appeal of Revenue for block period 1st April, 1989 to 24th June, 1999 is directed against order dt. 23rd Oct., 2003 of CIT(A)-I, Ludhiana. We have heard parties and perused records. only dispute involved in this appeal is relating to addition of Rs. 3,87,283 made in this case under s. 158BD r/w s. 158BC deleted by CIT(A). relevant facts, briefly stated, are that search under s. 132 of IT Act, 1961, was conducted at business premises of M/s Classic Global Impex Ltd. on 24th June, 1999. On basis of documents seized and post-search enquiries made by DI (Wing), it came to light that said company was engaged in giving bogus capital gain or loss as per requirement of concerned persons. Only bills of purchase and sale of shares owned by company were supplied to earn capital gain or loss but no actual trading in shares was done and that these were merely paper transactions for purpose of giving entries of capital gains. AO having jurisdiction over respondent received information from Asstt. CIT, Central Circle-I, Ludhiana, vide his letter No. 7, dt. 12th April, 2001 informing AO that Mrs. Ranjeet Kaur had made transaction of 15,800 shares of M/s Classic Global Impex Ltd. On basis of this information, AO initiated proceedings under s. 158BD. assessee had objected to initiation of proceedings under s. 158BD. So however, AO rejected objections. assessee also asked AO to give reasons for issuing notice under s. 158BD, in response to which AO vide letter dt. 6th June, 2003 informed assessee that reasons have been recorded before t h e issue of notice under s. 158BD and that assessee was at liberty to inspect file and satisfy herself on this ground. assessee was also asked t o establish genuineness of transaction made in shares of M/s Classic Global Impex Ltd. assessee not having furnished sufficient evidence to establish genuineness of purchase or sale of shares, AO on basis of evidence recorded in paras 3 to 5 of assessment order held that transaction disclosed by assessee in purchase and sale of shares was bogus in order to claim deduction under s. 54F. AO has specifically pointed out that M/s Classic Global Impex Ltd. had engaged M/s Beetel Capital Services Ltd. as its agent for which agreement had been executed for payment of Rs. 2,000 per month to said firm. AO also referred to statement of Shri Kavintansh Khanna, director of M/s Beetel Capital Services Ltd. who had admitted that he used to effect all transfers on basis of list supplied to him by management of company without any transfer deed and without verifying any specimen signatures of previous holder because he did not have register o f specimen signatures. AO has also pointed out that transaction in shares had been routed through M/s Neeraj Aggarwal & Co. and M. Sood & Co. and statement of Shri Surinder Kumar Sood had also been recorded. Shri Sood had stated that he did not remember transaction except that payment was made to assessee by cheque. AO also referred to prevailing rate in stock exchanges of Ludhiana, Delhi and Mumbai at time of purchase and sale by assessee and has pointed out variation in rates with reference to prevalent rates at relevant point of time. AO had accordingly treated sum of Rs. 3,79,660 as undisclosed income of assessee. Further addition of Rs. 7,593 was on account of 2 per cent commission for getting entry in this regard. assessee had challenged order of AO before CIT(A) on various grounds and had pleaded as under: "That appellant had filed copies of brokers account and other contract notes along with return of income. That transaction of sale and purchase of shares was disclosed in return and as such said income could not be brought within ambit of undisclosed income under s. 158BC. That there was no satisfaction recorded under s. 158BD before issue of notice. That even on merits, no addition is justified in hands of assessee." CIT(A) held that since assessee had disclosed transaction of sale and purchase of shares in original return, AO was precluded from issuing notice under s. 158BD to assessee for purpose of assessing same income that was disclosed by assessee. Since CIT(A) quashed assessment on aforesaid ground he did not consider it necessary to record finding in regard to satisfaction recorded under s. 158BD as well as on merits of addition. Revenue is aggrieved and in appeal before us. learned Departmental Representative pointed out that in course of search of M/s Classic Global Impex Ltd., incriminating material was found to establish that share transactions claimed by various persons including assessee were bogus. Since assessee had also shown transaction of 15,800 shares of said company, AO was justified in issuing notice under s. 158BD. According to learned Departmental Representative, assessee had disclosed capital gains simply for purposes of claiming deduction under s. 54F to explain source of investment in construction of house property. It was accordingly, pleaded that order of CIT(A) may be set aside and that of AO restored. learned counsel for assessee, on other hand, reiterated contention advanced before CIT(A) that once assessee had disclosed income in original return, AO is precluded from taking action for assessment of investments, etc. in block assessment. learned counsel placed reliance on decision of jurisdictional High Court of Punjab & Haryana in case of CIT vs. Smt. Geeta Gupta in