Search assessment cannot rest on post-search inquiry alone when no incriminating material is found.

In block assessment under Chapter XIV-B, additions cannot be made as undisclosed income unless incriminating material is found during search. Where the assessee had disclosed the gifts in the return and no seized material showed the gifts to be bogus, a post-search inquiry could not replace the statutory basis required for search assessment. The proper remedy, if warranted, lay in regular reassessment proceedings rather than block assessment. On these facts, the addition under block assessment was unsustainable and the Revenue's challenge failed.

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Issues: Whether, in the absence of any incriminating material found during search, additions could be made in block assessment proceedings under Chapter XIV-B on the basis of post-search inquiry and treated as undisclosed income.

Analysis: The assessee had disclosed the gifts in the return of income and no material suggesting that the gifts were bogus was found during the search. The special scheme of Chapter XIV-B applies to undisclosed income detected on the basis of material seized in search, and where no such material is recovered, a post-search inquiry cannot substitute for the statutory foundation required for block assessment. On those facts, the proper course, if at all warranted, would be reassessment under the regular reassessment provisions, not addition under the search assessment provisions.

Conclusion: The addition under block assessment was unsustainable and the Revenue's challenge failed.

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