After an income tax search: from the panchnama to the block notice

The search team has left. Somewhere in the premises is a copy of a document, several pages long, signed by two witnesses and by the person in occupation, headed panchnama. From the date on that document, most of the clocks in the assessment that follows start to run.

This note traces the sequence under the Income-tax Act, 2025, which governs every search initiated on or after 1 April 2026, with a worked timeline on illustrative dates. Where the parallel provisions of the Income-tax Act, 1961 differ for searches initiated between 1 September 2024 and 31 March 2026, the difference is noted, and a concordance of the two sets of section numbers closes the piece.

Key points

• For the block assessment, the search concludes on the date recorded in the last panchnama drawn in relation to the person named in the authorisation, whether or not a seizure is recorded in it (section 301(d)). That date closes the block period; the 60-day windows for a provisional attachment and a valuation reference (section 247(8), (9)) and the 120 days for release of explained assets (section 250(3)) run from the same event, the execution of the last authorisation.
• The block period is the six tax years preceding the year of search plus the part of the year of search up to the last panchnama (section 301(a)); assessments pending for those years abate (section 292(2)), and the regular income of the year of search is assessed separately (section 292(6)).
• The notice under section 294(1)(a) issues only with the prior approval of the Additional or Joint Commissioner or Director (section 294(3)) and gives a period not exceeding 60 days to furnish Form ITR-BN (Rule 332 of the Income-tax Rules, 2026); no revised return is permitted, and a late return is not a return under section 263.
• The block order is due within eighteen months from the end of the quarter in which the search was initiated (section 296(1), as substituted by the Finance Act 2026) — a different anchor and a longer period than the twelve months from the quarter of the last panchnama under section 158BE(1) of the 1961 Act.
• Undisclosed income of the block period is taxed at 60 per cent (section 192) with no interest under sections 423 to 425 and no penalty under section 439 (section 297); the block penalty is 50 per cent of the tax (section 298(2)), avoidable only where the block return is furnished, the tax paid with evidence, and the returned income is not appealed.

Which law governs the assessment after a search?

The date of initiation of the search decides it, and there are four regimes.

A search initiated on or after 1 April 2026 is assessed under Part B of Chapter XVI of the Income-tax Act, 2025, sections 292 to 301 (section 292(1)), with the search power itself in section 247. A search initiated between 1 September 2024 and 31 March 2026 is assessed under Chapter XIV-B of the Income-tax Act, 1961, sections 158B to 158BH, which section 536(2)(c) of the new Act preserves for proceedings relating to tax years beginning before 1 April 2026 (see the site’s page on the block assessment scheme and which Act governs an appeal filed today).

Earlier searches sit under earlier machinery: up to 31 March 2021, sections 153A and 153C; between 1 April 2021 and 31 August 2024, the reassessment machinery as it stood on 31 August 2024, preserved by section 152(3).

This note uses the 2025 Act numbering. The 1961 Act equivalents, and the points on which they differ, are set out in the concordance at the end.

The clocks that run after a search

A worked timeline: search initiated on 10 September 2026

Take a search initiated on Thursday, 10 September 2026 at the premises of a company, concluded with the last panchnama drawn on 12 September 2026. Suppose the seized material reaches the jurisdictional Assessing Officer on 5 November 2026, the notice under section 294(1)(a) is served on 20 November 2026 allowing the full 60 days, and the block order is passed on 15 February 2028. The dates are illustrative; the computations are the statute’s.

Three features of this example are worth noting. The date of the last panchnama, not the date of the raid, closes the block period, and the 60-day and 120-day periods run from the execution of the last authorisation rather than from the day the search began. The Department’s limitation, by contrast, now runs from the quarter in which the search was initiated, and the handover exclusion and the end-of-month rule can still add two months to it. And the year of search is assessed twice, once for regular income and once for undisclosed income within the block.

What is the panchnama, and why does its date matter?

The Act does not define the panchnama. Section 247(10) applies the provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 relating to searches and seizure “so far as may be” to a search under section 247, and the panchnama is the record those provisions require.

In practice it is the contemporaneous record, drawn by the authorised officer and attested by witnesses, of what was searched, what was found, what was seized, what was placed under a restraint order under section 247(4), and the statements recorded on oath under section 247(6) during the search. Section 247(7) attaches presumptions to what is found: that books, documents, electronic information and assets belong to the person in whose possession or control they are found, that their contents are true, that signatures and handwriting are what they purport to be, and that electronic exchanges were exchanged between the parties they purport to be between.

