Block assessment requires a finding on undisclosed income before disputed receipts can be assessed separately from regular assessment.

Block assessment under Chapter XIV-B can proceed separately from regular assessment, but a tribunal must first determine whether the disputed receipt constitutes undisclosed income for block purposes. Where that essential finding is absent, the court cannot properly decide the legal issue, and the matter requires fresh adjudication. Here, the tribunal had not recorded a finding on the nature of the disputed film-distribution receipts or their relationship to the regular assessment, so the order was set aside and the matter remitted for reconsideration after hearing the assessee.

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Issues: Whether the amount of Rs. 34.25 lakhs could be treated as undisclosed income in block assessment under Chapter XIV-B of the Income-tax Act, 1961, when the Tribunal had not recorded a finding on the nature of the amount and its relationship with the regular assessment.

Analysis: The assessee's search assessment and the regular assessment concerned the same film-distribution receipts, but the Tribunal did not determine the crucial factual issue whether the balance amount not received under the agreements was assessable as undisclosed income in block proceedings or was only relevant to the regular assessment. The court noted that block assessment under Chapter XIV-B and regular assessment operate in different fields and may proceed simultaneously, yet the absence of a finding on the core issue prevented a proper adjudication of the substantial questions of law.

Conclusion: The Tribunal's order was set aside and the matter was remitted for fresh consideration of the scope of Chapter XIV-B and the effect of the regular assessment, after giving the assessee an opportunity of hearing.

Ratio Decidendi: Where the Tribunal has not recorded the necessary finding on whether a receipt falls within undisclosed income for block assessment, the matter must be remitted for fresh adjudication.

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