Block assessment can rest on search material and connected evidence where undisclosed income is shown by seized records and statements.

In a block assessment under Chapter XIV-B, undisclosed income may be computed on the basis of evidence found during search and connected material available with the Assessing Officer. Here, the addition rested on search material, including the partner's statement and seized diaries showing unrecorded catering receipts, and the lower appellate authorities concurrently found that the books did not fully reflect catering income. Applying section 158BB of the Income-tax Act, 1961, the court found no reliance on extraneous material and no legal infirmity in the sustained addition. The challenge failed because the concurrent factual findings did not give rise to any substantial question of law.

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Issues: Whether, in a block assessment under Chapter XIV-B, undisclosed income could be estimated on the basis of evidence found during search and connected materials, and whether any substantial question of law arose from the addition sustained.

Analysis: The assessment was founded on material found during search, including the partner's statement recorded in the course of search and seized diaries showing unrecorded catering receipts. The lower appellate authorities concurrently found that the books did not reflect the full catering income and sustained a reduced addition on that basis. Section 158BB of the Income-tax Act, 1961 requires computation of undisclosed income of the block period on the basis of evidence found as a result of search or requisition and other material available with the Assessing Officer. On the facts, the addition was not based on extraneous material, and the concurrent findings of fact did not give rise to any legal infirmity warranting interference.

Conclusion: The addition sustained in block assessment was upheld and no substantial question of law arose; the assessee's challenge failed.

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