Block assessment requires search-linked material; unexplained bank credits alone cannot be taxed as undisclosed income.

In block assessment proceedings under Chapter XIV-B, only undisclosed income detected from evidence found as a result of search, or material relatable to that evidence, can be assessed. The Assessing Officer must establish a nexus between the search material and the addition; mere unexplained credit entries in a disclosed bank account, without such linkage, fall within regular assessment and cannot be treated as undisclosed income. Additions made solely on that basis were unsustainable, and the finding in favour of the assessee was upheld.

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Issues: Whether, in block assessment proceedings under Chapter XIV-B, unexplained credit entries in a disclosed bank account could be treated as undisclosed income when no material relatable to the search was brought on record.

Analysis: Block assessment is confined to undisclosed income detected on the basis of evidence found as a result of search or requisition, together with material or information available to the Assessing Officer that is relatable to such evidence. The Assessing Officer must apply mind to the material gathered after search and establish a nexus between that material and the evidence unearthed during search. Mere unexplained entries in books or bank accounts, without such linkage, belong to the domain of regular assessment and cannot be brought to tax as undisclosed income in block assessment proceedings.

Conclusion: The additions made only on the basis of unexplained credit entries, without any material relatable to the search, were not sustainable. The finding in favour of the assessee was upheld and the revenue's appeal failed.

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