Seizure-derived documents from third parties and jurisdiction to assess under section 153C found invalid, assessment quashed.

Assessment under the tax code cannot be grounded on documents seized from third-party premises unless those materials, on their face or by reliable corroboration, indicate they belong to or pertain to the taxpayer. The statutory presumptions favour the searched person for documents found in their possession; it was for that person or the revenue to rebut the presumption with tangible evidence showing the material related to the taxpayer. Private notings or diaries without independent linkage are "dumb documents" and lack evidentiary value. Because the seized electronic and account-book entries contained no clear identifier or corroboration tying them to the taxpayer, invoking jurisdiction to assess the taxpayer was void and the assessment was quashed.

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Issues: Whether the Assessing Officer validly assumed jurisdiction under Section 153C of the Income-tax Act, 1961 by recording satisfaction-notes and issuing notices to the assessee (a third party), on the basis of seized material and third-party statements.

Analysis: The Tribunal examined the statutory scheme of sections 153A/153C and the required condition-precedents: (i) the AO of the searched person must record satisfaction that seized material belongs to/pertains to or contains information relating to a third person; and (ii) the AO of the third person must record independent satisfaction that the material received has a bearing on determination of that third person's total income. The Tribunal analysed the seized account books, electronic data, loose sheets and witness statements relied upon by the AO, applying established legal principles: presumptions under section 132(4A)/292C operate in favour of the searched person and cannot be displaced by uncorroborated, inconsistent or hearsay statements; entries in loose sheets or private notings are 'dumb documents' and are not admissible like regularly kept books of account; statements recorded during or after search cannot alone constitute incriminating material absent independent corroboration; subsequent material filed after recording of satisfaction cannot be used to bolster the original satisfaction note. The Tribunal applied the prudent-person test to evaluate whether the AOs' satisfactions were based on cogent, demonstrative material, considering contemporaneous facts (no incriminating material at assessee's premises, absence of traceable money-flow from alleged suppliers to the accused, retractions and contradictions in third-party statements, absence of corroboration from suppliers or independent enquiries). On these grounds the Tribunal found the satisfaction-notes and consequent notices to be based on conjecture, hearsay and unreliable documents, thereby failing the statutory condition-precedents for invocation of section 153C.

Conclusion: The AO's assumption of jurisdiction under Section 153C is invalid and the notices/assessments under Section 153C are quashed; appeals of the assessee are allowed and the Revenue's appeals are dismissed.

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