Prior disclosure defeats undisclosed income treatment under Chapter XIV-B, even when the return was belated or irregular.

Income disclosed to the Department before search cannot be treated as undisclosed income under Chapter XIV-B merely because the return was belated or otherwise irregular. The decisive test under the definition of undisclosed income is whether the income had been disclosed for the purposes of the Act; here, the Department already had the relevant information through prior disclosure, a later return, and correspondence, and the search revealed no previously suppressed material. The court distinguished authority relied on by the Revenue because it involved advance tax and not prior disclosure of the same income. The issue was answered in favour of the assessee.

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Issues: Whether income disclosed to the Department by way of a belated return and related communication prior to search could still be treated as "undisclosed income" under Chapter XIV-B.

Analysis: The income in question had been communicated to the Department nearly three years before the search, first through a voluntary disclosure scheme and then through a subsequent return and correspondence. The defining feature of "undisclosed income" under Section 158B(b) is that it must be income not disclosed for the purposes of the Act. On the facts, the Department itself already had the relevant information before the search, and the search did not uncover any previously suppressed material. The Court distinguished the precedent relied upon by the Revenue, as that case dealt with advance tax and did not involve prior disclosure of the same income to the Department. Once the assessee had already placed the income before the Department, it could not be re-characterised as undisclosed income merely because the return was belated or irregular.

Conclusion: The income was not undisclosed income within the meaning of Section 158B(b), and the issue was decided in favour of the assessee.

Ratio Decidendi: Income already disclosed to the Department before search cannot be treated as undisclosed income under Chapter XIV-B merely because the return in which it was shown was belated or otherwise not a valid return under Section 139.

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