s.158BA — Assessment of total undisclosed income as a result of search
Section 158BA directs a block assessment of total undisclosed income after a search, abates pending assessments of block years, revives them on annulment, and charges the income at the section 113 rate.
Part of Chapter XIV-B as substituted by the Finance (No. 2) Act, 2024, and applies where a search is initiated, or a requisition made, from 1 September 2024 to 31 March 2026. Section 49 of the Finance Act, 2025 amended it with effect from 1 September 2024: "total income" became "total undisclosed income", sub-section (2) was substituted so as to add clause (b), "pending" in sub-section (4) became "required to be made", and sub-section (5) was widened to a recomputation, reference or order. The counterpart in the Income-tax Act, 2025 is section 292, which applies to a search initiated on or after 1 April 2026.
Income-tax Act, 1961
s.158BA
Income-tax Act, 2025
s.292
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 158BA(1) of the Income-tax Act, 1961 opens "Notwithstanding anything in any other provisions of this Act". Where a search is initiated under section 132, or a requisition made under section 132A, on or after 1 September 2024, the Assessing Officer shall proceed to assess or reassess the total undisclosed income of the block period under Chapter XIV-B. Sub-section (2)(a) abates any assessment, reassessment or recomputation for a year in the block that is pending on the date of initiation of the search, on that date. Sub-section (2)(b) abates a proceeding for which a notice is issued after the search is initiated and before the block order, on the date of the notice, except for "the assessment year in which the last of the authorisations for a search is executed". Sub-section (3) abates a pending reference to the Transfer Pricing Officer, or his order, with the assessment. Sub-section (4) requires a block assessment from an earlier search to be completed before that of a later search. Sub-section (5) revives the abated proceeding if the block proceeding or order is annulled in appeal or any other legal proceeding, from the date the annulment order is received by the Principal Commissioner or Commissioner; the revival ceases if the annulment is set aside. Sub-section (6) requires the total income, other than undisclosed income, of the year in which the last authorisation is executed to be assessed separately under the other provisions of the Act. Sub-section (7) charges the total undisclosed income at the rate in section 113, as income of the block period, irrespective of the previous year to which it relates. The counterpart for a search initiated on or after 1 April 2026 is section 292 of the Income-tax Act, 2025. Section 292(2)(b) excepts "the tax year in which last of the authorisations for a search is executed", and section 292(3) abates a transfer pricing reference on the date referred to in section 292(2).
What the provision does
Starts the block assessment, ends the ordinary proceedings pending for block years, sends the regular income of the search year to a separate assessment, and charges undisclosed income at 60 per cent as income of the block. It does not abate a completed assessment, an appeal pending against one, or a rectification. It does not say how undisclosed income is computed, which is section 158BB (section 293 of the 2025 Act). It does not revive an abated proceeding merely because the block order finds no undisclosed income: revival follows only on annulment.
Threshold questions
- Whether a search was initiated, or a requisition made, in the case of the person assessed, since any other person is reached only through section 158BD
- Whether an assessment, reassessment or recomputation for a block year was pending on the date of initiation, including one restored by an order setting an earlier assessment aside
- Whether an order has been passed in a proceeding that had abated, and whether the plea of abatement was taken before the officer who passed it
- Whether a notice for a block year was issued after the search and before the block order, and whether it relates to the excepted year
- Whether the regular income of the year in which the search concluded has been kept out of the block and assessed separately
- Whether, the block order having been annulled, the revived proceeding was completed within the time allowed by section 153(8) of the 1961 Act or section 286 of the 2025 Act
In practice
The recurring disputes.
Whether abatement depends on undisclosed income being found
The assessee's case is that section 158BA(2) and section 292(2) operate by date. A proceeding for a block year pending when the search is initiated "shall abate and shall be deemed to have been abated" on that date, when no computation of undisclosed income exists or could exist. The Orissa High Court accepted this in Saroj Kumar Sahoo v. National Faceless Assessment Centre (18 February 2026) at paragraphs 7.8 to 7.10. The Revenue's case rests on the rest of the same judgment. Paragraph 7.11 makes abatement subject to the other conditions of the chapter, and paragraph 8.15 says that after the Finance Act, 2025 abatement is confined to undisclosed income and requires a computation. On that reading a scrutiny of disclosed income continues. The firm's view is that paragraph 8.15 goes further than the section. Both Acts abate proceedings, not parts of income, and the revival clause would be unnecessary if disclosed income had never left the regular assessment. Paragraph 8.15 was also reached on a text of sub-section (2) that did not include clause (b). An officer continuing a scrutiny after a search will rely on that paragraph, and the objection should be taken in writing in that proceeding.
Which year is excepted from abatement under the 1961 Act
Clause (b) of section 158BA(2) excepts "the assessment year in which the last of the authorisations for a search is executed". The Revenue's case is that, read with sub-section (6), the exception is for the search year, whose regular income sub-section (6) requires to be assessed separately. A literal reading saves the year before the search year and abates a scrutiny of the search year itself, which defeats sub-section (6). The assessee's case is that sub-section (6), in the same section, says "the assessment year relevant to the previous year in which" the last authorisation is executed. Different words in the same section are taken to mean different things, and a provision that ends proceedings is read as written. Section 292(2)(b) of the 2025 Act says "the tax year in which" it is executed, which is the year in which the search concludes. The firm's view is that the purposive reading is likely to prevail under the 1961 Act. The literal reading is available on a file where a scrutiny notice for the search year was issued before the block order and the assessee wants it to have abated.
Whether section 292 abates a proceeding pending under the 1961 Act
Section 292(2) of the 2025 Act abates proceedings "under the provisions of this Act", and section 292(3) names references under section 166. For the first years of the 2025 Act every pending scrutiny, reassessment and transfer pricing reference for a completed block year will be a proceeding under the 1961 Act. Read literally, these do not abate, and the draftsman named the 1961 Act elsewhere when he meant it. Against that, section 292(1) overrides the rest of the Act, the exclusion for income assessed before the search assumes that pending assessments end, and a block that could not abate any of its completed years would not work. The literal argument is available to the assessee or to the Revenue, whichever it suits on the file. The firm's view is that a court would hold that 1961 Act proceedings for block years abate. An officer who continues such a proceeding should be asked in writing to state the provision under which he does so.
Whether the block rate or the rate for deemed income applies to unexplained credits
Section 158BB(4)(b) applies sections 68, 69, 69A, 69B and 69C in a block assessment, and outside the block such income is taxed under section 115BBE. Under the 1961 Act, where the charge under section 115BBE would exceed the block rate, the Revenue may contend that deemed income is taxable under that section whatever the proceeding, and that section 113 has no overriding words. The assessee's answer is that the deeming sections are applied only "for the purposes of determination of undisclosed income", that section 158BA(1) overrides the other provisions of the Act, and that section 158BA(7) charges the income at the section 113 rate "as income of the block period". Under the 2025 Act the positions reverse. The assessee will want the 30 per cent of section 195, and the Revenue will rely on section 192(1), which taxes block income at 60 per cent "Irrespective of anything contained in any other provisions of this Act". The firm's view is that the block rate governs under both Acts: income determined in the block is charged once, under the block's charging words.