Undisclosed income in block assessment: cash found in search remained taxable despite a protective addition in regular assessment.

Cash found during a search and not recorded in the books was held taxable as undisclosed income in block assessment under Chapter XIV-B. The Court accepted that regular assessment and block assessment operate separately, and the explanation to Section 158BA prevents double taxation of income already assessed, but does not bar a block addition merely because a protective addition was made in regular assessment. On those facts, the Revenue succeeded and the block addition was upheld.

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Issues: Whether cash found during search could be assessed as undisclosed income in block assessment notwithstanding the assessee's reliance on voluntary disclosure and the existence of a protective addition in regular assessment.

Analysis: The addition arose from cash found during the search and not reflected in the books. The Court accepted that block assessment under Chapter XIV-B covers undisclosed income found in search, while regular assessment continues separately for disclosed income. The explanation to Section 158BA makes clear that income assessed in regular assessment is not to be taxed again in block assessment, but this does not bar an addition in block assessment merely because a similar amount has been added protectively in regular assessment. On the facts, the cash discovered at search remained undisclosed income liable to be brought to tax in the block assessment proceedings.

Conclusion: The question of law was answered in favour of the Revenue and against the assessee; the block addition was upheld.

Final Conclusion: The appeal failed and the tribunal's view was set aside because the amount found during search was taxable as undisclosed income in the block assessment.

Ratio Decidendi: Income found in a search and not recorded in the books is taxable as undisclosed income in block assessment, and the existence of a parallel protective addition in regular assessment does not preclude such taxation.

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