Judgment L. Narasimha Reddy, J. This appeal under Section 260-A of the Income Tax Act, 1961 (for short ‘the Act’) is preferred against the order dated 03-04-2000 passed by the Hyderabad Bench ‘B’ of The Income Tax Appellate Tribunal (for short ‘the Tribunal’). The appellant is the assessee. The facts, that gave rise to the filing of this appeal, are as under: The appellant is a Company, engaged in the business of manufacture and supply of PVC Leather Cloth and PVC Film. It submitted returns, year after year. At least from the assessment year 1987-88, it has been showing losses in the returns. A search was conducted on 08-10-1996, and on the basis of the discoveries made therein, the Income Tax Officer (ITO) made a block assessment, for the period 1987-88 to 1997-98. Broadly stated, he took the view that the aggregate of losses posted for the period of one decade, in the annual assessments, was Rs.12,59,78,540/-, and if the undisclosed income of Rs.1,46,02,752/- is taken into account, the loss would get reduced to Rs.11,13,75,788/-. Through his order dated 12-03-1998, the ITO levied tax on the differential amount of the loss, by treating it as undisclosed income. An appeal was filed by the appellant, before the Appellate Tribunal, against the order of the ITO. Two contentions were urged before the Tribunal: The first was that the occasion to levy penal tax would arise, if only the search, and the consequential block assessment resulted in showing of income, over and above the loss that was shown in the individual assessments for the corresponding period; and if the undisclosed income has the effect of just reducing the loss, no tax can be levied. The second contention was that, even while making the block assessment, the depreciations, allowances and reductions, as are provided in respect of the regular and normal assessments, must be allowed. It was pleaded that the appellant had to its credit, the accumulated depreciation, and the occasion to set off the same against profits did not arise, on account of the incurring o losses in the concerned assessment years; and the undisclosed income, noticed in the search, must be subjected to the depreciation and other facilities under law. The Bench of the Tribunal that heard the appeal, comprised of the Vice-President and the Accountant Member. In their order dated 21-06-1999, the members differed in their views. The Bench of the Tribunal that heard the appeal, comprised of the Vice-President and the Accountant Member. In their order dated 21-06-1999, the members differed in their views. The Vice-President agreed with the contention of the appellant, whereas the Accountant Member took the contrary view. Therefore, the matter was referred to a third member, who, in turn, agreed with the Accountant Member. The appeal was accordingly dismissed. Though several questions of law were framed in the memorandum of grounds, we find that the following questions of law arise for consideration. 1) When the result of a search has the effect of only reducing the losses of an assessee for the block period, does there exists an occasion to levy tax on the undisclosed income? and 2) When there is unabsorbed depreciation available to an assessee in the previous assessment years, whether he is entitled to seek adjustment thereof against any amount of undisclosed income, noticed in the search? Sri C.V. Narasimham, learned counsel for the appellant submits that, even according to the ITO, the undisclosed income has just the effect of reducing the losses and the occasion to levy tax would arise, if only it is more than the aggregate of losses. He contends that the outcome of a block assessment, must be dealt with as a whole, and it was not open to the ITO to pick up some amount and treat it as income, though what remained to the credit of the appellant was only a loss, may be, at a reduced figure. He further submits that the view taken by the Tribunal cannot be sustained in law. He relied upon certain precedents. Sri J.V. Prasad, learned Standing Counsel for the Income-Tax, on the other hand, submits that on certain occasions, even losses can be treated as income. He submits that at least in the context of the block assessments, the amount, representing undisclosed income, though falling short of the accumulated loss, in the assessment years of the block period; can certainly be treated as income. He contends that the undisclosed income needs to be dealt with, strictly in accordance with the provisions of Chapter XIV-B of the Act, and even penalty is liable to be levied on such amounts. He contends that the undisclosed income needs to be dealt with, strictly in accordance with the provisions of Chapter XIV-B of the Act, and even penalty is liable to be levied on such amounts. Learned Standing Counsel submits that an assessee, who has resorted to the acts of concealing actual income, has to face the consequences, and that the view taken by the Tribunal accords with law. He placed reliance upon the judgment of the Supreme Court, in Commissioner of Income-Tax v. Gold Coin Health Food P. Ltd. ([2008] 304 ITR 308 (SC)). The appellant has been submitting returns, year after year, but was uniformly posting losses. Over a period of 10 years, the aggregate of losses was Rs.12,59,78,540/-. In mid 90’s, searches were undertaken in the houses and offices of the Directors of the appellant-company. That resulted in discovery of the undisclosed amount of Rs.1,46,02,752/-. The ITO passed an order for the block assessment period. He took the view that the unearthed income can straightaway be taxed under the relevant provisions of Chapter XIV-B of the Act. The contention of the appellant was twofold. The first was that the unearthed income did not wipe away the loss, much less, showed any profits. The second was that, even if the amount is treated as independent income, it must be set off against the available and accumulated depreciation. Those contentions were not accepted by the ITO, and the appeal preferred before the Tribunal was dismissed. We find that those very questions arise for consideration before us also. The first question is, as to whether the amount, which is discovered during the search, has the effect of just reducing the