The main legal point established in the judgment is that donations made to a political party were not treated as undisclosed income, and additions based on account entries and sworn statements must be supported by concrete evidence.

P.P.S. JANARTHANA RAJA, J.

1. The Revenue has filed the present appeals against the order of the Income-tax Appellate Tribunal under Section 260A of the Income-tax Act, 1961, raising the following questions of law:-

T.C.(Appeal) No.799/2005:-

"1.Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that donations to the tune of Rs.75 lakhs made by the assessee to the All India Anna Dravida Munnetra Kazhagam could not be included in the undisclosed income of the block period ignoring relevant materials like absence of any list of donors at the time of search, the list furnished later on not showing the addresses and identity of the donors and the unreliable nature of the affidavits filed and relying on irrelevant material like the improbability of the assessee having earned such income in the absence of any specific source, without taking into consideration the provisions of section 68, 69 and 69A of the Income Tax Act ?

2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that a sum of Rs.2.25 lakhs given by Shri. J.A.Richards could not be assessed as undisclosed income for the block period even though the said person has admitted the payment to the assessee specifying the purpose of payment, in the statement made under oath, the payment was corroborated by the entries in the diary of the then Chairman of Tamil Nadu Mineral Corporation and the assessee also did not avail of the specific opportunity to examine the records and furnish evidence to rebut the inference ?"

T.C(Appeal) No.1202 of 2005:-

"1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the block assessment under Section 158BC could not be made unless the assessment is based only on materials, valuables etc found during the course of such search ?

2. Whether in the facts and circumstances of the case, the Tribunal was right in holding the information not found during the course of search cannot be used to arrive at an undisclosed income under the Block Assessment as per the Section 158BB amended with retrospective effect from 01.07.1995?"

2. The brief facts arising out of the appeals are as under:-

The assessee was a former Minister for Industries in the Tamil Nadu Government during the period 1993 to 1996. The Revenue conducted a raid under Section 132 of the Income Tax Act, 1961 (hereinafter called as the "Act") on 21.11.1996. During the course of raid, some incriminating documents were seized. Therefore, the Assessing Officer issued a notice under Section 158 BC of the Act on 11.03.1997 directing the assessee to furnish return of income in Form -2B for the block period 1987-88 to 1997-98. The block assessment years are 1987-88 to 1997-98. The assessee/respondent has filed return of income on 13.11.1997 showing the undisclosed income as Nil. Subsequently, the Assessing Officer completed the block assessment for the block period determining the undisclosed income at Rs.99,94,761/-. Aggrieved by that order, the assessee/respondent filed appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal allowed the appeal in part and set aside the order of assessment directing the Assessing Officer to redo the matter after giving opportunity to the assessee. In consequence of the same, the Assessing Officer sent a notice to the respondent/assessee and completed the revised assessment as per the direction of the Tribunal and completed the assessment under Section 143(3) of the Act read with Section 158 BC of the Act and determined the undisclosed income at Rs.77,93,730/-. While completing the assessment, the Assessing Officer included a sum of Rs.75,00,000/-, which was advanced by the assessee as donation to the building fund of All India Anna Dravida Munnetra Kazhagam (herinafter called as "AIADMK") as undisclosed income. Further the Assessing Office