Block assessment of search income requires books or records for exclusion of unexpired-year amounts

Undisclosed income found in search was held assessable in the block period under Chapter XIV-B, which requires strict construction and does not permit exclusion merely because the previous year was still open or the regular return time had not expired. Exclusion under section 158BB(1)(d) was available only if the assessee produced normal-course books or other records showing entries relatable to the income or transactions before the search. As no such material was produced, the full amount was rightly brought to tax in block assessment and the Tribunal's contrary view was set aside.

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Issues: Whether the entire sum of Rs. 50 lakhs found in the search could be assessed as undisclosed income for the block period under Chapter XIV-B, and whether any part of the amount could be excluded on the ground that the assessee could file a regular return for the balance of the accounting year.

Analysis: Chapter XIV-B was held to require strict construction, and undisclosed income falling within the statutory definition could not escape block assessment merely because the previous year had not ended or the time for filing the regular return had not expired. Exclusion under section 158BB(1)(d) was held to be available only where the assessee produced books of account or other normal-course records showing entries relatable to the income or transactions up to the date of search. On the facts, no such material was produced and the assessee had not brought any relevant business records to support exclusion of the amount from the block period.

Conclusion: The entire amount of Rs. 50 lakhs was rightly brought to tax in the block assessment, and the Tribunal's view was erroneous.

Final Conclusion: The appeal succeeded and the order of the Assessing Officer as affirmed by the Appellate Commissioner was restored, with the substantial questions answered for the Revenue.

Ratio Decidendi: Under Chapter XIV-B, income discovered in search can be excluded from block assessment for the unexpired part of the year only if supported by normal-course books or records showing the relevant entries before the search; otherwise it remains assessable as undisclosed income of the block period.

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