1997 (9) TMI 614 - AT - Income Tax

Summary

Issues Involved:
1. Computation of undisclosed income for the block period.
2. Set-off of losses incurred during the block period against the income of other years within the same block period.

Summary:

Issue 1: Computation of Undisclosed Income for the Block Period

The appeal arises from an assessment made u/s 158BC of the Income-tax Act, following a search u/s 132. The block period includes assessment years 1986-87 to 1995-96 and the period from 1-4-95 to 2-8-95. The assessee contended that the "undisclosed income for the block period could only be computed by setting off the loss incurred in any of the years falling in the block period against the profit for the other years." The Tribunal examined the provisions of Chapter XIV-B and the relevant sections, particularly section 158BB, which provides for the aggregation of income or loss of each previous year within the block period.

Issue 2: Set-off of Losses Incurred During the Block Period

The assessee argued that it is permissible to set off losses incurred during the block period against the income earned in the same period. The Tribunal noted that section 158BB(1) and its Explanation (a) allow for the aggregation of income or loss of each previous year within the block period, excluding brought forward losses under Chapter VI and unabsorbed depreciation u/s 32(2). The Tribunal held that there is no prohibition against setting off losses of some previous years within the block period against the income of other years within the same period. The Tribunal emphasized that the block period should be treated as one unit, and the principle of aggregation applies, allowing for the adjustment of losses against income within the block period.

Conclusion:

The Tribunal accepted the assessee's claim and directed that the losses for the assessment years 1989-90, 1993-94, 1994-95, and 1995-96, as computed in the block assessment, be set off against the undisclosed income computed for the other previous years within the block period. The appeal was allowed to this extent, and other grounds were not addressed as they were not argued.