JUDGMENT judgment of court was delivered by L. Narasimha Reddy J.-The respondent is manufacturer of steel and is assessee under Income-tax Act, 1961 (for short, "the Act"). search was conducted in premises of factory on March 25, 1999. On basis of discoveries said to have been made therein, Assessing Officer initiated steps under Chapter XIV-B of Act and issued notice under section 158BC of Act. It was mentioned that comparison of figures mentioned in RG-1 register on one hand and daily rough production register ("the DRPR") on other hand revealed discrepancy of about 250 metric tonnes of steel and in that view of matter, income-tax on corresponding amount is payable at penal rate. Reference was also made to statement said to have been made by managing partner of respondent. reply was submitted by respondent to effect that purport of daily rough production register is totally different from that of RG1 register. According to them, it is only after steel that is produced on particular day and recorded in daily rough production register is cooled for three days, and weighed on approval of quality, that it can be entered in RG- 1 register. Other grounds such as that though search was made on March 25, 1999, statement was recorded on May 11, 1999, through process of questioning and prolonged interrogation were also pleaded. Ultimately, respondent filed return for block period on April 17, 2000, declaring nil income. Assessing Officer passed order on March 27, 2002, treating sum of Rs. 17,64,780 representing cost of 134 metric tonnes of steel as taxable income. Aggrieved by order passed by Assessing Officer, respondent filed appeal before Commissioner of Income-tax (Appeals)-I, Hyderabad. same was dismissed on August 27, 2002. Thereafter, it filed IT (SS) No. 120/VIZ/97 before Visakhapatnam Bench of Income-tax Appellate Tribunal (for short, "the Tribunal"). appeal was allowed through order dated March 11, 2003. Hence, this further appeal under section 260A of Act by Revenue. Sri S. R. Ashok, learned senior counsel for appellant, submits that during course of search, RG-1 register and daily rough production register were compared, apart from verifying material on ground and when particulars thereof were put to managing partner, he agreed for addition of sum of Rs. 35,00,000 towards undisclosed income. He contends that once assessment was made on basis of material found during course of search and statement recorded from managing partner of respondent under section 132(4) of Act there was no basis for Tribunal to interfere with order of assessment. Sri Y. Ratnakar, learned counsel for respondent, on other hand, submits that except that Assessing Officer made comparison of facts and figures mentioned in RG-1 register and daily rough production register, no independent material was discovered and assessment was made on basis of assumptions. He contends that entries in daily rough production register are in relation to activities that take place on particular day and quantity of steel produced on that day would be entered in RG-1 register three days thereafter on completion of cooling, quality verification and weighing and that same was mentioned in course of search as well as subsequent enquiry. Learned counsel further submits that emphasis by Assessing Officer all through was only on discrepancy between entries in two registers which is genuinely in realm of Central Excise Department and without even alleging that quantity of steel representing discrepancy was sold, attempt was made to levy penal tax. He submits that Tribunal corrected patent error committed by Assessing Officer and that no interference is warranted. search in premises of respondent was conducted on March 25, 1999, and only material on basis of which block assessment was sought to be made is that there is discrepancy in facts and figures mentioned in RG-1 register on one hand and daily rough production register on other hand, to extent of about 135 metric tonnes. attempt is made to rest order of assessment on sworn statement said to have been made by managing partner of respondent. first aspect that needs to be dealt with is as to whether statement said to have been recorded from managing partner of respondent would fit into one referable to section 132(4) of Act. provision reads: "The authorised officer may, during course of search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under Indian Income-tax Act, 1922 (11 of 1922), or under this Act." On perusal of this it becomes clear that, firstly, statement must be recorded during course of search and seizure. Secondly, it can be recorded only as sequel to discovery of books of account, cash, bullion or similar items. In instant case, search has taken place on March 25, 1999, but statement was recorded on May 11, 1999. It was not even alleged that search was carried out for entire period in between. statement recorded one-and-half months after search can by no means be brought under purview of section 132(4) of Act. Further, it becomes doubtful as to whether RG-1 register and daily rough production register which are referable to Central Excise Act and rules made thereunder can be treated as books of account mentioned in section 132(4) of Act. Assuming them to be so, statement fails to qualify test under provision on first count itself. Added to that, statement was almost in form of answer to question. answer was not in form of any voluntary disclosure. It was to effect that since facts suggested in question cannot be explained instantly, assessee had agreed to offer value of material at Rs. 35,00,000 as undisclosed income. It is relevant to mention that four days after statement was recorded, respondent submitted letter/representation on December 19, 2000. At end of it, it was mentioned that "... such admission was made only due to confusing state of mind on account of prolonged, hectic interrogation search proceedings". For all practical purposes, statement was retracted. In CIT v. Naresh Kumar Agarwal ITTA No. 112 of 2003, dated September 9, 2014- [2014] 369 ITR 171 (AP), this court dealt with evidentiary value of such statements and facts of present case fit into evidentiary value of such statements and facts of present case fit into said judgment. Coming to merits of matter, block assessment in instant case is not on basis of any discovery of wealth, bullion or books of account. sole basis is alleged discrepancy between two registers. When maintenance of registers was under Central Excise Act and rules framed thereunder, Assessing Officer could have formed opinion only after ascertaining relevant facts or method of arriving at conclusions, from concerned officials of Central Excise Department. respondent made specific plea that entries in daily rough production register are only tentative in nature and it is only after steel produced on particular day is cooled for three days, tested for quality and weighed, that corresponding entry can be made in RG1 register. This, however, did not weigh with Assessing Officer. Straightaway conclusions were drawn as to discrepancy. Even if necessary latitude is shown regarding power of Assessing Officer to make block assessment, what would have constituted basis, is suppression of sale proceeds of product. mere production of material, even if not reflected in register, does not constitute basis to levy Central excise duty, leave alone income-tax. While excise duty becomes payable when manufactured material is removed from factory, income-tax becomes payable when product is sold and sale proceeds accrue to assessee. When it was not even alleged that steel, representing differential quantity, was sold, there was no basis to infer or imagine accrual of income or corresponding obligation to pay income-tax. It does not need any emphasis that proceedings under Chapter XIV-B are penal in nature and they can be sustained if only they are founded and grounded on undisputed or established facts. assessee cannot be subjected to proceedings under that Chapter, just on basis of imaginations or surmises. Being last authority on facts Tribunal analysed every aspect and recorded finding to effect that neither Assessing Officer nor Appellate Commissioner have recorded any finding to effect that respondent has suppressed sale of any steel, referable to discrepancy in registers. We do not find any basis to interfere with order under appeal. appeal is, accordingly dismissed. There shall be no order as to costs. *** Commissioner of Income-tax v. Balaji Steel Profile