Block assessment set-off rules: only carried-forward losses and depreciation beyond the block period are barred from adjustment.

In a block assessment under Chapter XIV-B, Section 158BB governs computation of undisclosed income, while Section 158BH applies the Act's other provisions unless excluded. The bar on set-off under Section 158BB(4) applies only to losses brought forward from earlier years or unabsorbed depreciation carried beyond the block period. Losses and depreciation attributable to the block period itself are not excluded merely because the assessment is made in block proceedings and remain available for computation under the Act.

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Issues: Whether, in a block assessment under Chapter XIV-B, unabsorbed losses and unabsorbed depreciation can be set off against undisclosed income when they relate to the block period, and whether only losses or depreciation carried forward beyond the block period are barred from such set-off.

Analysis: The computation of undisclosed income under the block assessment scheme is governed by Section 158BB, while Section 158BH applies the other provisions of the Act save as otherwise provided. Sub-section (4) of Section 158BB bars set-off only of losses brought forward from a previous year or unabsorbed depreciation carried forward into the block assessment, but preserves such items for adjustment in regular assessments. The bar is therefore attracted only when the losses or depreciation have spilled over beyond the block period. If they are referable to the block period itself, they are to be worked out in the assessment and not excluded merely because the assessment is under Chapter XIV-B.

Conclusion: The set-off prohibition does not extend to losses or depreciation attributable to the block period, and the matter had to be reconsidered on that basis.

Ratio Decidendi: In a block assessment, only losses brought forward from earlier years or unabsorbed depreciation carried forward beyond the block period are excluded from set-off against undisclosed income; items referable to the block period itself remain for computation in accordance with the Act.

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