Third-party search material requires section 153C first; reassessment under general provisions was held without jurisdiction

Reassessment based solely on search material relating to a third party must proceed under the special search-related mechanism in section 153C, not the general reassessment route under sections 147/148, unless the statutory satisfaction requirement is first met and independent post-search material exists. On the facts described, the reassessment was held without jurisdiction because the material came exclusively from a search on another person and the required satisfaction note was absent, so the reassessment orders were quashed. The separate objection of borrowed satisfaction from investigation material was noted, but it did not affect the result once the jurisdictional defect under section 153C was established.

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Issues: (i) Whether reassessment under sections 147/148 of the Income-tax Act, 1961 was without jurisdiction because the matter ought to have been proceeded with under section 153C of the Income-tax Act, 1961 on the basis of material found in the search of a third party; (ii) Whether the reassessment was invalid because it was founded only on borrowed satisfaction from the investigation material without independent inquiry.

Issue (i): Whether reassessment under sections 147/148 of the Income-tax Act, 1961 was without jurisdiction because the matter ought to have been proceeded with under section 153C of the Income-tax Act, 1961 on the basis of material found in the search of a third party.

Analysis: The reassessment was founded exclusively on material seized in the search of another person. The special mechanism under section 153C applies where material belonging to or pertaining to a person other than the searched person is found in search proceedings, and that mechanism overrides the general reassessment route. In the absence of any independent post-search material and in the absence of the required satisfaction note from the searched person's Assessing Officer, the general reassessment provisions could not be used to bypass section 153C.

Conclusion: The reassessment under sections 147/148 was without jurisdiction and was rightly quashed in favour of the assessee.

Issue (ii): Whether the reassessment was invalid because it was founded only on borrowed satisfaction from the investigation material without independent inquiry.

Analysis: The challenge on borrowed satisfaction was considered on the footing that the Assessing Officer had acted on information from the investigation wing and the insight portal. The record, however, showed that the statutory procedure under the reassessment regime had been followed and the issue had been separately examined in earlier proceedings. Since the reassessment itself was already held to be jurisdictionally defective on the section 153C ground, this challenge did not alter the result of the appeals.

Conclusion: This ground was decided against the assessee, but it did not affect the ultimate quashing of the reassessment orders.

Final Conclusion: The core jurisdictional defect lay in the use of sections 147/148 instead of the special search-related mechanism under section 153C, and that defect vitiated the reassessment orders for both years.

Ratio Decidendi: Where reassessment is triggered solely by search material relating to a third person, the Assessing Officer cannot invoke sections 147/148 in bypass of section 153C unless the statutory satisfaction requirement is first met and some independent post-search material exists.

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