Block assessment limits additions to undisclosed income within the block period; traced salary funds and third-party deposits could not be treated as unexplained.

In block assessment, additions are confined to undisclosed income within the relevant block period, and the Assessing Officer in remand cannot go beyond the Tribunal's earlier directions. Fixed deposits made before the block period, or deposits standing in others' names without cogent evidence that the funds belonged to the assessee or that the holders were benamidars, cannot be treated as undisclosed income. Investment in a housing society flat was also held explained where payments were traced to a bank account credited with salary income subjected to tax deduction at source, and the absence of separate returns did not by itself make the investment undisclosed. The impugned additions were therefore unsustainable.

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Issues: (i) Whether additions made in block assessment towards fixed deposits could be sustained when part of the deposits related to a period prior to the block period and the remaining deposits stood in the names of others. (ii) Whether investment in a housing society flat could be treated as undisclosed income in block assessment when the payments were made from a bank account funded by salary income subjected to tax deduction at source.

Issue (i): Whether additions made in block assessment towards fixed deposits could be sustained when part of the deposits related to a period prior to the block period and the remaining deposits stood in the names of others.

Analysis: The block assessment framework under Chapter XIV-B permits addition only of undisclosed income falling within the relevant block period. The earlier order had already held that fixed deposits of Rs. 2,10,818 were made before the block period and therefore could not be included. It also held that fixed deposits of Rs. 4,99,304 standing in the names of others could not be treated as the assessee's undisclosed income in the absence of cogent evidence that the monies belonged to the assessee or that the named persons were benamidars. In remand proceedings, the Assessing Officer was bound by the Tribunal's directions and could not reopen what had already been concluded.

Conclusion: The additions relating to Rs. 2,10,818 and Rs. 4,99,304 were not sustainable and were liable to be excluded from the block assessment.

Issue (ii): Whether investment in a housing society flat could be treated as undisclosed income in block assessment when the payments were made from a bank account funded by salary income subjected to tax deduction at source.

Analysis: The payments to the housing society were traced to cheques issued from the assessee's bank account into which salary income was credited. The salary income had been subjected to tax deduction at source, and the material on record did not show that the funds were from an undisclosed source. The Tribunal had already concluded in the first round that the investment in the flat was explained and could not be regarded as undisclosed income merely because separate returns had not been filed. The remand was limited to recomputation in light of those findings, and the Assessing Officer could not travel beyond them.

Conclusion: The addition on account of investment in the housing society flat was not sustainable as undisclosed income.

Final Conclusion: The Revenue's appeal failed and the assessee's cross-objection succeeded, as the impugned additions were either outside the block period, unsupported by evidence, or already concluded in the assessee's favour in the earlier round.

Ratio Decidendi: In block assessment, only undisclosed income falling within the block period can be brought to tax, and in remand proceedings the Assessing Officer must strictly confine himself to the Tribunal's directions; additions cannot be sustained on the basis of mere suspicion where the source is traceable to disclosed salary income subjected to TDS or where the alleged investment stands in the names of others without cogent evidence linking it to the assessee.

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