s.158B — Block period and undisclosed income defined
Section 158B defines the block period as six years plus the search year up to the last panchnama, and defines undisclosed income inclusively; section 301 of the 2025 Act is its counterpart.
Part of Chapter XIV-B as substituted by the Finance (No. 2) Act, 2024, and applies to a search initiated, or a requisition made, from 1 September 2024 to 31 March 2026. Section 48 of the Finance Act, 2025 inserted the words "virtual digital asset" into clause (b) with effect from 1 February 2025; every other amendment that Act made to the chapter took effect from 1 September 2024. The counterpart in the Income-tax Act, 2025 is section 301, which applies to a search initiated on or after 1 April 2026.
Income-tax Act, 1961
s.158B
Income-tax Act, 2025
s.301
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 158B of the Income-tax Act, 1961 defines the terms on which a block assessment turns, for a search initiated, or a requisition made, from 1 September 2024 to 31 March 2026. Clause (a) defines the block period as the previous years relevant to six assessment years preceding the previous year in which the search was initiated, together with the period from 1 April of that previous year to the date of execution of the last of the authorisations. The words are read as the six previous years immediately before the search year, which is what section 301(a) of the Income-tax Act, 2025 says expressly in terms of tax years. The block is closed at six years, and neither Act allows it to be extended to ten. Clause (b) defines undisclosed income inclusively. It covers money, bullion, jewellery, virtual digital asset or other valuable article or thing, any expenditure, and any income based on an entry in books or other documents or transactions, where it represents income or property which has not been or would not have been disclosed for the purposes of the Act. It also covers any expense, exemption, deduction or allowance claimed under the Act which is found to be incorrect. The Explanation deems the last of the authorisations to have been executed, in 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. In a requisition it is the actual receipt of the books, documents or assets by the Authorised Officer. The counterpart is section 301 of the 2025 Act, for a search initiated on or after 1 April 2026. Section 301(e) is identical in substance to clause (b). Section 301(d)(i) adds that the last panchnama counts "irrespective of whether or not any seizure is recorded in such panchnama".
What the provision does
Fixes the period a block assessment covers, the income it reaches, and the event on which the block ends: the last panchnama in a search, and actual receipt of the books or assets in a requisition. In a search case the time limit for the order under section 158BE(1) of the 1961 Act is reckoned from the end of the quarter in which that panchnama was drawn. It does not define when a search is initiated. It does not say what is excluded from the block or on what material undisclosed income is computed, which is the work of section 158BB (section 293 of the 2025 Act). It does not allow the block to reach back beyond six years.
Threshold questions
- Whether the six years of the block have been counted back from the year in which the search was initiated, and not from the year in which it concluded
- Whether the document relied on as the last panchnama in fact records the conclusion of a search, or only the lifting of a restraint
- Whether the item is income or property which has not been disclosed, or, for the search year or a year whose return was not yet due, would not have been disclosed
- Whether a transaction of the search year was recorded in books or other documents maintained in the normal course before the search
- Whether a claim treated as undisclosed income has been found to be incorrect on what the search, survey or requisition produced, or is an ordinary disallowance
- Whether, in a requisition case, the block has been closed on the actual receipt of the books, documents or assets by the Authorised Officer
In practice
The recurring disputes.
Which document is the last panchnama
The block ends on the conclusion of search as recorded in the last panchnama, and under the 1961 Act limitation runs from the same event. The assessee's case rests on CIT v. S.K. Katyal (Delhi High Court, 12 November 2008), decided on the old Chapter XIV-B. A second panchnama had been drawn about a month and a half after the search, when a restraint was lifted and nothing was seized. The Court held that the panchnama the provision refers to "must be one which, in fact and not just in form, records the conclusion of search" (paragraph 27). The Revenue's case is that the Supreme Court in VLS Finance Ltd. v. CIT (28 April 2016) counted limitation from a later panchnama. For a search under the 2025 Act it will add that section 301(d)(i) now counts the last panchnama "irrespective of whether or not any seizure is recorded in such panchnama", and will read those words as reversing Katyal. VLS Finance was decided on its facts, where the later visits had never been challenged. How the added words affect Katyal is open. The firm's view is that Katyal stands: the provision still requires the conclusion of search to be recorded, Katyal turned on the absence of any search on the second date, and it had already accepted that a panchnama of search need not record a seizure.
Whether a claim disclosed in a return can be undisclosed income
The Revenue's case is that the third limb of the definition is new text. It covers an "expense, exemption, deduction or allowance claimed under this Act which is found to be incorrect"; the old chapter's limb said "false" and did not mention an exemption. No link to concealment or to seized material is required by the words, and the exclusion for assessed income protects the income assessed, not a deduction allowed in computing it. The assessee's case is that a claim made in a return is disclosed, and the definition is of undisclosed income. In CIT v. Ravi Kant Jain (Delhi High Court, 15 March 2001) income already returned and re-characterised under another head was held to be outside the old chapter. In Sun Aero Ltd. v. PCIT (Delhi High Court, 8 July 2026) an exemption allowed in a scrutiny assessment could not be withdrawn in the block on material gathered after the search. Revision and reassessment exist for errors in completed assessments, with their own conditions and time limits. The point is open. The firm's view is that the limb reaches a claim shown to be incorrect by what the search, survey or requisition produced, such as a bogus expense or an exemption resting on a sham. It does not turn every disallowance an officer could have made in scrutiny into undisclosed income.
What would not have been disclosed means for the search year
The second limb reaches the search year and any earlier year whose return was not yet due, where nothing had yet fallen to be disclosed. The assessee's case is that a transaction recorded in books or other documents maintained in the normal course before the search is protected, as the Delhi High Court accepted in CIT v. Harjeev Aggarwal (10 March 2016, paragraphs 30 and 31) under the old chapter. A salaried person or investor who keeps no books will rely on other documents kept in the ordinary way, such as bank statements and contract notes. The Revenue's case is that the limb asks what the assessee would have done, a question of likelihood answered from the surrounding circumstances. In Harjeev Aggarwal those included payment in cash without explanation, the absence of any record of the payment at the time of search, and the assessee's own admission (paragraph 35), and the Revenue succeeded. The limb is decided on the facts of each file, and the assessee who relies on the protection has to show the record made before the search.
When a search is initiated
The choice of regime, the block period and abatement all run from the initiation of the search, and neither section 158B of the 1961 Act nor section 301 of the 2025 Act defines it. One reading takes the date of the authorisation, as the first formal act. The other takes the date on which the authorised officers commence the search. The assessee or the Revenue may press whichever reading suits the dates on a file, since on the first reading a warrant signed in one quarter and executed in the next would alter the block and, under the 2025 Act, the time limit. The second reading fits the text better. The exclusions speak of books maintained "before the date of initiation of search", and treat the period from initiation to the execution of the last authorisation as a period of the operation. The Orissa High Court in Saroj Kumar Sahoo tested pendency as on the date of search, though the date of the warrant was not in issue there. The point is open. The firm's view is that initiation is the commencement of the search under the authorisation.