s.158BG — Authority competent to make the block assessment
Fixes the rank of the officer who may pass a block order and forbids the order without the previous approval of an Additional or Joint Commissioner or Director.
Applies to a search initiated, or a requisition made, on or after 1 September 2024; the date is in the proviso itself. Searches from 1 September 2024 to 31 March 2026 are under this section. The counterpart in the Income-tax Act, 2025 is section 299, which applies to a search initiated or requisition made on or after the commencement of that Act, 1 April 2026. The Finance Act, 2026 inserted section 292BC into the 1961 Act with effect from 1 April 2021 and substituted section 522 of the 2025 Act. Both now deem approvals in assessment proceedings to be administrative and supervisory.
Income-tax Act, 1961
s.158BG
Income-tax Act, 2025
s.299
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 158BG of the Income-tax Act, 1961 requires the order of assessment for the block period to be passed by an Assessing Officer not below the rank of a Deputy Commissioner, Assistant Commissioner, Deputy Director or Assistant Director. Its proviso is a prohibition: "no such order shall be passed without the previous approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director", for a search initiated, or a requisition made, on or after 1 September 2024. This is the second approval in a block assessment. The first is the prior approval, by an officer of the same rank, that section 158BC(3) requires before the notice calling for the block return is issued. A penalty above two lakh rupees needs a third, under section 158BFA(3)(b). Section 158BG applies to a search initiated from 1 September 2024 to 31 March 2026. For a search initiated on or after 1 April 2026 the counterpart is section 299 of the Income-tax Act, 2025. Sub-section (1) fixes the same minimum rank. Sub-section (2) puts the approval as a direction: the order "shall be passed with the previous approval" of the same authorities. Section 294(3) carries the approval before the notice. The Finance Act, 2026 then legislated on approvals for both Acts. It inserted section 292BC into the 1961 Act with effect from 1 April 2021. That section clarifies, "for the removal of doubts" and notwithstanding any judgment, that any approval given in relation to assessment, reassessment or recomputation proceedings is deemed "administrative and supervisory in nature". Such an approval is not invalid for insufficiency of the reasons recorded or for any defect in the form or manner of its authentication or communication. Section 522(3) of the 2025 Act is in substantially the same terms, without those opening words, and operates from 1 April 2026. Both speak of an approval given.
What the provision does
Fixes the minimum rank of the officer who may pass a block order and forbids the order without the previous approval of an Additional or Joint Commissioner or Director. It does not deal with the approval before the notice, which is section 158BC(3). Since section 292BC, an approval that was given cannot be attacked for brief reasons or for defects of form, signing or communication. Neither section 158BG nor section 292BC says that an order passed without approval, or before it, is valid.
Threshold questions
- Whether the block order was passed by an officer not below the rank of Deputy Commissioner, Assistant Commissioner, Deputy Director or Assistant Director
- Whether previous approval of the Additional or Joint Commissioner or Director was in fact given for the order
- Whether the approval is dated before the order, and the approval under section 158BC(3) or section 294(3) before the notice
- Whether the draft order and the record were placed before the approving authority when approval was sought
- Whether the objection is to the absence or timing of the approval, or only to its reasons, form, signing or communication, which section 292BC and section 522(3) now answer
In practice
The recurring disputes.
Whether an order passed without previous approval or before it is valid
The assessee's case is that both approvals are stated as preconditions. The Assessing Officer "shall take prior approval" before issuing the notice. Under section 158BG no order shall be passed "without the previous approval", and under section 299(2) the order shall be passed "with the previous approval". Section 292BC and section 522(3) speak of "any approval given" and cure insufficiency of reasons and defects in form, authentication or communication. They do not say that an order passed without approval, or before it, is valid. The Revenue's case is that Parliament has declared such approvals to be "administrative and supervisory in nature", and for the 1961 Act has done so for the removal of doubts and notwithstanding any judgment. In Kailash Moudgil v. DCIT (ITAT Delhi Special Bench, [2000] 72 ITD 97, 2 December 1999), on the old section 158BG, the approval was held to be "only an administrative approval and not a judicial approval" (paragraph 10), and any infirmity was treated as curable in appeal (paragraph 31). The firm's view is that the new provisions end challenges based on the brevity, form or signing of an approval that was in fact given. They leave open the challenge that no approval was obtained, and the challenge that it was obtained after the notice or the order it was to precede.
Whether an approval given without the draft order or the record can be challenged
The assessee's case is that an approval required by statute before an order is passed calls for the approving authority to apply its mind to that order. In ACIT v. Serajuddin & Co. (Orissa High Court, 15 March 2023) the approval under section 153D was held to be mandatory and not to be given mechanically. An approval given without the draft order or the record is a failure to approve, which is different from a failure to give reasons. Kailash Moudgil itself sets out, from Black's Law Dictionary, that "'Approval' implies knowledge and exercise of discretion after knowledge" (paragraph 8). The Revenue's case is that an administrative approval is not open to the scrutiny applied in decisions such as Serajuddin, and that section 292BC is retrospective to 1 April 2021. Kailash Moudgil held that the approving authority need not hear the assessee or record reasons, and that absence of reasons "would not invalidate the assessment order". A block order is also one order for the whole block, so an objection to a single approval covering many years is weaker than it was under section 153D. The firm's view is that the challenge that nothing was placed before the approving authority remains open. The record of both approvals, with dates and what accompanied the request, should be obtained in every case.
Whether the deeming provisions reach the approval of a penalty
A block penalty above two lakh rupees, imposed by a Deputy or Assistant Commissioner or Director, needs the previous approval of the Additional or Joint Commissioner or Director (section 158BFA(3)(b); section 298(5)(b)). The assessee's case is that section 292BC and section 522(3) are confined to approvals "in relation to any assessment, reassessment or recomputation proceedings", which does not obviously include the approval of a penalty. On that reading an objection to the reasons, form or communication of a penalty approval is untouched. The Revenue will say that the block penalty is directed in the course of the proceedings under the block provisions, so that its approval is given in relation to them. Neither provision names penalty proceedings, and the point is open.