Disclosed salary and interest cannot be taxed as undisclosed income in block assessment without incriminating search material.

Salary and interest received from a firm could not be treated as undisclosed income in block assessment where the firm had already disclosed those payments in its return, tax audit report and statement of income before the search. The definition of undisclosed income under section 158B(b) requires income not disclosed for the purposes of the Act, and no incriminating material was found during search to support the addition. The fact that the assessee's own return was not filed in time did not convert already disclosed receipts into undisclosed income. The deletion of the addition was upheld.

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Issues: Whether salary and interest received from a firm could be treated as undisclosed income in block assessment when the firm had filed its return and disclosed the payments before the search.

Analysis: The definition of undisclosed income under section 158B(b) of the Income-tax Act, 1961 requires that the income or transaction must represent income not disclosed for the purposes of the Act. The assessee's salary and interest from the firm had already been reflected in the firm's return, tax audit report, and statement of income filed before the search under section 132. No incriminating material was found during search to support the addition. In these circumstances, the disclosed receipts could not be characterised as undisclosed income merely because the assessee's individual return for the relevant assessment year had not been filed within time.

Conclusion: The addition of salary and interest as undisclosed income was rightly deleted and the Revenue's challenge failed.

Ratio Decidendi: Income already disclosed to the Department through the payer's return and supporting records before search cannot be assessed as undisclosed income in block proceedings absent incriminating material found during search.

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