The date on the last panchnama has statutory consequences. Section 301(d) provides that the last of the authorisations is deemed to have been executed, in the case of a search, “on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued, irrespective of whether or not any seizure is recorded in such panchnama”. Those closing words settle, for the new Act, a question that was litigated for years under the old one: a panchnama that records no seizure still counts.

Section 301 opens with the words “for the purposes of this Part”, so the definition governs the block assessment: it closes the block period (section 301(a)) and fixes the year whose regular income is assessed separately (section 292(6)). Sections 247(8), 247(9) and 250(3) use the same phrase, “the date on which the last of the authorisations for the search was executed”, without a definition of their own; the 1961 Act supplied one through Explanation 1 to section 132, and the same construction is the natural one here, though the new Act does not say so in terms. What the last panchnama no longer does is start the Department’s limitation for the block order, which section 296(1) anchors to the quarter of initiation.

A search recorded as temporarily concluded and resumed is concluded only when the final panchnama says so. The sequence and wording of every panchnama drawn in the proceedings should therefore be checked against the authorisation to which each relates.

A restraint order under section 247(4)(b) on books, documents, assets, bank lockers, bank accounts or computer systems that it is not practicable to seize is not a seizure, and cannot remain in force beyond 60 days from the date of the order. The person from whose custody material was seized may, on application, take copies or extracts in the presence of the authorised officer (section 251(2)).

What happens in the months after the search?

Four things run in parallel.

The handover under section 251(1) moves the file from the investigation wing to the Assessing Officer who will make the block assessment. It must happen within 180 days of initiation of the search, and the period until it happens, up to 180 days, is excluded in computing the Department’s limitation (section 296(3)).

The investigation wing may, during the search or within 60 days of the last authorisation being executed, and with the prior approval of the Principal Director General, Director General, Principal Director or Director, provisionally attach property in the interest of the revenue (section 247(8)). The attachment is valid for six months from the end of the month in which the order is made.

A reference to a Valuation Officer or an approved valuer may be made within the same 60 days, and the report is due within 60 days of the reference (section 247(9)).

The assessee’s own window opens under section 250(2). Where the nature and source of a seized asset can be explained, an application may be made within 30 days from the end of the month in which the asset was seized. An asset so explained to the satisfaction of the Assessing Officer is released, after recovery of any existing liability and with the prior approval of the Principal Chief Commissioner, Chief Commissioner, Principal Commissioner or Commissioner, within 120 days from the date on which the last authorisation was executed (section 250(3)). Seized money not released may be applied against the liability determined on completion of the block assessment, and the Central Government pays simple interest at 0.5 per cent a month on money seized in excess of the liabilities, from the day after the 120-day period expires to the date of completion of the assessment (section 250(8), (9)).

Which years does the block period cover?

Section 301(a) defines the block period as the six tax years preceding the tax year in which the search was initiated, together with the period from 1 April of the year of search to the date on which the last authorisation was executed. In the example above, a search initiated on 10 September 2026 produces a block period of tax years 2020-21 to 2025-26 plus 1 April 2026 to 12 September 2026.

Any assessment, reassessment or recomputation for a tax year within the block period that was pending on the date of initiation of the search abates on that date (section 292(2)(a)), as does a pending transfer pricing reference or order under section 166 (section 292(3)). Section 292(2)(b) carries forward the rule in section 158BA(2)(b) of the 1961 Act: a notice issued for any block-period year, other than the year of search, between the initiation of the search and the block order also abates, on the date of its issue.

If the block proceeding or order is later annulled in appeal or other legal proceeding, the abated proceedings revive from the date the order of annulment is received by the Principal Commissioner or Commissioner, and the revival lapses if the annulment is set aside (section 292(5)). The income other than undisclosed income of the tax year in which the last authorisation was executed is assessed separately under the ordinary provisions (section 292(6)), so a regular return for the year of search is still due, and the block return and the regular return must be built to fit together.

Where a second search is initiated while a block assessment from an earlier search is still to be made, the earlier block assessment is completed first; the later search is then assessed under the Part, with at least three months from the end of the month in which the earlier assessment was completed (section 292(4)).

What is the block notice under section 294?

The notice under section 294(1)(a) is the formal beginning of the assessment. Before issuing it the Assessing Officer must take the prior approval of the Additional Commissioner, Additional Director, Joint Commissioner or Joint Director (section 294(3)). The absence or mechanical grant of that approval is a point to examine on the record, just as approval under section 153D was under the earlier scheme.

