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Issues: Whether, in computing undisclosed income for a block period under Chapter XIV-B, income of a previous year falling within the block period can be excluded merely because it was below the taxable limit and no return was filed.
Analysis: Chapter XIV-B provides a special procedure for assessment of undisclosed income in search cases. The statutory scheme under sections 158BA, 158BB and 158BC requires the aggregate of income for the block period to be determined on the basis of the materials found and the manner of computation prescribed by the Act. The Court held that the block assessment is of income for the entire block period, and the statute does not carve out an exclusion for income of a particular year merely because it was below the assessable limit. The note in Form No. 2B could not override the statutory provisions, and even where the return was not filed because income was below the taxable limit, the income for that previous year was still required to be considered in the block computation.
Conclusion: Income below the taxable limit for a previous year cannot be excluded from undisclosed income of the block period merely on that ground; the question was answered in favour of the Revenue.
Ratio Decidendi: In a block assessment under Chapter XIV-B, undisclosed income is to be computed for the entire block period in accordance with the statutory scheme, and income of any previous year within that period is not excluded merely because it was below the taxable threshold or no return was filed.
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