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Issues: (i) Whether the peak credit addition made on account of deposits in the assessee's bank account could be sustained in block assessment; (ii) Whether the addition treating the difference in share purchase consideration as unexplained investment and undisclosed income was sustainable.
Issue (i): Whether the peak credit addition made on account of deposits in the assessee's bank account could be sustained in block assessment.
Analysis: The bank account was shown in the regular books and reflected in the balance sheets filed with the returns for the block period. The entries were also supported by the cash book. The fact that the account was referred to in the search material did not exclude scrutiny under Chapter XIV-B, but the addition could not stand without a proper examination of the source of deposits and supporting evidence.
Conclusion: The addition was set aside and the matter was remanded to the Assessing Officer for fresh examination after giving reasonable opportunity to the assessee. The issue is partly decided in favour of the assessee.
Issue (ii): Whether the addition treating the difference in share purchase consideration as unexplained investment and undisclosed income was sustainable.
Analysis: The assessee produced confirmations from the transferors, their assessment records and balance sheets, and the share purchase was recorded in the seized books before the date of search. The seized transfer deeds showing a lower figure were explained as containing a clerical mistake. No evidence was brought on record to show that the assessee had in fact made any payment from undisclosed sources prior to the search. In the absence of such conclusive material, the addition could not be justified, whether viewed under the principles applicable to unexplained investment.
Conclusion: The addition of Rs. 18,17,410 was deleted. The issue is decided in favour of the assessee.
Final Conclusion: The appeal succeeded in part, with one addition remanded for reconsideration and the other addition deleted for want of supporting evidence.
Ratio Decidendi: An addition in block assessment must rest on material found during search or other conclusive evidence, and a disclosed transaction supported by regular books and corroborative records cannot be treated as undisclosed income merely on suspicion or an unverified assumption of payment from undisclosed sources.
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