The notice requires a return “setting forth his undisclosed income, for the block period” within such period, not exceeding 60 days, as the notice specifies. The Assessing Officer fixes the period; the statute fixes only the ceiling.

The return is Form ITR-BN, inserted as Appendix IV to the Income-tax Rules, 2026 under Rule 332 by the Income-tax (Third Amendment) Rules, 2026 (Notification No. 97/2026, G.S.R. 656(E), dated 24 July 2026), deemed in force from 1 April 2026 and applying to every search initiated under section 247 on or after that date. For a search under the 1961 Act the form is ITR-B, prescribed by Rule 12AE of the Income-tax Rules, 1962, inserted by the Income-tax (Tenth Amendment) Rules, 2025 with effect from 1 September 2024.

Section 294(1)(a) then sets the rules of the road. The return is treated as a return under section 263, and a notice under section 270(8) follows; processing under section 270(1) does not apply to it (section 294(2)). A return furnished beyond the period allowed in the notice is not deemed to be a return under section 263. No notice under section 280 is required. And a person who has furnished the block return “shall not be entitled to furnish a revised return”, so the figures in ITR-BN must be right the first time.

Section 294(1)(a)(v) allows the period to be extended by a further 30 days, and only where four conditions coincide: the due date for the return of the tax year immediately preceding the year of search had not expired on the date of search, the assessee was liable to audit under section 63 for that year, the accounts of that year were not audited when the notice was issued, and the assessee requested time in writing to get them audited.

The Assessing Officer then determines the total undisclosed income in the manner laid down in section 293, applying sections 268, 270(8), 270(10), 271, 276, 277 and 278 so far as may be (section 294(1)(b)), and passes the order of assessment or reassessment under section 294(1)(c). The Dispute Resolution Panel route under section 275 does not apply to that order. Seized assets are dealt with as per section 250 (section 294(1)(d)).

A person other than the one searched receives the same notice under section 295 once the Assessing Officer is satisfied that undisclosed income belongs to, pertains to or relates to that other person and the material is handed over to the officer having jurisdiction. The other person’s block period is that of the searched person, or, where more than one, the one whose block period ends latest (section 295(2)(a), (b)). The Finance Act 2026 added two narrower cases: where the other person’s undisclosed income pertains only to the year immediately preceding the search and the search year, the block period is confined to those; and where it pertains to a single one of the five earlier years, to that year alone (section 295(2)(c), (d)). The date for abatement of that person’s pending assessments is the date on which the material is received, not the date of the original search (section 295(3)).

What is taxed, and at what rate?

The total undisclosed income of the block period is the sum of the undisclosed income declared in the block return and the undisclosed income determined by the Assessing Officer (section 293(1)). It is computed on the basis of evidence found as a result of search, survey or requisition and any other material or information available with the Assessing Officer or coming to notice during the proceedings (section 293(4)). “Undisclosed income” expressly includes virtual digital assets (section 301(e)).

Section 293(2) keeps four categories out of the block:

• income determined or assessed under section 270(1) or (10), 271, 279 or 294(1)(c) of the 2025 Act, or under sections 143, 144, 147, 153A, 153C or 158BC of the 1961 Act, or settled under section 245D(4) of that Act, before the date of search;
• income declared in a return under section 263 of the 2025 Act or section 139 of the 1961 Act, or in response to a notice under section 268(1) or section 142(1), filed before the search and not covered by the first category;
• income which the assessee shows to have been computed from entries in the regular books maintained in the normal course, for a year that had ended but whose return was not yet due, for the part of the year of search before the search, and for the period of the search itself — subject to the Assessing Officer’s power to recompute any part he considers undisclosed (section 293(3)); and
• income referred to in section 207(8), section 216 or the specified entry of section 393(1) of the 2025 Act, or section 115A(5), section 115G or section 194P(1) of the 1961 Act.

The third carve-out is where much of the practical work lies. The regular books for the unfiled year and the search-year period must be complete, contemporaneous and reconciled, because what they record is regular income and what they do not record is candidate undisclosed income. Sections 102 to 105 on unexplained credits, investments, money and expenditure apply in computing it (section 293(6)(b)), and losses brought forward from before the block period, and unabsorbed depreciation, cannot be set off against block undisclosed income (section 293(8)).

Undisclosed income of the block period is charged at 60 per cent under section 192(1), irrespective of the tax year to which it relates (section 292(7)), increased by a surcharge, if any, levied by any Central Act (section 192(2)). Section 297 then takes away what would otherwise follow: no interest under sections 423, 424 or 425 and no penalty under section 439 on that income.

