Third-party search material and borrowed satisfaction render reassessment invalid when the Assessing Officer lacks independent belief.

Reassessment based on search material relating to a third party must proceed under section 153C, since that special regime overrides sections 147 and 148 where seized material pertaining to another person is relied on. Reopening is also invalid where the Assessing Officer merely adopts Investigation Wing information without independent application of mind and records borrowed satisfaction instead of forming a personal belief on tangible material. In this article, the reassessment proceedings for the batch of years were quashed, and the merits of the additions were not examined.

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Issues: (i) Whether reassessment under sections 147 and 148 was valid when the information used to reopen the assessments arose from search material relating to a third party and was said to fall within section 153C; and (ii) whether the reopening was vitiated for want of independent application of mind by the Assessing Officer and reliance on borrowed satisfaction.

Issue (i): Whether reassessment under sections 147 and 148 was valid when the information used to reopen the assessments arose from search material relating to a third party and was said to fall within section 153C.

Analysis: The reassessment was founded on material gathered in a search under section 132 in the case of another group and forwarded through the Investigation Wing. The material forming the basis of action against the assessee was treated as search-derived information relating to a person other than the searched person. Section 153C, being a special provision with a non-obstante clause and overriding effect over sections 147 and 148, was held to be the proper route where seized material pertaining to a third person is relied upon.

Conclusion: The reopening under sections 147 and 148 was held to be without jurisdiction and invalid; the assessee succeeded on this issue.

Issue (ii): Whether the reopening was vitiated for want of independent application of mind by the Assessing Officer and reliance on borrowed satisfaction.

Analysis: The reasons recorded and the assessment order showed that the Assessing Officer relied on information received from the Investigation Wing without making an independent enquiry or forming an independent belief on the material. The legal requirement that reassessment must rest on the Assessing Officer's own satisfaction and tangible material was not satisfied, and the recorded reasons were found to be a repetition of the external report rather than an independent basis for belief.

Conclusion: The reopening was also invalid on the ground of borrowed satisfaction; the assessee succeeded on this issue as well.

Final Conclusion: The reassessment proceedings for all the years in the batch were quashed, and the additions on merits were not examined as they became academic.

Ratio Decidendi: Where reassessment is initiated solely on the basis of search material pertaining to a third person, the special regime under section 153C must be followed, and reassessment under section 147 is impermissible if it rests only on borrowed satisfaction without independent application of mind.

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