IT Appeal No. 249 of 2003 order dt. 23rd Jan., 2004 in support of contention that since assessee had disclosed assets, action under s. 158BD could not be justified. T h e learned counsel also contended that AO had not recorded satisfaction before issue of notice under s. 158BD and that assessee had placed sufficient evidence on record to support transaction in purchase of shares was genuine. It was accordingly, pleaded that appeal of Revenue may be dismissed. We have given our careful consideration to rival contentions. principle of law laid down by Hon ble Punjab & Haryana High Court in case of CIT vs. Geeta Gupta (supra) is binding upon us. In this case, their Lordships have held that "it seems that AO has not made any addition on account of anything found during course of search representing undisclosed income or assets. However, he has made addition on presumption that assets/investments reflected in statement of affairs/balance sheet ought t o have been in possession of assessee." Their Lordships have further recorded "in present case, statement of affairs/balance sheet showing capital balance in asst. yr. 1997-98 had duly been disclosed in return filed for that year. only valuable article or thing recovered at time of search was 719 gms. gold ornaments, which was less than gold ornaments of 3.4 kgs. declared in WT Return for year 1995-96. Thus, there was no question of there being any undisclosed income within meaning of s. 158B(b) of Act." crucial question, however, for our consideration is as to how far above principle of law is applicable in case before us. It has got to be decided as to whether any material was found by Revenue in course of search of any person on basis of which AO could have satisfaction that there was undisclosed income assessable in case of assessee justifying action under s. 158BD. evidence found in course of search in case of M/s Classic Global Impex Ltd. on 24th June, 1999 revealed that company was engaged in giving bogus gain or loss as per requirement of concerned persons for commission. assessee had also shown transaction in respect of above company of 15,800 shares. assessee had disclosed capital gains from sale and purchase of said shares in regular return filed for asst. yr. 2000-01 but had simultaneously claimed deduction under s. 54F in respect of investment in residential house property. important question that has been raised before us is that when assessee had disclosed capital gains in return of income, can it be said that there was undisclosed income which was chargeable to tax under block assessment procedure. It may appear that since assessee had disclosed capital gains, in other words, disclosed income rather than suppressing income, there could not be undisclosed income for purpose of bringing same to tax under Chapter XIV-B of IT Act, 1961. However, when entire facts are taken into account, it becomes abundantly clear that but for this claim of purchase and sale of shares and bogus capital gains, investment made by assessee in house property remains unexplained for which assessee would be liable to tax as income from undisclosed sources. So impact of disclosure by assessee in return covers investment made in construction of house property. In other words, if capital gain claimed by assessee is bogus and assessee has no source of income to explain investment in house property, provisions of s. 69 would be attracted and assessee liable to tax in respect of unexplained investment in house property. This is what is to be appreciated in right perspective. assessee had not offered investment made in house property as its income for relevant assessment year. investment in house property has been claimed to have been made out of sale proceeds of sale of shares which on basis of search is alleged to be bogus. Thus, there is live link between material found in course of search of another person and investment in house property made by assessee. next question that arises for consideration is as to whether CIT(A) was right in holding that since assessee, while filing return of income for asst. yr. 2000-01, had disclosed capital gain and investment in house property, no action under s. 158BD was permissible in this case. CIT(A) has held that once transaction has been disclosed in return of income same could not have been brought under definition of "undisclosed income" by any yardstick. He has cited following decisions in support of his finding: (a) CIT vs. Shamhu Lal C. Bachkaniwala (2002) 162 CTR (Guj) 435: (2000) 245 ITR 488 (Guj) (b) L.R. Gupta & Ors. vs. Union of India & Ors. (1992) 101 CTR (Del) 179: (1992) 194 ITR 32 (Del) (c) CIT vs. Vinod Danchand Ghodawat (2000) 163 CTR (Bom) 432: (2001) 247 ITR 448 (Bom) (d) Abdulgafar A. Nadiawala & Anr. vs. Dy. CIT (2002) 18 I.T. Rep. 142 (Mumbai) (e) Chinar Estates (P) Ltd. & Ors. vs. Dy. CIT & Ors. (2002) 18 Rep 531 (Del) (f) Chander Mohan Mehta vs. Asstt. CIT (1999) 65 TTJ (Pune) 327: (1999) 71 ITD 245 (Pune) 71 ITD 245 (Pune) (g) Sampat Beer Bar vs. Asstt. CIT (2002) 18 IT Rep. 220. It may be relevant to reproduce operative portion of order of CIT(A) to appreciate correctness of his order: "As held in all aforesaid decisions, undisclosed income clearly refers to income which has not been or would not have been disclosed for purposes of this Act. Respectfully following above judgments, and after gong