Search-derived reassessment survives later challenge to search when jurisdiction is valid on the notice date.

Reassessment based on material recovered in a search can be sustained even where the search is later challenged, because the validity of the notice is tested on the date it is issued. An interim order concerning the search is only a prima facie view and does not by itself establish that the search is void. Where the notice under the Second Explanation to Section 148 is founded on search-derived material, a subsequent declaration of invalidity in the searched person's case does not retrospectively remove jurisdiction already validly exercised. The assessment order was therefore upheld and the writ petition dismissed.

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Issues: Whether reassessment proceedings and the assessment order could be sustained when the search at the premises of the searched person was under interim challenge, and whether a later declaration of invalidity of the search would nullify proceedings initiated against the petitioner under the Second Explanation to Section 148 of the Income-tax Act, 1961.

Analysis: The material recovered during search can be used in assessment even if the search is later held illegal. An interim order restraining passing of the final assessment order is only a prima facie view and does not by itself establish that the search is void. The legality of the initiation of proceedings has to be tested with reference to the date on which notice was issued, and on that date the petitioner could not rely on a later interim order or a subsequent challenge to the search. The notice was founded on material recovered in search, and the later fate of the search proceedings against the searched person would not divest the Assessing Officer of jurisdiction already validly exercised.

Conclusion: The challenge to the assessment order failed. The proceedings and the impugned assessment order were held valid, and the writ petition was dismissed.

Final Conclusion: The decision affirms that reassessment based on search-derived material can proceed independently of a later challenge to the search, and that a subsequent invalidation of the search does not, by itself, undo proceedings already initiated on the date of notice.

Ratio Decidendi: Search material may be relied upon in assessment proceedings, and a later or merely interim challenge to the search does not retrospectively extinguish jurisdiction validly assumed on the date of initiation under Section 148 of the Income-tax Act, 1961.

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