Law:

Section:

Section 158BB of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income, computation of - Block period 1-4-1986 to 11-10-1996 - Whether only brought forward losses of past years under Chapter VI and unabsorbed depreciation under section 32(2) are to be excluded while aggregating total income or loss of each previous year in block period and set-off of loss suffered in any of previous years in block period against income assessed in other previous years in block period is not prohibited - Held, yes FACTS Pursuant to a search, the assessee filed his return of income for relevant block period and also filed an application before the Settlement Commission for claiming set-off of inter se losses and depreciation accruing in any of the previous years in the block period against the income returned/assessed in any other previous year in the block period. The Settlement Commission, however, rejected said application. On appeal, the High Court confirmed the order of the Settlement Commission. On appeal to the Supreme Court: HELD Section 158BB, inter alia, states that undisclosed income of the block period shall be 'the aggregate of the total income of the previous years falling within the block period' computed in accordance with the provisions of Chapter IV. 'Total income' is defined in section 2(45 ) to mean the total amount of income referred to in section 5, computed in the manner laid down in the Act. In other words, Chapter XIV does not rule out Chapter IV in the matter of computation of undisclosed income under Chapter XIV-B. It may be mentioned that ordinarily, in the case of regular assessment, the unit of an assessment is one year consisting of twelve months, whereas in the case of block assessment the unit of assessment consists of ten previous years and the period up to the date of the search. Section 158BB provides for aggregation of income/loss of each previous year comprised in the block period. The block period assessment under Chapter XIV-B is in addition to regular assessment. [Para 7] Analysing section 158BB(4), read with the Explanation (a) thereto, one finds that only brought forward losses of the past years under Chapter…

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