Block assessment additions require search evidence; estimates and post-search valuation alone cannot sustain undisclosed-income additions.

Block assessment additions must rest on evidence found during search or material directly relatable to that evidence. On-money payment for immovable property could not be sustained without seized material; the estimate of unexplained investment was also deleted because it was based only on stamp duty, registration and construction particulars, not search evidence. A post-search valuation report alone could not support an addition for cost of improvement in the absence of contemporaneous material. The alleged excess gold jewellery addition failed because the assessee furnished reconciliation and the discrepancy was not enough to justify unexplained income. The assessee obtained complete relief and the Revenue's additions were rejected.

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Issues: (i) whether the addition of Rs. 31 lakhs towards alleged on-money payment for purchase of immovable property could be sustained in block assessment in the absence of material found during search; (ii) whether the addition of Rs. 5 lakhs sustained by the first appellate authority towards unexplained investment in the property could be upheld without search evidence; (iii) whether the addition of Rs. 83,700 towards alleged cost of improvement could be made on the basis of a post-search valuation report alone; and (iv) whether the addition of Rs. 86,000 towards alleged excess gold jewellery was justified despite reconciliation furnished by the assessee.

Issue (i): whether the addition of Rs. 31 lakhs towards alleged on-money payment for purchase of immovable property could be sustained in block assessment in the absence of material found during search

Analysis: Block assessment under section 158BB(1) is to be computed on the basis of evidence found as a result of search and such other material relatable to that evidence. The record did not show any seized material supporting payment of on-money. The statement attributed to the assessee did not establish such payment, while the vendor's statement by itself could not form the basis of addition in the absence of search material.

Conclusion: The addition of Rs. 31 lakhs was not sustainable and stood deleted in favour of the assessee.

Issue (ii): whether the addition of Rs. 5 lakhs sustained by the first appellate authority towards unexplained investment in the property could be upheld without search evidence

Analysis: Although the first appellate authority has coterminous powers with the Assessing Officer, those powers in block assessment cannot travel beyond evidence found during search. The estimate was made only with reference to stamp duty, registration charges and construction particulars, without supporting seized material.

Conclusion: The addition of Rs. 5 lakhs was not justified and was deleted in favour of the assessee.

Issue (iii): whether the addition of Rs. 83,700 towards alleged cost of improvement could be made on the basis of a post-search valuation report alone

Analysis: The valuation report was obtained after the search and there was no contemporaneous seized material, books of account or other evidence indicating the alleged expenditure on improvement. In block assessment, valuation alone could not substitute for search evidence.

Conclusion: The addition of Rs. 83,700 was unsustainable and was deleted in favour of the assessee.

Issue (iv): whether the addition of Rs. 86,000 towards alleged excess gold jewellery was justified despite reconciliation furnished by the assessee

Analysis: The assessee furnished a reconciliation of the gold stock, and the appellate authority accepted the explanation. On the facts, the discrepancy was not sufficient to support the addition as unexplained income.

Conclusion: The deletion of the addition of Rs. 86,000 was confirmed in favour of the assessee.

Final Conclusion: The block assessment additions based on alleged on-money, unexplained investment, improvement cost and excess jewellery were not sustained, and the assessee obtained complete relief while the Revenue failed.

Ratio Decidendi: In block assessment, additions can be made only on the basis of evidence found during search or material relatable to such evidence, and estimates or post-search valuation without supporting seized material cannot justify undisclosed-income additions.

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