Block assessment requires incriminating search evidence; statements alone cannot sustain additions for undisclosed income.

In block assessment under Chapter XIV-B, undisclosed income had to rest on evidence found as a result of search and material relatable to that evidence. Additions for alleged unexplained security deposits and inflated salary failed because they were based only on statements recorded during search and survey, without any incriminating document or seized material. The same reasoning applied to the salary addition: employee statements alone could not justify treating the amount as undisclosed income in the absence of corroborating search evidence. Both additions were therefore deleted.

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Issues: (i) Whether additions for alleged unexplained security deposits and inflated salary could be sustained in block assessment under Chapter XIV-B solely on the basis of statements recorded during search and survey, without incriminating material found as a result of search. (ii) Whether the addition made on account of inflated salary shown in respect of employees was sustainable on the same evidentiary basis.

Issue (i): Whether additions for alleged unexplained security deposits and inflated salary could be sustained in block assessment under Chapter XIV-B solely on the basis of statements recorded during search and survey, without incriminating material found as a result of search.

Analysis: The additions were founded only on statements recorded from employees during survey and from a partner during search. The material on record did not show that any incriminating document or seized material had been found to support the additions. In block assessment, undisclosed income must be determined on the basis of evidence found as a result of search and material relatable to such evidence. Statements recorded during search or survey, by themselves, do not constitute evidence found as a result of search for this purpose.

Conclusion: The additions could not be sustained and were liable to be deleted.

Issue (ii): Whether the addition made on account of inflated salary shown in respect of employees was sustainable on the same evidentiary basis.

Analysis: This addition also rested only on statements of a few employees recorded during search and survey, with no corroborating search material. The same legal principle governing block assessment applied, and a statement alone could not justify treating the amount as undisclosed income in the absence of seized incriminating evidence.

Conclusion: The addition on account of inflated salary was not sustainable and was deleted.

Final Conclusion: The block assessment additions were rejected for want of incriminating search evidence, and the assessee obtained complete relief in the connected appeals.

Ratio Decidendi: For purposes of block assessment under Chapter XIV-B, a statement recorded during search or survey, without supporting incriminating material found as a result of search, does not by itself constitute evidence on the basis of which undisclosed income can be assessed.

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