The Supreme Court has ruled that it is mandatory for the Income Tax Department to serve a notice to the assessee before it initiates assessment of undisclosed income. <br/><br/>The apex court considered the provisions of the Income Tax Act which deals with special procedure for assessment of search cases, while deciding on an appeal filed by the I-T department on carrying out block assessment against the respondent, Hotel Blue Moon, Guwahati. The court dismissed the Department's appeal and upheld the judgement of the Guwahati High court in the case. <br/><br/>A bench of Justices S H Kapadia and H L Dattu said in its order that on a consideration of the provisions of Chapter XIV-B of the Act, they are in agreement with the reasoning and the conclusion reached by the High Court. Under block assessment, I-T Department assesses the undisclosed income of a block period and not the total income or loss of the previous year. <br/><br/>The apex court did not agree with the submissions of the counsel for the I-T Department, who submitted that the issue of notice is not mandatory but optional and are to be applied to the extent practicable.