Block assessment computation must follow the amended Section 158BB framework, with limited statutory exclusions and remand where facts remain unclear.

The retrospective amendment to the Explanation to Section 158BB requires undisclosed income for block assessment to be computed by taking the total income or loss of each previous year in accordance with the Act as a whole, subject only to the express exclusions for brought forward losses under Chapter VI and unabsorbed depreciation under Section 32(2). Losses within the block period cannot be ignored merely because the return was belated or not filed, unless the statute specifically bars their adjustment. Where the factual treatment of returns and losses still requires verification, the proper course is remand for fresh assessment under the amended framework.

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Issues: (i) Whether, after the retrospective amendment to the Explanation to Section 158BB, the undisclosed income of the block period could be computed by taking the total income or loss of each previous year in accordance with the provisions of the Act, subject to the limited exclusions relating to brought forward losses and unabsorbed depreciation. (ii) Whether the assessment order should be set aside and the matter remitted to the Assessing Officer for fresh consideration in the light of the amended provision and the facts relating to filing of returns and loss adjustment.

Issue (i): Whether, after the retrospective amendment to the Explanation to Section 158BB, the undisclosed income of the block period could be computed by taking the total income or loss of each previous year in accordance with the provisions of the Act, subject to the limited exclusions relating to brought forward losses and unabsorbed depreciation.

Analysis: The amended Explanation substituted the earlier expression linked to Chapter IV with the words requiring computation in accordance with the provisions of the Act. The result is that, for block assessment, the total income or loss of each previous year has to be aggregated on the basis of the Act as a whole, while the only express restriction remains the exclusion of brought forward losses under Chapter VI and unabsorbed depreciation under Section 32(2). The principle applied was consistent with the Supreme Court's view that inter se adjustment of losses within the block period is not prohibited, and that the statutory amendment expands the basis of computation.

Conclusion: The amended provision governs the computation of block-period undisclosed income, and losses within the block period cannot be excluded merely because the return was belated or not filed, except to the extent specifically barred by the statute.

Issue (ii): Whether the assessment order should be set aside and the matter remitted to the Assessing Officer for fresh consideration in the light of the amended provision and the facts relating to filing of returns and loss adjustment.

Analysis: The Court noted that the factual position regarding the filing of returns and the exact treatment of losses required a proper factual determination. In view of the retrospective amendment and the need to examine the applicability of the relevant clauses in Section 158BB on the available facts, the appropriate course was to send the matter back for reconsideration rather than to finally sustain the Tribunal's direction on merits.

Conclusion: The matter was remitted to the Assessing Officer for fresh assessment in accordance with law.

Final Conclusion: The appeals were disposed of by remitting the block-assessment matters for reconsideration under the amended block-assessment framework, while recognising the revised statutory basis for computing undisclosed income.

Ratio Decidendi: In block assessment, the retrospective amendment to the Explanation to Section 158BB requires computation of each previous year's income or loss in accordance with the Act, subject only to the statutory exclusions, and where the factual application of that framework remains unclear, remand for fresh assessment is appropriate.

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