Pre-search disclosed income cannot be treated as undisclosed income for block assessment under Chapter XIV-B.

Income already declared in returns filed before a search cannot be treated as undisclosed income for Chapter XIV-B merely because those returns were belated or otherwise ineffective for regular assessment. The block assessment machinery under section 158BB operates only where undisclosed income exists in the statutory sense under section 158B(b), meaning income not disclosed or not likely to have been disclosed for the purposes of the Act. If the search does not uncover fresh income and the amounts were already disclosed before the search, the jurisdictional basis for block assessment is absent. Any ancillary issue on Chapter VI-A deductions becomes irrelevant once the assessment itself is annulled.

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Issues: Whether the income declared in returns filed before the search, though belated, could be treated as undisclosed income for block assessment under Chapter XIV-B, and whether the assessment order was liable to be annulled for want of undisclosed income.

Analysis: The disputed figures represented income already declared by the assessee in returns filed much before the search, and the search did not unearth any fresh income. The computation machinery under section 158BB presupposes the existence of undisclosed income, and the definition in section 158B(b) covers only income which has not been or would not have been disclosed for the purposes of the Act. Where the assessee had already disclosed the income in returns filed before the search, even if those returns were belated or otherwise not valid for regular assessment, the income could not be characterised as undisclosed income for Chapter XIV-B. In consequence, the block assessment lacked the necessary jurisdictional foundation. The observations on deductions under Chapter VI-A did not survive once the assessment itself was annulled.

Conclusion: The disputed income could not be assessed as undisclosed income in block assessment, and the impugned assessment was liable to be annulled in favour of the assessee.

Ratio Decidendi: Income already disclosed by the assessee before search cannot be treated as undisclosed income for block assessment merely because the returns were belated or invalid for regular assessment; the block assessment provisions apply only where undisclosed income in the statutory sense exists.

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