In their place stands section 298. Where the block return is not furnished within the period allowed, or not furnished at all, simple interest runs at 1.5 per cent per month or part of a month on the tax on the undisclosed income determined, from the day after the period in the notice expires to the date of completion of the assessment (section 298(1)).

Penalty under section 298(2) is a fixed 50 per cent of the tax so leviable on the undisclosed income determined. It cannot be imposed where the block return was furnished, the tax on the returned income was paid or seized money offered for adjustment, evidence of payment accompanied the return, and no appeal is filed against the assessment of the income so returned (section 298(3)). Where the income determined exceeds the income returned, the penalty attaches only to the excess (section 298(4)). A penalty above ₹2,00,000 by a Deputy or Assistant Commissioner or Director requires the previous approval of the Additional or Joint Commissioner or Director (section 298(5)(b)).

How long does the Department have?

Section 296(1), as substituted by the Finance Act 2026 with effect from 1 April 2026, requires the order under section 294 to be passed within eighteen months from the end of the quarter in which the search was initiated. The period is extended by twelve months where a reference under section 166(1) is made during the block proceedings (section 296(2)).

The period between initiation of the search and handover of the seized material to the jurisdictional Assessing Officer, up to 180 days, is excluded (section 296(3)). Where the limitation after that exclusion would expire before the end of a month, it runs to the end of that month (section 296(4)). For the other person under section 295, the period is twelve months from the end of the quarter in which the notice under section 294 was issued (section 296(5)).

The order is passed by an Assessing Officer not below the rank of Deputy or Assistant Commissioner or Director, and with the previous approval of the Additional or Joint Commissioner or Director (section 299).

Once it is passed, the seized material may be retained until one month from the end of the quarter in which the order is made, and beyond that only on reasons recorded and the approval of the approving authority (section 251(3)); the approving authority cannot allow retention beyond thirty days after all proceedings for the relevant years are completed (section 251(4)).

How does this differ from a search before 1 April 2026?

A search initiated between 1 September 2024 and 31 March 2026 runs under Chapter XIV-B of the 1961 Act on the same design, with these differences.

What does this mean in practice?

Five things follow.

First, obtain and read every panchnama drawn in the proceedings, identify the last one for each person named in an authorisation, and calendar from its date the 60-day attachment and valuation windows and the 120-day release date. Calendar the Department’s limitation separately, from the end of the quarter of initiation, and carry the extended date after the handover exclusion and the end-of-month rule, not the base date.

Second, the application under section 250(2) for release of explained assets is due within 30 days from the end of the month of seizure. It is easily missed in the aftermath of a search, and the section provides no later route to it.

Third, the block return is a one-shot document. The period is at most 60 days, the extension is narrow, a late return loses its status under section 263, and there is no revised return. What is declared in ITR-BN, and the evidence of payment filed with it, determines whether the 50 per cent penalty is avoided at all.

Fourth, the carve-out in section 293(2)(c) rewards an assessee whose regular books for the unfiled year and the search-year period are complete and can be tied to the seized material entry by entry. The reconciliation should be prepared before the notice arrives, not after.

Fifth, the year of search is assessed twice over, once for regular income under the ordinary provisions and once for undisclosed income within the block. The two returns have to be consistent with each other and with the statements recorded under section 247(6).

The block scheme is two years old in its 1961 form and five months old in its 2025 form. How far the jurisprudence built around sections 153A and 153C on incriminating material, satisfaction and mechanical approval carries into a single consolidated order is the question that will shape search litigation for the rest of this decade.

Provisions cited are the Income-tax Act, 2025 as amended by the Finance Act 2026, and the Income-tax Act, 1961 as amended by the Finance (No. 2) Act 2024 and the Finance Act 2025, as published on incometaxindia.gov.in and read in September 2026. Income-tax Act, 2025: section 192, section 247, section 250, section 251, section 263, section 292, section 293, section 294, section 295, section 296, section 297, section 298, section 299, section 301, section 536; Notification No. 97/2026 (Form ITR-BN). Income-tax Act, 1961: section 132, section 132B, section 113, section 158B, section 158BA, section 158BB, section 158BC, section 158BD, section 158BE, section 158BF, section 158BFA, section 158BG, Rule 12AE.

This note is general commentary on the law as at 07 September 2026 and is not advice on any matter. The position in a particular case depends on its own facts.