The reassessment u/s 147 is not permissible in case of person other than the searched person, when the incriminating material found during search belongs to the other person and the AO of searched person has forwarded the said material to the AO of that other person and the AO wants to make assessment of such other based on such incriminating material only. In this case the assessment of other person is to be done u/s 153C.

The above law is applicable for search conducted before 1-4-2021.

Paras Chandreshbhai Koticha Versus Income Tax Officer Ward - 1 (2) (2). 2026 (1) TMI 417 - GUJARAT HIGH COURT

The Gujrat High Court in case of Paras Chandreshbhai Koticha (Gujarat High Court, 7 January 2026) ruled a landmark judgment on the interplay between search assessments under sections 153A/153C and reassessment under sections 147/148, particularly where material originates from a search under section 132/132A.

Core issue and background

The petitions challenged notices issued under section 148 where the “reason to believe” was entirely founded on material unearthed during searches on third parties (K‑Star Group, Navratna Group, Flamingo Group, Affluence Commodities, etc.). The assessees argued that once incriminating material arises from a search, the only permissible route is via the special code of sections 153A/153C, and not the general provisions of sections 147/148.

The case involves two core jurisdictional issues under the pre‑2021 regime: (1) when search material relates to an “other person”, whether the AO can bypass section 153C and straightaway use sections 147/148; and (2) whether, for a searched person, additions based on search material can be made via 147/148 instead of 153A.​

Issue 1: Other person – can AO use 147/148 on search material without 153C satisfaction?

Issue involved

• Where incriminating material relating to a person other than the searched person is found in a search under section 132/132A and transmitted to the AO of that “other person”, can that AO reopen under sections 147/148 without any satisfaction recorded by the AO of the searched person and without invoking section 153C.​
• Connected point: does the absence of a 153C satisfaction note permit the AO of the other person to “fall back” on sections 147/148 based on the same search material.​

Court’s holding

• Recording of satisfaction by the AO of the searched person on the incriminating material pertaining to the “other person” is mandatory and a jurisdictional pre‑condition under section 153C; this follows from the phrase “the Assessing Officer is satisfied”, SC rulings in Manish Maheshwari, Calcutta Knitwears, Super Malls and CBDT Circular 24/2015.​
• In absence of such satisfaction, the AO of the other person cannot:
• Assume jurisdiction under section 153C on that material; and
• Directly invoke sections 147/148 on the same incriminating search material.​
• The AO of the other person may use sections 147/148 only on the basis of other independent material (post‑search or from other sources) that does not form part of the incriminating material transmitted under section 153C.​

So, issue‑wise: reopening of an “other person” based on search material, without a 153C satisfaction note, by resort to 147/148, is held to be illegal, without jurisdiction, and liable to be quashed.​

Issue 2: Searched person – can AO use 147/148 on search material?

Issue involved

• For an assessee who is himself a “searched person” under section 153A, can the AO switch from the search code to the general reassessment code and reopen under sections 147/148 on the very incriminating material found during search.​

Court’s holding

• Sections 153A–153D form a special, self‑contained code for search assessments, with non‑obstante clauses overriding sections 147/148 etc.​
• Applying Abhisar Buildwell (SC) and Amar Jewellers (Guj HC):
• If incriminating material is found for a searched person, additions for those years must be made under section 153A; the AO cannot invoke 147/148 on that same search material.​
• If no incriminating material is found for a completed/unabated year, the Revenue is not remediless; it can reopen under sections 147/148 based on other material (non‑search, independent material) subject to the conditions of 147/148.​

So, issue‑wise: for a searched person, use of 147/148 on search incriminating material is barred; 147/148 survives only for non‑search independent material.​

Issue 3: Scope of 147/148 vis‑à‑vis 153A/153C – general principles

Issue involved

• More generally, what is the scope of 147/148 when there is search material and special provisions 153A/153C exist with non‑obstante clauses.​

Court’s holding (summary A–D)

The Court answered this by formulating four propositions:​

• (A) For a searched person (153A), AO must record satisfaction on incriminating material relating to an “other person” and communicate it to that other person’s AO.
• (B) Without a satisfaction note by the AO of the searched person, the AO of the other person cannot assume 153C jurisdiction solely on material sent; any such attempt is illegal and without jurisdiction.
• (C) AO of the other person can invoke 147/148 only on material from other sources, not on incriminating material sent under 153C; once a 153C satisfaction is recorded and material is transmitted, the only route is 153C, not 147/148.
• (D) For assessees governed by 153A (searched persons), AO cannot resort to 147/148 on incriminating search material; however, Revenue can still invoke 147/148 on post‑search, independent material, subject to statutory conditions.

These four are the court’s consolidated, issue‑wise holdings on the scope of 147/148 vis‑à‑vis 153A/153C.​

Practical takeaways for defence and advisory

This judgment provides a powerful toolkit to test the validity of reassessment notices linked to search cases.​

• Where your client is an “other person” and the only material is what has come from a search on someone else, first insist on production of the satisfaction note of the AO of the searched person under section 153C. If none exists, challenge any 147/148 action as being without jurisdiction in light of this ruling.
• If the Department relies on search‑derived material alone (no post‑search, independent enquiry or information), any attempt to bypass the 153A/153C machinery and proceed under 147/148 is now vulnerable and can be assailed on the strength of this precedent.
• For searched assessees, where the AO seeks to reopen under 147/148 on the very incriminating material found in search, this judgment—read with Abhisar Buildwell and Amar Jewellers—supports the proposition that the only proper code is 153A, and the AO cannot “change track” to 147/148 merely to overcome limitation or other constraints.