminating material seized in a third-party search, when no incriminating material was found in the assessee's own search, were valid.

Analysis: The additions rested on lenders' ledgers and related statements obtained during the search of a third party. No seized document from the assessee's premises supported the additions; a statement under section 132(4), by itself, did not constitute incriminating material. Material belonging to or pertaining to a person other than the searched person required recourse to the distinct statutory procedure under section 153C, including the requisite satisfaction and transfer of material. The Assessing Officer instead invoked section 153A without initiating section 153C proceedings. Consequently, the interest addition for the final assessment year, being founded on the impugned loan additions, could not survive.

Conclusion: The assessments and additions framed under section 153A were legally invalid and were quashed; the consequential interest addition was also invalid.

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