Block assessment additions need corroborated search evidence; retracted statements and loose papers alone cannot prove undisclosed income.

In block assessment, undisclosed income must be established from search material with independent corroboration; mere loose papers and a retracted search statement are insufficient. The assessee showed that scrap sales were recorded in the books, buyers denied any cash over and above billed amounts, comparable market rates supported the pricing, and no unaccounted cash or assets were found. On that basis, the addition for alleged unaccounted scrap sales was deleted.

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Issues: Whether the addition made in block assessment on account of alleged unaccounted cash sales of scrap, based on seized loose papers and a statement recorded during search, was sustainable.

Analysis: The seized papers were found from the cabin of a person who later retracted his search statement by affidavit and again in examination under section 131. The assessee produced material to show that the scrap sales were recorded in the books, the buyers denied payment of any cash over and above the billed amounts, comparable market rates supported the sale prices, and no unaccounted cash, assets, or application of alleged cash receipts was found. The distinction between regular assessment and block assessment was material: only undisclosed income found as a result of search can be assessed in block proceedings. Mere loose papers and an uncorroborated statement, particularly when retracted and unsupported by independent evidence, were held insufficient to establish undisclosed income.

Conclusion: The addition was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The appeal succeeded because the material relied upon by the Revenue did not establish any undisclosed income for block assessment purposes.

Ratio Decidendi: In block assessment, an addition cannot be sustained merely on the basis of a retracted search statement and loose papers unless the material is corroborated by independent evidence showing undisclosed income.

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