Block assessment income not taxable for the year cannot be treated as undisclosed income merely for non-filing of return.

In block assessment, income of a year falling within the block period cannot be treated as undisclosed income merely because the return was not filed if that income was not otherwise taxable for the relevant assessment year. The 1995 amendment to section 158BC of the Income-tax Act, 1961 was treated as reflecting this legislative intent. The remaining issues were factual, based on appreciation of evidence, and no substantial question of law arose under section 260A. On that basis, interference in appeal was not warranted.

---

---

Issues: Whether, in a block assessment, income of a period falling within the block period but not taxable can still be treated as undisclosed income merely because the return was not filed.

Analysis: The amendment introduced with effect from 1 July 1995 in section 158BC of the Income-tax Act, 1961 indicated that where the income of a particular assessment year falling within the block period is not taxable, it should not be treated as undisclosed income. In the facts of the case, the Court held that the legislative intent, as reflected by the amendment, governed the issue and that the remaining points were findings of fact based on appreciation of evidence. On that basis, no substantial question of law arose for consideration under section 260A of the Income-tax Act, 1961.

Conclusion: The answer was against the assessee on interference in appeal, and the appeal was dismissed.

Ratio Decidendi: Income that is not taxable for the relevant assessment year within the block period cannot be treated as undisclosed income merely because the return was not filed, and an appeal under section 260A of the Income-tax Act, 1961 does not lie where no substantial question of law arises.

---