Block assessment must rest on search evidence; unrelated statements cannot sustain additions under Chapter XIV-B.

A block assessment under Chapter XIV-B must be founded on evidence found during search, and any other material used by the Assessing Officer must be relatable to that search evidence. Where additions were made mainly on statements and material not forming part of the search material from the assessee's premises, the block assessment could not be sustained. The Tribunal was therefore justified in setting aside the block assessment and allowing the Assessing Officer to proceed with regular assessment or reassessment in accordance with law.

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Issues: Whether the block assessment could be sustained when it was not founded on search material found during the search and the material relied on was not relatable to such search evidence.

Analysis: For a block assessment under Chapter XIV-B, the assessment must rest on evidence found as a result of the search and on other material or information available with the Assessing Officer only if such material is relatable to the search evidence. The assessment order showed that the additions were based mainly on statements and other material which did not form part of the search material found in the assessee's premises. In that situation, the Tribunal was justified in holding that the block assessment could not be sustained on the material relied upon, and in permitting the Assessing Officer to proceed with regular assessment or reassessment in accordance with law.

Conclusion: The block assessment was rightly set aside; the decision is against the Revenue and in favour of the assessee.

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