Block assessment cannot tax disclosed share capital; reassessment is the proper route for disturbing regular book entries.

Chapter XIV-B block assessment could not be used to tax share capital already disclosed in the assessee's books and regular returns before the search. The Tribunal applied the principle that block assessment is not a substitute for regular assessment, so an addition treating such disclosed capital as undisclosed income was unsustainable. If the Assessing Officer considered the regular assessments incomplete or erroneous, the proper course was reassessment under the applicable provisions. The addition was deleted, and the remaining grounds became academic or consequential.

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Issues: Whether additions of share capital could be made in block assessment proceedings under Chapter XIV-B when the amounts stood disclosed in the assessee's books and regular assessments, and whether such matters, if any, ought to be dealt with through reassessment proceedings.

Analysis: The assessee had regularly filed returns and the share capital stood recorded in its books before the search. The addition was made in block assessment on the footing that the shareholders were not genuine and the capital represented undisclosed income. The Tribunal noted that the same search-based controversy had already been considered in an earlier case and, following the settled principle that block assessment is not a substitute for regular assessment, held that amounts already disclosed in the regular records could not be brought to tax in block proceedings. If the Assessing Officer considered the regular assessments to be incomplete or erroneous, the proper course was to invoke reassessment jurisdiction.

Conclusion: The addition of share capital as undisclosed income in block assessment was not sustainable, and the assessee succeeded on the substantive addition issue.

Final Conclusion: The appeal was allowed to the extent that the block assessment addition was deleted, while the remaining grounds were treated as academic or consequential.

Ratio Decidendi: Chapter XIV-B block assessment cannot be used as a substitute for regular assessment to tax income already disclosed in the assessee's books and returns; if the Revenue seeks to disturb such disclosure, the appropriate remedy is reassessment under the applicable provisions.

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