Block assessment evidence rule bars extrapolated additions for earlier years without seized material or admission.

In a block assessment under search provisions, undisclosed income must be computed only on the basis of evidence found during the search and material relatable to that evidence. An estimated suppression of turnover for earlier years, derived by extrapolating the search-period ratio of accounted to unaccounted sales, was held arbitrary because no seized material or admission supported those earlier years. On the same footing, an addition for initial capital allegedly needed to run an undisclosed business for earlier years could not survive. The additions for suppressed turnover and capital employed were deleted.

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Issues: Whether, in a block assessment under search provisions, additions towards alleged suppression of turnover for earlier years and the corresponding capital employed for undisclosed business could be sustained on a presumptive extrapolation from the search period despite the absence of seized material or an admission for those earlier years.

Analysis: The only material found during search related to the period covered by the bank accounts operated during the search-linked period, and the assessee had already disclosed the income arising from that material in the block return. No evidence was found for the earlier years, and the statement recorded did not admit suppression of sales in those years. Section 158BB(1) requires computation of undisclosed income on the basis of evidence found as a result of search and material relatable to such evidence. An estimate of earlier years' turnover by applying the ratio of accounted to unaccounted sales for the search period, without supporting search evidence for those earlier years, was held to be arbitrary. On the same reasoning, an addition for initial capital allegedly required to run undisclosed business for earlier years could not survive.

Conclusion: The additions sustained towards suppression of turnover and enhanced towards capital employed for undisclosed business were deleted; the assessee succeeded on the substantive issue.

Ratio Decidendi: In a block assessment, undisclosed income must be computed on the basis of evidence found in search and material relatable to that evidence, and cannot be extended to earlier years by mere extrapolation or notional estimation in the absence of seized material or an admission.

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