losses for the block period; or it can be treated as income separately for the block period? The discussion on this aspect must start by taking note of the language employed in the charging section of the Chapter, viz., Section 158 BA of the Act. The heading of the section itself reads, “assessment of undisclosed income as a result of search”. The expression undisclosed ‘income’ repeatedly occurs in almost all the sections and sub-sections in the Chapter. This in contradiction to the term, “total income”, as defined under Section 2(45), and which alone is taxable under Section 22(1). Way back in he year 1975. The heading of the section itself reads, “assessment of undisclosed income as a result of search”. The expression undisclosed ‘income’ repeatedly occurs in almost all the sections and sub-sections in the Chapter. This in contradiction to the term, “total income”, as defined under Section 2(45), and which alone is taxable under Section 22(1). Way back in he year 1975. Their Lordships of the Supreme Court explained the distinction between “income” on the one hand, and “total income” on the other, with specific reference to the “loss”. In C.I.T. v. Harprasad and Co.P.Ltd. ([1975] 99 ITR 118 (SC)), after referring to the various provisions and the typical expressions, used in the Act, Their Lordships have explained the distinction between “income” and “total income”. It was also held that if an assessee has incurred losses, more than the income, in an assessment year, he does not incur any tax liability, and if the loss spills over the concerned assessment year, he shall be entitled to claim adjustment against profits if any, in the subsequent assessment year, and for that purpose, filing of a return, albeit showing loss; is necessary. The relevant paragraph reads: “…It may be remembered that the concept of carry forward of loss does not stand in vacuo. It involves the notion of set off. Its sole purpose is to set off the loss against the profits of a subsequent year. It presupposes the permissibility and possibility of the carried-forward loss being absorbed or set off against the profits and gains, if any, of the subsequent year. Set off implies that the tax is exigible and the assessee wants to adjust the loss against profit to reduce the tax-demand. It follows that if such set-off is not permissible or possible owing to the income or profits of the subsequent year being from a nontaxable source, there would be no point in allowing the loss to be “carried forward”. Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it could not be allowed to be carried forward and absorbed against income in a subsequent year, from a taxable source…” Hariprasad’s case (2 supra) was referred with approval, in many subsequent decisions, including the one, in Gold Coin’s case (1 supra). The manner in which, the undisclosed income of the block period must be recovered, is prescribed in Section 158 BB of the Act. The manner in which, the undisclosed income of the block period must be recovered, is prescribed in Section 158 BB of the Act. Broadly stated, it is to the effect that the income found as a result of the search, must be added to the aggregate income, shown in 10 years period, spread over the block period, reduced by the aggregate o the total income, or as the case may be, as increased by the aggregate of the losses of such previous years. For example, if the aggregate of the income shown in the block period of 10 years is Rs.15 lakhs, and the income discovered through search is Rs.5 lakhs, that figure must be added to 15 lakhs, thereby, it comes to Rs.20 lakhs. If taxable income for the block period was found to be Rs.7 lakhs, it would become 7+5 i.e. 12 lakhs, after search and consequential block assessment. If, on the other hand, a sum of Rs.6 lakhs was posted as loss, that would stand revised to 6-5=Rs.1 lakh, in the block statement. If one takes into account, the language employed in Section 158 BA of the Act, or for that matter, the entire Chapter, what becomes taxable is, the income, which is found to be at a higher figure, as a result of the search. If the undisclosed income has the effect only of reducing the loss, it is difficult to treat any component thereof, as income. This picture would be clear, if one takes into account, the judgment of the Supreme Court in Hariprasad’s case (2 supra). There is another way of looking at the issue. An assessee, who is found to have concealed a part of his income, can certainly be treated as a wrongdoer. The Parliament has stipulated the methods in which, a typical wrong must be dealt with. Under the Act, as it stood then, two courses of action are provided: The first is to subject the undisclosed income to a penal rate of tax, and the second is, to levy penalty under Section 271(1)(c) of the Act. In dealing with the first aspect, the undisclosed income is required to be subjected to the same type of assessment, as any other income, disclosed by the assessee, in his returns, Section 158 BH of the Act makes this aspect clear. It reads. In dealing with the first aspect, the undisclosed income is required to be subjected to the same type of assessment, as any other income, disclosed by the assessee, in his returns, Section 158 BH of the Act makes this aspect clear. It reads. “Sec.148 BH: Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter.” In other words, a fresh assessment, on par with a regular one, must be undertaken. The only difference is that the undisclosed income noticed in the search, as remains after allowing the standard or statutory reductions, depreciations, allowances is levied the tax, at an increased rate. In the instant case, it is not in dispute that the undisclosed Income attributed to the appellant, did not have the effect of wiping off the accumulated losses. Therefore, whatever may be the character of the undisclosed income, vis-à-vis the ‘total income’. It cannot be treated as ‘income’ within the connotation of Chapter XIV-B of the Act. On account of the fact that the aggregate losses were huge, the undisclosed income submerged in them, and virtually lost its identity. Hence, there was nothing to be brought under the tax regime of Chapter XIV-B of the Act. The ITO as well as the