Block assessment permits inter se set-off of losses and unabsorbed depreciation within the block period, subject to quantification.

In block assessment, undisclosed income is computed under the ordinary rules of the Act, so loss and unabsorbed depreciation arising in different years within the block period may be set off inter se. The rejection of that claim in principle was incorrect because the statutory scheme does not prohibit such aggregation within the block period, though brought forward items outside the permitted framework remain subject to the statute. The assessee was therefore entitled to the set off claimed, and the matter required remand only for verification and quantification on the available record.

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Issues: Whether, in computing undisclosed income for block assessment, the assessee was entitled to set off loss and unabsorbed depreciation against the total income, and whether the Assessing Officer was right in rejecting that claim.

Analysis: The computation of undisclosed income under the block assessment provisions does not exclude the ordinary rules of computation under the Act. The relevant scheme permits aggregation of income and loss of the previous years falling within the block period, while brought forward losses of earlier years and unabsorbed depreciation are excluded only to the extent indicated by the statutory framework. A prior Supreme Court ruling on the same computation method was applied, and it was held that inter se set off of losses and depreciation accruing in different years within the block period is not prohibited. However, the quantification of the admissible set off had to be verified on the material available before the Assessing Officer.

Conclusion: The rejection of the assessee's claim on principle was incorrect. The assessee was held entitled to set off loss and unabsorbed depreciation, and the matter was remitted only for quantification.

Ratio Decidendi: In block assessment, undisclosed income is computed in accordance with the Act so that inter se set off of losses and unabsorbed depreciation within the block period is permissible, subject to proper quantification on the record.

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