Retraction of search statement cannot alone fix undisclosed income; block assessment must rest on seized material and corroboration.

A retracted statement recorded during search under section 132(4) is admissible but not conclusive, and undisclosed income in a block assessment must be determined from seized material or other admissible evidence. On the facts noted, the Revenue's addition could not rest solely on a later-retracted statement because the seized documents did not independently establish undisclosed income at the higher figure, and there was no corroborative material quantifying that amount. The assessment was therefore confined to the income supported by the record, being the amount disclosed in the block return, and the higher addition was held unsustainable.

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Issues: Whether the assessee's undisclosed income in the block assessment could be fixed at Rs. 25 lakhs solely on the basis of a retracted statement recorded during search, or whether the assessment had to be restricted to the income supported by seized material and other admissible evidence.

Analysis: A statement recorded during search under section 132(4) of the Income-tax Act, 1961 is admissible and an admission is an important piece of evidence, but it is not conclusive and may be shown to be incorrect or unreliable. In a block assessment under Chapter XIV-B, undisclosed income has to be determined on the basis of material found as a result of search or other relevant admissible material. The statement relied upon by the Revenue was made long after the search, the assessee had retracted it, and the record did not show that the seized documents themselves established undisclosed income of Rs. 25 lakhs. The amount disclosed in the block return was Rs. 7 lakhs, and the higher addition was not supported by corroborative material quantifying such income.

Conclusion: The addition of Rs. 25 lakhs was not sustainable. The undisclosed income was directed to be taken at Rs. 7 lakhs for the block period, and the assessee succeeded to that extent.

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