Block assessment law bars set-off of brought forward losses and unabsorbed depreciation against undisclosed income.

Chapter XIV-B provides a special block assessment regime for search cases, separate from regular assessment, and Section 158-BB sets out the method for computing undisclosed income for the block period. Under Section 158-BB(4), brought forward business loss and unabsorbed depreciation cannot be set off against undisclosed income determined in block assessment, although they may remain available for adjustment in regular assessment. The statutory scheme therefore excludes aggregation of such losses or depreciation within the block computation, and the claimed set-off was not permissible.

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Issues: Whether, in a block assessment under Chapter XIV-B, unabsorbed depreciation and brought forward business loss can be set off against undisclosed income of the block period under Section 158-BB(4) of the Income-tax Act, 1961.

Analysis: Chapter XIV-B creates a special and distinct procedure for search cases, separate from regular assessment. The scheme of Section 158-BA and the Explanation to Section 158-BA(2) treats block assessment as additional to regular assessment, while Section 158-BB lays down the method for computation of undisclosed income. Section 158-BB(4) expressly provides that brought forward losses under Chapter VI and unabsorbed depreciation under Section 32(2) shall not be set off against undisclosed income determined for the block period, though they may be carried forward for adjustment in the regular assessment. The statutory language leaves no room to aggregate such losses or depreciation within the block assessment.

Conclusion: The claimed set-off was not permissible in block assessment and the issue was decided against the assessee.

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