INCOME TAX ACT, 1961

--Search and seizure--Block assessment Undisclosed income--In fact assessee intended to declare profit earned out of the unrecorded sales and not the total amount of unrecorded sales. Assessee also retracted from the statement made by Mr. S that the sale proceeds out of the unrecorded sales were invested in purchase of agricultural land and instead contended that said investment was in fact shown as an advance of respective members of the family by company. Accordingly in the return filed in response to notice issued under section 158BC, assessee declared undisclosed income which included gross profit on account of unaccounted sales relatable to shortage of gold ornaments. Assessing officer accepted the contention of the assessee and assessed undisclosed income as disclosed by assessee in the return filed. Subsequently the Commissioner (Central), Pune set aside the assessment order passed by the assessing officer under section 158BC vide his order under section 263 on the ground that said order of the assessing officer was erroneous and prejudicial to the interest of revenue. In so far as assessing officer accepted the retraction of statement made under section 132(4) by Mr. Shantikumar Shah without verifying investment made in purchase of agricultural land and development expenses incurred which was admitted by Mr. S as out of proceeds of unrecorded sales in the above said statement. Stand of the assessee before the assessing officer at this stage was that the unrecorded sales of assessee cannot be assessed as undisclosed income merely because assessee could not correlate/identify corresponding purchases. It was further contended that the shortage of stock itself indicate that all the purchases were accounted for properly but only sales were not accounted for. Therefore in respect of such unaccounted sales only gross profit ought to have been added instead of adding the entire unrecorded sales because investment in agricultural land was found at the time of search. The Commissioner (Appeals) upheld the order of assessing officer. Held: While framing block assessment entire undisclosed/suppressed sales could not be treated as undisclosed income on such unaccounted/suppressed sales but only the gross profit on such would be assessed as such undisclosed income.