Regularly disclosed income cannot be taxed again as undisclosed income in block assessment under Chapter XIV-B.

Income and cash credits already disclosed in the regular return for the relevant assessment year could not be treated as undisclosed income in block assessment under Chapter XIV-B. The Rajasthan HC noted that block assessment is confined to undisclosed income found on search material and, under Section 158BB, income already returned under Section 139 or disclosed in response to notices under Sections 142(1) or 148 must be reduced from the computation. Since the credits had been shown before the search, their later inclusion in block assessment was impermissible and the addition failed.

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Issues: Whether income and cash credits already disclosed in the regular returns for the relevant assessment year could again be brought to tax as undisclosed income in block assessment proceedings under Chapter XIV-B.

Analysis: The scheme of Chapter XIV-B, read with the Explanation to Section 158BA(2) and Section 158BB, shows that block assessment is an assessment in addition to regular assessment and is confined to undisclosed income found on the basis of search material. Under Section 158BB(1)(a) and (b), the computation of undisclosed income has to be made after reducing income already returned under Section 139 or disclosed in response to notices under Sections 142(1) or 148, where such income relates to previous years within the block period. Since the relevant credits had already been shown in the regular returns filed before the search, they could not be treated as undisclosed income merely because they were later noticed in the block assessment proceedings.

Conclusion: The addition could not be sustained in block assessment proceedings and the answer to the question was against the Revenue and in favour of the assessee.

Ratio Decidendi: Income already disclosed in a regular return before search cannot be reassessed as undisclosed income in block assessment under Chapter XIV-B, because block assessment excludes income already assessed or disclosed for the relevant previous year.

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