s.158BB — Computation of total undisclosed income of block period
Section 158BB computes the total undisclosed income of the block: what is aggregated, what is excluded, the material that may be used, and the bar on losses; section 293 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. As substituted in 2024 the section computed the "total income" of the block. Section 50 of the Finance Act, 2025 rewrote it with effect from 1 September 2024: sub-sections (1) and (1A) replaced the old sub-section (1), sub-sections (3) and (5) were substituted and sub-section (6) was omitted. A 2024 print of the section is not the law for any search. The counterpart in the Income-tax Act, 2025 is section 293, which applies to a search initiated on or after 1 April 2026.
Income-tax Act, 1961
s.158BB
Income-tax Act, 2025
s.293
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 158BB of the Income-tax Act, 1961 computes the total undisclosed income of the block for a search initiated, or a requisition made, from 1 September 2024 to 31 March 2026. Under sub-section (1) it is the aggregate of the undisclosed income declared in the block return and the undisclosed income determined by the Assessing Officer; no year by year total income enters the calculation. Sub-section (1A) excludes four classes of income. Clause (a) covers income determined under section 143(1), or assessed, before the search was initiated. Clause (b) covers income declared in a return filed before the search under section 139 or in response to a notice under section 142(1). Clause (c) covers income computed by the assessee from books and documents maintained in the normal course, for a year whose return was not yet due and for the search year; the Assessing Officer may recompute it if he is of the opinion that any part is undisclosed. Clause (d) covers income within sections 115A(5), 115G and 194P(1). Sub-section (2) requires undisclosed income to be computed in accordance with the Act, on evidence found as a result of search or survey or requisition and on any other material or information available with the Assessing Officer or coming to his notice during the proceedings. Sub-section (3) keeps transfer pricing income of the search year out of the block. Sub-section (4) determines a firm's income before deduction of payments to a partner who is not a working partner, and applies sections 68, 69, 69A, 69B, 69C and 92CA so far as may be. Sub-section (7) bars set-off of losses and unabsorbed depreciation brought forward from before the block, which may be carried forward afterwards. Section 79A separately bars set-off of any loss against undisclosed income found in a search, requisition or survey. The counterpart for a search initiated on or after 1 April 2026 is section 293 of the Income-tax Act, 2025, with section 120 in place of section 79A.
What the provision does
Says what goes into the block and what stays out, the material on which undisclosed income may be determined, and how deemed income, firms, transfer pricing and earlier losses are treated. It does not bring a gross receipt to tax: what is assessed is income computed under the heads, with the deductions the Act allows, except where a deeming provision makes the sum itself the income. It does not exclude the income of a year for which the return was due and was neither filed nor assessed before the search, however fully it was recorded in the books. It does not extinguish earlier losses.
Threshold questions
- Whether the income was assessed, or determined on processing under section 143(1), before the date of initiation of the search
- Whether the income was declared in a return filed before the search under section 139 or in response to a notice under section 142(1)
- Whether, for the search year and a year whose return was not yet due, the income is computed from books and other documents maintained in the normal course within the dates fixed by section 158BB(1A)(c)
- Whether each addition identifies the material on which it rests and where that material came from, the search, a survey, a requisition or elsewhere
- Whether the amount added is income computed in accordance with the Act, and not a gross receipt
- Whether a loss or unabsorbed depreciation brought forward from before the block has been set off against undisclosed income, or its later carry forward wrongly denied
- Whether income of the search year relating to an international or specified domestic transaction has been kept out of the block
In practice
The recurring disputes.
Whether a block addition can rest on material not found in the search
The Revenue's case is that section 158BB(2) and section 293(4)(b) allow "any other material or information" available with the Assessing Officer or coming to his notice during the proceedings, and name survey evidence beside search evidence. The old chapter required such other material to be "relatable to such evidence", and those words have not been re-enacted. Regular assessments now abate, so the block is the only assessment those years will have. The assessee's case is that CIT v. Ravi Kant Jain (Delhi High Court, 15 March 2001) and ACIT v. Hotel Blue Moon (Supreme Court, 2 February 2010) confined a block assessment to material found in the search on a formulation that had no such qualifier. The limit came from the nature of the assessment, which the headings of section 158BA and section 292 still describe as an assessment of undisclosed income "as a result of search". If any material will do, a search becomes a licence to reassess six years and part of a seventh at 60 per cent without the conditions and time limits of the reassessment provisions. The question is open under both Acts. The firm's view is that other material may supplement what the search produced but cannot stand alone. Section 158BB(2) joins the two sources with "and"; section 293(4) letters them separately, so under the 2025 Act the argument rests on the heading and structure without that textual support.
Whether a statement recorded during the search is enough
The assessee's case rests on CIT v. Harjeev Aggarwal (Delhi High Court, 10 March 2016, paragraphs 20 to 24). A statement is not "evidence found as a result of search", words that are unchanged; there must be a nexus between the statement and material found; and a statement, particularly one later retracted, cannot be the sole basis of a block assessment. The Revenue's case is that the same paragraph 20 classes a statement as "information", usable if relatable to search material, and the present provisions admit "any other material or information" without that condition. It will add that Harjeev Aggarwal upheld the addition once corroboration was shown. One of the two phrases the Court construed survives and the other does not. The firm's view is that a bare admission with nothing else remains an unsafe basis for an addition at 60 per cent, but the textual argument for excluding it is weaker than it was. A statement supported by material from outside the search is now difficult to keep out.
Whether a loss of a block year can be set off against undisclosed income
The assessee's case is that section 158BB(7) and section 293(8) bar only losses brought forward from before the first year of the block. In E.K. Lingamurthy v. Settlement Commissioner (IT & WT) (Supreme Court, 22 January 2009), under the old chapter, the Court held that set-off of a loss of one block year against income of another block year "is not prohibited". Section 158BB(2) requires computation "in accordance with the provisions of this Act", and section 79A and section 120 apply where undisclosed income is included in the total income of a year, whereas block income is charged as income of the block period. The Revenue's case is that the aggregate in section 158BB(1) and section 293(1) contains only undisclosed income declared and determined. Lingamurthy was said of a computation that aggregated the total income or loss of each year, and a loss of a block year belongs to the regular assessment of that year. The point is unsettled. The firm's view is that the Revenue has the better of the text as it now stands, since no step in the present computation brings a year's loss into the aggregate. The assessee's argument is stronger under the 1961 Act, because of the opening words of section 158BB(2).
Whether income returned in response to a reassessment notice is excluded
Clause (b) of section 158BB(1A) covers a return under section 139 and a return in response to a notice under section 142(1); section 293(2)(b) is to the same effect. The 2024 text also listed a return in response to a notice under "section 148", and the Finance Act, 2025 dropped those words. The Revenue's case is that the omission, made by the same Act that rewrote the sub-section, is deliberate, so that income first offered in a reassessment return in a proceeding that has abated is open to the block. The assessee's case is that income returned to the Department before the search has been disclosed, and falls outside the definition of undisclosed income before any exclusion is reached. The firm's view is that the assessee is right, and that the omission will be relied on all the same. Two other situations are outside the words of the exclusions: income assessed in an order passed after the search began, and a third party's assessment completed between the search and the receipt of the material by his Assessing Officer. On those the firm's view is that a court would not allow the same income to be taxed twice.