Block assessment evidence rule: pre-search statements and related material were usable, and unexplained credits were upheld as undisclosed income.

In block assessment proceedings, material available with the Assessing Officer on the search date, including a statement recorded before the search, could be relied on under the amended section 158BB(1), which operated retrospectively from 1-7-1995. On the evidence, deposits and interest credits were treated as undisclosed income because some creditors' statements showed the credits were not genuine, while later statements from others were rejected for lack of supporting material and proof of funds. The High Court treated these findings as concurrent factual determinations and declined interference. The block assessment was sustained and the assessee's appeals failed.

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Issues: (i) Whether a statement and other material available before the date of search could be relied upon for framing block assessment under the amended scheme of section 158BB(1). (ii) Whether the deposits and interest credits were rightly treated as undisclosed income on the basis of the statements of creditors and other evidence.

Issue (i): Whether a statement and other material available before the date of search could be relied upon for framing block assessment under the amended scheme of section 158BB(1).

Analysis: The amendment to section 158BB(1) brought in the concept that material relatable to evidence available with the Assessing Officer on the date of search could be used for arriving at the block assessment conclusion. The Court held that the statement recorded before the search formed part of the material relatable to evidence available on the search date and that the provision operated retrospectively from 1-7-1995.

Conclusion: The pre-search statement and related material were validly relied upon for block assessment, against the assessee.

Issue (ii): Whether the deposits and interest credits were rightly treated as undisclosed income on the basis of the statements of creditors and other evidence.

Analysis: The Court distinguished between creditors whose statements showed that the deposits were not genuine and the remaining creditors whose later statements were rejected for want of supporting material and source of funds. The determination rested on appreciation of evidence and concurrent factual findings recorded by the lower authorities. Such findings did not give rise to a substantial question warranting interference.

Conclusion: The treatment of the impugned deposits and interest credits as undisclosed income was upheld, against the assessee.

Final Conclusion: The block assessment was sustained in full and all the tax case appeals failed.

Ratio Decidendi: In block assessment proceedings, material available with the Assessing Officer on the date of search, including a pre-search statement relatable to the evidence, may be relied upon under the retrospectively applicable scheme, and concurrent factual findings on the genuineness of credits will not be disturbed in the absence of a substantial question of law.

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