Block assessment limits tax to the profit element in unaccounted receipts, not the full gross on-money collections.

In block assessment, unaccounted gross receipts cannot be taxed as such; only the undisclosed income embedded in those receipts may be assessed. A seized paper indicating cash collections on flat sales supported the inference of on-money receipts, but Chapter XIV-B did not permit addition of the entire gross amount as undisclosed income. The assessee's material showing prior payments, land-related expenditure and construction cost also undermined any separate initial investment addition. The correct approach was to estimate only the profit element from the receipts, and that estimated profit was found to be lower than the disclosure already offered by the assessee, so the proposed addition was deleted.

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Issues: Whether the addition of Rs. 1,47,91,840 as undisclosed income under block assessment was sustainable, or whether only the profit element from the alleged unaccounted receipts could be brought to tax.

Analysis: A seized paper showed cash collections on the sale of one flat and supported the inference that the assessee was receiving on-money in relation to flats in the project. The evidence justified a finding that unaccounted receipts existed, but Chapter XIV-B authorises taxation of undisclosed income and not gross undisclosed receipts. The assessee had placed material showing payments to earlier organisers, land-related payments, and construction cost, and no material supported the proposed initial investment addition. The proper approach was therefore to estimate only the profit element from the receipts, and the estimated profit was held to be less than the disclosure already offered by the assessee.

Conclusion: The addition of Rs. 1,47,91,840 was not justified and was directed to be deleted; the issue was decided in favour of the assessee.

Ratio Decidendi: In block assessment, unaccounted gross receipts cannot be taxed as such; only the undisclosed income, namely the reasonable profit element proved or estimated from those receipts, can be assessed.

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