Block assessment principles allow Chapter VI-A deductions and exclude income already disclosed in regular assessment.

In block assessment under section 158BB(1), deductions otherwise allowable under Chapter VI-A remain available in computing undisclosed income, because the statutory scheme does not exclude them. Amounts already disclosed in the regular return and assessed under regular proceedings do not fall within the definition of undisclosed income under section 158B(b); accordingly, the retirement receipt of Rs. 1,50,500, having been reflected and assessed, was outside block assessment. The text states that these principles rendered the challenged additions unsustainable and that the Revenue's appeal failed.

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Issues: (i) Whether deduction under Chapter VI-A of the Income-tax Act, 1961 is admissible while computing undisclosed income under section 158BB(1) of the Income-tax Act, 1961 for the block period. (ii) Whether the sum of Rs. 1,50,500 received on retirement from the firm and already disclosed in the regular return and assessed under section 143(3) of the Income-tax Act, 1961 could be included in undisclosed income under section 158B(b) of the Income-tax Act, 1961.

Issue (i): Whether deduction under Chapter VI-A of the Income-tax Act, 1961 is admissible while computing undisclosed income under section 158BB(1) of the Income-tax Act, 1961 for the block period.

Analysis: The computation of undisclosed income under the block assessment provisions has to be made in accordance with the Act. The proviso to clause (a) of the Explanation to section 158BB indicates the manner of aggregation, and the statutory scheme does not exclude allowable deductions under Chapter VI-A. The substituted expression in the provision supports the view that deductions otherwise admissible under the Act remain available in such computation.

Conclusion: Deduction under Chapter VI-A is admissible while computing undisclosed income under section 158BB(1) of the Income-tax Act, 1961.

Issue (ii): Whether the sum of Rs. 1,50,500 received on retirement from the firm and already disclosed in the regular return and assessed under section 143(3) of the Income-tax Act, 1961 could be included in undisclosed income under section 158B(b) of the Income-tax Act, 1961.

Analysis: Amounts that were already disclosed in the regular return and considered in regular assessment cannot be characterised as undisclosed income for block assessment purposes. Since the receipt had been reflected in the return and taken into account in the assessment order, it fell outside the statutory definition of undisclosed income.

Conclusion: The amount of Rs. 1,50,500 could not be included in undisclosed income under section 158B(b) of the Income-tax Act, 1961.

Final Conclusion: The additions challenged in the appeal were upheld as unsustainable, and the block assessment principles were applied in favour of the assessee on the decided issues, resulting in dismissal of the Revenue's appeal.

Ratio Decidendi: In block assessment, deductions otherwise allowable under the Income-tax Act may be considered in computing undisclosed income, and income already disclosed in the regular return and assessed in regular proceedings does not constitute undisclosed income.

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