Section 132(4) statement and register discrepancy cannot sustain block assessment without proof of suppressed sales.

A statement recorded long after a search could not be treated as a valid Section 132(4) statement, especially when it was not shown to be voluntary and was later retracted; it therefore lacked evidentiary value for sustaining the assessment. A block assessment could not rest solely on a mismatch between RG-1 and DRPR registers, because no independent material showed suppression of sales or accrual of income. Mere production-record discrepancy was insufficient to infer undisclosed income, and proceedings under Chapter XIV-B required a firm factual foundation rather than surmise.

---

---

Issues: (i) Whether a statement recorded after the search could be treated as a statement under Section 132(4) of the Income-tax Act, 1961 and used against the assessee; (ii) Whether a block assessment could rest solely on a discrepancy between RG-1 and DRPR entries without proof of suppression of sales or accrual of income.

Issue (i): Whether a statement recorded after the search could be treated as a statement under Section 132(4) of the Income-tax Act, 1961 and used against the assessee.

Analysis: The statutory power under Section 132(4) applies to examination on oath during the course of search or seizure and in relation to persons found in possession or control of books, documents or valuables discovered in that process. A statement recorded long after the search did not satisfy that requirement. The statement was also not shown to be voluntary in nature and was subsequently retracted, which further weakened its evidentiary value.

Conclusion: The statement could not be treated as a valid statement under Section 132(4) for the purpose of sustaining the assessment.

Issue (ii): Whether a block assessment could rest solely on a discrepancy between RG-1 and DRPR entries without proof of suppression of sales or accrual of income.

Analysis: The assessment was founded only on the alleged mismatch between two registers maintained under the excise regime. No independent material was found to show that the differential quantity was sold or that sale proceeds accrued to the assessee. Mere discrepancy in production records, without proof of suppression of sales, was insufficient to infer undisclosed income. Proceedings under Chapter XIV-B were treated as requiring a firm factual foundation and could not be sustained on surmise or assumption.

Conclusion: The block assessment was unsustainable and the addition could not be upheld.

Final Conclusion: The Revenue failed to establish any legally sustainable basis for the addition, and the assessee succeeded in having the assessment set aside.

Ratio Decidendi: A block assessment under Chapter XIV-B cannot be sustained on a retracted statement recorded outside the scope of Section 132(4) or on a mere discrepancy in production registers unless there is material showing suppression of sales and accrual of undisclosed income.

---