Chapter XIV-B — Block assessment of search cases

Currently operative

Applies to searches initiated on or after 1 September 2024. (Searches up to 31 March 2021 were assessed under sections 153A/153C; searches between 1 April 2021 and 31 August 2024 under the reassessment machinery.) This is the operative scheme for all new search matters, and the only search assessment scheme carried into the Income-tax Act, 2025 — whose sections 292 to 301 apply to searches initiated on or after 1 April 2026, searches from 1 September 2024 to 31 March 2026 remaining under Chapter XIV-B of the 1961 Act.

Income-tax Act, 1961

Chapter XIV-B

Income-tax Act, 2025

ss.292–301 (rate s.192, penalty s.298(2))

In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.

In short

For searches initiated on or after 1 September 2024, search assessments are made under the block assessment scheme reintroduced by the Finance (No. 2) Act 2024 and carried into the Income-tax Act, 2025 as sections 292 to 301. Instead of separate orders for six or ten assessment years, a single order determines total undisclosed income for the block period, and pending assessments for years within that period abate. A return of undisclosed income is furnished within the period specified in the notice, which cannot exceed 60 days; a further 30 days may be allowed only where the return for the year of search was not yet due at the date of search, the assessee is liable to audit under section 44AB, the accounts are unaudited when the notice issues, and the assessee asks in writing for time (proviso inserted by the Finance Act 2025 with effect from 1 September 2024). No revised return is permitted. Undisclosed income of the block period is charged at the special rate (60 per cent plus surcharge under section 113 of the 1961 Act; section 192 of the 2025 Act), and penalty is levied not under section 271AAB but under section 158BFA(2) — section 298(2) in the Income-tax Act, 2025 — at 50 per cent of the tax on that income, with no penalty where the block return is furnished, the tax paid with evidence, and the undisclosed income so assessed is not appealed. Prior approval of the block order is under section 158BG (section 299(2) of the 2025 Act). Sections 292 to 301 of the 2025 Act apply to searches initiated on or after 1 April 2026; searches from 1 September 2024 to 31 March 2026 remain under Chapter XIV-B of the 1961 Act.

What the provision does

Establishes a self-contained scheme for search cases: computation of undisclosed income for the block period, a consolidated assessment order, its own time limits, its own approval requirement, and its own penalty.

Threshold questions

Was the search initiated on or after 1 September 2024 — if earlier, sections 153A/153C (up to 31 March 2021) or the reassessment machinery (1 April 2021 to 31 August 2024) apply instead
What is the block period, and which years fall within it
Was the notice validly issued, and was the return furnished within the period specified in it (not exceeding 60 days, with the conditional 30-day extension)
Was previous approval obtained for the block order
Is the assessment within the time limit for completion of block assessment

The recurring disputes.

The scheme is new and largely untested

There is as yet very little authority on the reintroduced scheme. Much of the accumulated jurisprudence on incriminating material, satisfaction and mechanical approval was developed around sections 153A and 153C, and how far it carries across to a single consolidated block order is an open question of real practical importance.

What counts as undisclosed income of the block period

Because the order determines undisclosed income for the block as a whole rather than total income year by year, the boundary between regular income already assessed and undisclosed income falling within the block is where the quantum argument now sits.

Approval attaches to one order, not to each year

Under the earlier scheme, approval under section 153D was required for each year's order, which made omnibus approvals vulnerable. Under the block scheme the approval attaches to a single order, so the multi-year mechanical approval argument loses much of its factual footing even though the principle survives.

Frequently asked.

What is block assessment in search cases?

A scheme under which a single consolidated assessment order determines total undisclosed income for a defined block period following a search, rather than separate assessments for each of six or ten assessment years. It was reintroduced by the Finance (No. 2) Act 2024 for searches initiated on or after 1 September 2024, and carried into the Income-tax Act, 2025 as sections 292 to 301, which apply to searches initiated on or after 1 April 2026.

Which scheme applies to my search?

It turns on the date the search was initiated, and there are three regimes. Searches up to 31 March 2021 are assessed under sections 153A and 153C. Searches between 1 April 2021 and 31 August 2024 are dealt with under the reassessment machinery of sections 147 and 148, the Finance Act 2021 having discontinued the 153A scheme. Searches on or after 1 September 2024 fall under block assessment. The date of initiation, not the date of the assessment order, is what decides it.

What penalty applies under block assessment?

Penalty under the block scheme is 50 per cent of the tax on the undisclosed income of the block period, with no penalty where the block return is furnished, the tax paid with evidence, and the undisclosed income so assessed is not appealed (proviso to section 158BFA(2)). Section 271AAB, which governed penalty in search cases under the earlier scheme, has no equivalent in the Income-tax Act, 2025.