Accountant Member of the Tribunal heavily relied upon the judgment of the Supreme Court in Gold Coin’s case (1 supra), in support of the views. That was a case in which the purport of Explanation 4 to 271(1)(c)(iii) of the Act was dealt with and explained. As is well-known, Section 271 enables levy of penalty on undisclosed incomes. The purpose and objective underlying Section 271 is totally different from the one, under Chapter XIV-B. Irrespective of the manner in which an undisclosed income must be treated in the assessment, the factum of concealment itself would expose the assessee, to penalty. Their Lordships took note of the recommendations of the Wanchoo Committee, that resulted in addition of Explanation 4(a) to Section 271(1) of the Act. The recommendation reads as under: “2.74 We are not unaware that linking concealment penalty to tax sought to be evaded can, at times, lead to anomalies. Their Lordships took note of the recommendations of the Wanchoo Committee, that resulted in addition of Explanation 4(a) to Section 271(1) of the Act. The recommendation reads as under: “2.74 We are not unaware that linking concealment penalty to tax sought to be evaded can, at times, lead to anomalies. We would recommend that, in cases where the concealed income is to be, set off against losses incurred by an assessee under other heads of income or against losses brought forward from earlier years, and the total income thus, gets reduced to a figure smaller than the concealed income or even to a minus figure, the tax sought to be evaded should be calculated as if the concealed income were the total income.” From a perusal of the extracted paragraph, it is evident that the immediate concern of the revenue was that the result of a search and unearthing of undisclosed incomes was proving futile, if it was being pitted against the aggregate or accumulated losses, and thereby, a device to penalize such concealments was invented. The anomaly mentioned in the very first sentence of the paragraph is the one, where the undisclosed income has the effect of just reducing the loss, thereby, disabling the revenue, to levy any tax, whatever. The anomaly, if one may call it, still remains, and the remedy was found in a different form, namely, to levy “penalty”, as distinguished from “tax at a higher rate”, on the undisclosed income. in the instant case, the subject-matter is not levy of penalty, under Section 271(1) of the Act. Therefore, the view taken by the ITO as well as the Tribunal cannot be sustained. The question No.1 is answered in favour of the appellant and against the revenue. The next question is almost in the form of an alternative to the first one. Assuming that the undisclosed income, vis-à-vis the appellant continued to have its identity, by treating it as independent of the aggregate and accumulated losses, it has to be seen as to whether the other facilities under the Act are not available to the appellant. Under the scheme of the Act, an assessee, who has a taxable income, is entitled to claim depreciation and other deductions. If the available depreciation is more than the taxable income, the remainder of it can be carried forward to the subsequent assessment years. Under the scheme of the Act, an assessee, who has a taxable income, is entitled to claim depreciation and other deductions. If the available depreciation is more than the taxable income, the remainder of it can be carried forward to the subsequent assessment years. If the assessee is not found to be having any taxable income, and has posted losses, the entire depreciation stands carried forward to the subsequent years. As and when the loss ceases and the assessee is found to be having any taxable income, the carried forward, depreciation can be pressed into service. It almost remains in hibernation, having the capacity to surface, whenever the need arises and law permits. Any doubt, in this behalf, stands clarified, with the passage of the judgment, in Haripasad’s case (2 supra), extracted in the preceding pages. The ITO as well as the Tribunal treated the undisclosed income as an “income”, by itself, by applying the principle underlying Explanation 4(c) to Section 271(1) of the Act. It is clear misapplication. When Chapter XIV-B of the Act is a self-contained code, there was no occasion, much less, basis, for the ITO to import the principle from Section 271, which occurs in Chapter XXI of the Act, dealing with the ‘penalties’. The result is that the undisclosed income ought to have been treated as part of total income and subjected to the same assessment, in the context of deductions and allowances, as in the case of ordinary assessments. If so done, the appellant would have the facility of claming depreciation. The plea of the appellant that the accumulated depreciation is much more than undisclosed income, remains unrebutted. However, in view of our answer to the first question, this contingency may not arise. Across the Bar, it is argued that the irregularities committed by the appellant remain unpunished, if such a course is adopted. There is no substance in the submission. The reason is that, whenever an undisclosed income is noticed against an assessee, and if it is set at naught, through accumulated depreciation, the corresponding amount of depreciation would not be available to be utilized by the assessee at a future date. The assessee feels the brunt o his concealment, to that effect. There is no substance in the submission. The reason is that, whenever an undisclosed income is noticed against an assessee, and if it is set at naught, through accumulated depreciation, the corresponding amount of depreciation would not be available to be utilized by the assessee at a future date. The assessee feels the brunt o his concealment, to that effect. At any rate, the ITO, or for that matter, the Appellate Tribunal, have just to implement, what the Parliament has handed out to its citizens, and they can neither expand, nor restrict the scope of the relevant provisions. The second question is accordingly answered in favour of the appellant. Hence, the appeal is allowed, and the order of the Income Tax Officer, as affirmed by the Tribunal, is set aside. There shall be no order as to costs.