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Issues: (i) Whether, in block assessment under Chapter XIV-B, the undisclosed income could be determined at an amount lower than the income originally returned by the assessee. (ii) Whether the separate addition for investment in shares was sustainable when the source stood explained from withdrawals reflected in the rough diaries already considered in the returned undisclosed income.
Issue (i): Whether, in block assessment under Chapter XIV-B, the undisclosed income could be determined at an amount lower than the income originally returned by the assessee.
Analysis: Undisclosed income in block assessment has to be computed on the basis of evidence found as a result of search and the materials available with the Assessing Officer under the special scheme of Chapter XIV-B. The return filed for the block period is not conclusive, and there is no estoppel against statute. An admission in the return may be explained or shown to be mistaken, and the assessment must reflect the correct taxable undisclosed income determined under the statutory framework. Since the detailed working furnished by the assessee was verified and found correct, the income assessable on the material before the Assessing Officer was lower than the amount originally returned.
Conclusion: The undisclosed income could validly be assessed at the lower amount of Rs. 6,60,633, and the Revenue's contention based solely on the returned figure failed.
Issue (ii): Whether the separate addition for investment in shares was sustainable when the source stood explained from withdrawals reflected in the rough diaries already considered in the returned undisclosed income.
Analysis: The rough diaries had already been aggregated and the balancing figure based on those entries was accepted as undisclosed income. The explanation that the same withdrawals were available as the source for purchase of shares was plausible and was not displaced by contrary material. A separate addition based only on the statement recorded during search, without meeting the assessee's explanation and where the source had already been brought to tax, was not justified.
Conclusion: The separate addition for shares was rightly deleted.
Final Conclusion: The block assessment had to be confined to the undisclosed income actually determined on the search material, and no further addition could be sustained merely because the assessee had originally returned a higher ad hoc figure.
Ratio Decidendi: In block assessments, the taxable undisclosed income must be determined from the search material and statutory computation provisions, and a return figure or search admission does not create an estoppel against assessment at the correct lower amount where the excess is not otherwise taxable.
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