through entire gamut of submissions of learned counsel on this issue, I am convinced that said transactions (having been duly disclosed in regular return of income for asst. yr. 2000-01) did not fall within description of undisclosed income . Consequently, I am unable to uphold action of AO in assessing said gains as undisclosed income Since appeal on this issue has succeeded, therefore, I do not consider i t necessary to dilate upon other issues, namely, justifiability of 158BD satisfaction, as well as merits of case, which have become academic and hence infructuous in nature in view of above decision." It has already been pointed out that decision of CIT(A) is also sought to be supported by decision of jurisdictional High Court in case of CIT vs. Smt. Geeta Gupta in IT Appeal No. 249 of 2003, order dt. 23rd Jan., 2004 (supra) on behalf of assessee. On going through aforementioned decisions relied upon by CIT(A) and also decision of Hon ble Punjab & Haryana High Court in case of CIT vs. Smt. Geeta Gupta (supra), we are of considered view that reliance on these decisions is misplaced. principle of law which has been laid down by Hon ble Punjab & Haryana High Court, various other High Courts and Benches of Tribunal is that block assessment has got to be based on incriminating material, found in course of search or in continuation of such proceedings and that no addition can be made on basis of entries in books of account or balance sheet filed along with return of income or during regular course of proceedings, subject to condition that no incriminating material is found in course of search on basis of which entries or disclosure made by assessee in return of income or during course of regular assessment proceedings, are found to be incorrect or false. If finding of CIT(A) that wherever assessee has disclosed transaction in original return, proceedings under s. 158BC/158BD would not be permissible, is accepted, then in no case of search assessment can be made in respect of sources of income or assets disclosed in return of income or in course of regular assessment proceedings. For example, if assessee has disclosed income from business in original return and purchases and sales are recorded in books of account and in course of search it is found that purchases claimed by assessee are bogus, then proceedings under s. 158BC or s. 158BD would not be permissible because assessee had disclosed purchases in course of regular assessment. In our considered view, judgments on this issue have to be read in context in which these have been rendered. When judgments relied upon by CIT(A) and judgment of jurisdictional High Court in case of CIT vs. Smt. Geeta Gupta are to be read in context in which these have been rendered, we are confident that there is no scope for any ambiguity. restriction placed by various High Courts and Tribunal in above referred decisions is that in case of search where no incriminating material is found, AO cannot investigate transactions, which are recorded and disclosed in regular course of assessment. Once incriminating documents are found in course of search, proceedings under s. 158BC or s. 158BD would be permissible even if those documents relate to transactions disclosed in original return. In this case, assessee had disclosed capital gains and investments in house property in regular return of income. However, as result of search in case of M/s Classic Global Impex Ltd. transactions in shares disclosed by assessee in return of income have been found to be bogus. It is on basis of incriminating documents found in course of search that transactions disclosed by assessee are found to be bogus and consequently investment made in house property claimed to have been met out of said capital gains has remained unexplained and accordingly, addition would be justified on account of undisclosed income. As pointed out earlier, bar under s. 158BC/158BD, in regard to transactions disclosed in return/balance sheet or during assessment proceedings, applies on such transactions in respect of which no incriminating document is found in course of search. This distinction has been overlooked by CIT(A). We, therefore, taking totality of facts and circumstances of this case into consideration, set aside his order in regard to this issue and hold that AO would be justified in taking action under s. 158BC/158BD even in respect of transactions disclosed in return of income if incriminating documents are found as result of search under s. 132 in case of assessee or in case of third party relating to undisclosed income. His order is, therefore, liable to be set aside. order of CIT(A) on this issue is accordingly set aside. We, however, find that CIT(A) did not decide other objections raised by assessee in regard to recording of satisfaction before issue of notice under s. 158BD and on merits of case. In order to be just and fair to assessee, we consider it appropriate to remit these two issues to file of CIT(A) for purpose of deciding same in accordance with law and after giving reasonable opportunity of being heard to assessee. Needless to mention that only issue decided by CIT(A) has been reversed by us by this order and accordingly same is not open for his fresh decision. For statistical purposes, appeal of Revenue is allowed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. SMT. RANJIT KAUR