Search-based undisclosed income must rest on seized material; disclosed material cannot support additions under the Income-tax Act.

Undisclosed income under sections 153A and 153C must be computed on the basis of material found during search proceedings, and material already disclosed in regular assessment or block assessment cannot be used for that purpose. Section 158BI excludes the chapter's application where a search is initiated under section 132 or requisition is made under section 132A after 31 May 2003; absent any factual averment establishing such initiation or requisition, the Tribunal's conclusion was not displaced. The question of law was answered against the assessee, and no illegality or infirmity was found in the Tribunal's order.

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Issues: Whether computation of undisclosed income under sections 153A and 153C of the Income-tax Act, 1961 is confined to material found during search proceedings, and whether interference was warranted with the Tribunal's view on the facts of the case.

Analysis: The Court held that undisclosed income has to be computed on the basis of material found during the course of search and that material already disclosed in regular assessment or block assessment proceedings cannot be relied upon for that purpose. It also noted that section 158BI of the Income-tax Act, 1961 excludes the chapter's application where a search is initiated under section 132 or requisition is made under section 132A after 31 May 2003, and found no averment showing such initiation or requisition so as to displace the Tribunal's conclusion.

Conclusion: The question of law was answered against the assessee, and no illegality or infirmity was found in the Tribunal's order.

Ratio Decidendi: In search-related assessment, undisclosed income is to be determined on the basis of material unearthed during search, and absent a legally relevant contrary factual foundation, the Tribunal's view will not be interfered with.

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