Third-party search material required special assessment procedure; retracted statements without corroboration could not sustain additions.

Where the basis of action was documents and statements from a third-party search, the special assessment machinery for an "other person" had to be used and reassessment under the general provisions was barred; the reassessment was therefore void ab initio. Additions for alleged cash loans and estimated interest could not be sustained because they rested mainly on a promptly retracted survey statement and seized papers that were not supported by independent corroboration, books, or third-party evidence. The reassessment was annulled and the monetary additions were deleted.

---

---

Issues: (i) Whether reassessment under section 147 was valid where the material relied upon emanated from a third-party search and the proper course was section 153C; (ii) whether the additions towards cash loans and estimated interest under section 69A could survive when based principally on a retracted survey statement and seized material not corroborated by independent evidence.

Issue (i): Whether reassessment under section 147 was valid where the material relied upon emanated from a third-party search and the proper course was section 153C.

Analysis: The reassessment was founded on documents and statements recovered in search proceedings conducted in the cases of third parties, with the assessee being treated as the person to whom the material related. The record showed no independent material justifying recourse to the regular reassessment provisions, and the seized material was of the kind contemplated by the special scheme for assessment of a person other than the searched person. In such a situation, the special machinery under section 153C, which operates notwithstanding the general reassessment provisions, had to be followed.

Conclusion: The initiation and completion of reassessment under section 147 were invalid, and the assessment was void ab initio.

Issue (ii): Whether the additions towards cash loans and estimated interest under section 69A could survive when based principally on a retracted survey statement and seized material not corroborated by independent evidence.

Analysis: The additions rested mainly on the assessee's survey statement, which was promptly retracted, and on seized papers from third-party premises that did not name the assessee and were not corroborated by books, third-party statements, or any independent evidence. A retracted admission, without cogent corroboration, could not by itself sustain the additions, and the seized papers were insufficient to prove the alleged cash advances or interest income.

Conclusion: The additions under section 69A were not sustainable.

Final Conclusion: The reassessment was annulled, and the monetary additions were also deleted, resulting in relief to the assessee with the revenue appeal failing and the cross objection succeeding in part.

Ratio Decidendi: Where the entire basis of action against a person is material seized in a third-party search, the special procedure for assessment of an "other person" must be invoked and reassessment under the general provisions is barred; likewise, a retracted confession cannot sustain additions without independent corroboration.

---