The main legal point established in the judgment is the requirement for incriminating evidence found during search and seizure operations and the likelihood of disclosure by the assessee for computing undisclosed income in a block assessment under Chapter XIV-B of the Income Tax Act, 1961.

Vibhu Bakhru, J.

1. The Revenue has filed this appeal under Section 260A of the Income Tax Act, 1961 (hereafter the “Act”) impugning an order dated 23rd June, 2003 (hereafter “the impugned order”) passed by Income Tax Appellate Tribunal (hereafter “the ITAT”) in IT(SS) No. 68/Del/2002 filed by the Assessee. This appeal was directed against an order dated 13th February, 2002 passed by the Commissioner of Income Tax (Appeals) [hereafter “the CIT(A)”] in an appeal preferred by the Assessee against the assessment order dated 27th February, 2001 passed by the Assessing Officer (hereafter “the AO”) for the Block Period 1st April, 1988 to 25th February, 1999.

2. The controversy involved in the present appeal relates to an addition of Rs.74 lacs made by the AO as undisclosed income of the Assessee. Admittedly, the said payment of Rs.74 lacs was made in cash for purchasing a property. The ITAT, in its order, has held that the AO had not made out any valid case for treating the investment as the undisclosed income of the Assessee for the block period. The ITAT further held that the addition on account of unexplained income, if any, had to be considered in the regular assessment on the basis of books of accounts and the return filed by the Assessee and there was no justification for considering the investment in the block assessment under Chapter XIV-B of the Act. This is contested by the Revenue.

3. By an order dated 19th February, 2007 the following substantial questions of law were framed for consideration:-

"1. Whether the Income Tax Appellate Tribunal was correct in law in deleting the addition of Rs.74 lacs paid by the Assessee in cash for the purchase of property bearing No.C-104, Naraina Vihar, Delhi?

2. Whether the Income Tax Appellate Tribunal was correct in law in holding that the provisions of Section 158 BB of the Income Tax Act, 1961 were not applicable to the facts of the case?

3. Whether the Income Tax Appellate Tribunal was correct in law in holding that the genuineness of the investment made for the purchase of property bearing No.C-104, Naraina Vihar, Delhi was to be considered in the hands of the Assessee, Smt. Anita Aggarwal and Harjeev Aggarwal and Sons, HUF?"

4. Briefly stated, the facts relating to the present case are as under:-

4.1 A search was conducted on 01.02.1999 on the premises of one Mr. Arvind Seth, a Non-resident Indian, pursuant to a specific information received from the investigation wing that the property bearing No. C 104, Naraina Vihar, Delhi owned by Mr. Arvind Seth, was being sold for Rs.86 lacs out of which only Rs.12 lacs were paid by cheque and the balance was payable in cash. The said search resulted in recovery of Rs.42.50 lacs and US $30000 from Mr. Arvind Seth of N-29, Green Park, New Delhi. A copy of the agreement to sell and a receipt confirming part payment of the sale consideration were also found and seized. Mr. Arvind Seth admitted, in his statement recorded during the search, that he had received total consideration of Rs.86 lacs out of which Rs.12 lacs was by way of cheque and the balance Rs.74 lacs was in cash. He also stated in his statement that although he has signed the receipt for the full amount, Rs.20 lacs was still to be received by him from Mr. Harjeev Aggarwal, the Assessee herein.

4.2 Since it was claimed that the amount of Rs.20 lacs was yet to be received and that the registration of the property was yet to be completed, a search was carried out on 02.02.1999 at the premises C-108, Naraina Vihar, Delhi - the residence of Mr. Harjeev Aggarwal.

4.3 During the search, the Income Tax Authorities seized certain books of accounts of the Assessee including a diary (referred to as “Annexure 8”), which contained a record of certain unaccounted sales and purchases made by the Assessee. Although Rs.1,00,600/- cash was also found, the same was stated to belong to the mother of the Assessee and was not seized.

4.4 In his statement during the search, the Assessee admitted that he e