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ITA Chapter 16 P2

Intimation of loss

  1. The Assessing Officer shall notify to the assessee by an order in writing the amount of the loss as computed by him for the purposes of section 111(1) or 112 or 113(2) or 115(1), where—
    1. in the course of the assessment of the total income of any assessee, it is established that a loss has taken place; and
    2. the assessee is entitled to have carried forward and set off such loss under the provisions of the said sections.

Assessment of total undisclosed income as a result of search

  1. Irrespective of any other provision of this Act, where on or after the commencement of this Act, in the case of any person, a search is initiated or requisition is made, then, the Assessing Officer shall proceed to assess or reassess the total undisclosed income of the block period as per provisions of this Part.
    1. The assessment or reassessment or recomputation proceedings under the provisions of this Act (other than of this part), if any, pertaining to any tax year falling in the block period, pending on the date of initiation of search, or the date of making of requisition, as the case may be, shall abate and shall be deemed to have been abated on such date.
    2. Any proceeding for assessment or reassessment or recomputation under any provisions of this Act (other than this Part) pertaining to any tax year falling in the block period (other than the tax year in which last of the authorisations for a search is executed or requisition is made), for which a notice has been issued during the period commencing on date of initiation of search or the date of making of requisition and ending on the date of making of order under section 294(1)(c), shall abate and shall be deemed to have been abated on the date of issue of such notice.
  3. If any reference has been made under section 166(1) or order has been passed under section 166(6), the assessment or reassessment or recomputation proceedings referred to in sub-section (2) together with such reference or order, shall abate and shall be deemed to have abated on the date referred to in sub-section (2).
  4. If any assessment under the provisions of this Part is required to be made in the case of an assessee, in whose case a search is initiated or a requisition is made subsequently—
    1. such pending assessment shall be duly completed;
    2. assessment in respect of such subsequent search or requisition shall be made thereafter under the provisions of this Part; and
    3. if the period available for assessment in clause (b) is less than three months, such period shall be extended to three months from the end of the month in which the assessment, as referred to in clause (a) was completed.
  5. Irrespective of anything contained in this Part or section 286, if any proceeding initiated under this Part or any order of assessment or reassessment made under section 294(1)(c) has been annulled in an appeal or any other legal proceeding, then—
    1. the assessment or reassessment or recomputation or reference or order relating to any tax year which has abated under sub-section (2) or (3), shall revive with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner;
    2. the revival, as referred to in clause (a) shall cease to have effect, if such order of annulment is set aside.
  6. The income (other than undisclosed income) of the tax year in which the last of the authorisations for a search is executed or a requisition is made, shall be assessed separately as per the other provisions of this Act.
  7. The total undisclosed income relating to the block period, as referred to in section 293(7) shall be charged to tax at the rate specified in section 192 as income of the block period, irrespective of the tax year or years to which such income relates.

Computation of total undisclosed income of block period

  1. The total undisclosed income of the block period referred to in section 292(1) shall be the aggregate of the following:—
    1. undisclosed income declared in the return furnished under section 294;
    2. undisclosed income determined by the Assessing Officer under sub-section (4).
  2. The following income shall not be included in the total undisclosed income of the block period:—
    1. the total income determined or assessed, as the case may be, under section 270(1) or (10) or section 271 or 279 or 294(1)(c) of this Act or section 143 or 144 or 147 or 153A or 153C or 158BC or 245D(4) of the Income-tax Act, 1961 (43 of 1961) prior to the date of initiation of the search or the date of requisition, in respect of any of the tax year falling within the block period;
    2. the total income declared in the return of income filed under section 263 of this Act or section 139 of Income-tax Act, 1961 (43 of 1961), or in response to a notice under section 268(1) of this Act or section 142(1) of Income-tax Act, 1961 (43 of 1961) prior to the date of initiation of the search or the date of requisition, in respect of any of the tax year falling within the block period, and not covered under clause (a);
    3. the income computed by the assessee, in respect of—
      1. a tax year, where such tax year has ended and the due date for furnishing the return for such year has not expired prior to the date of initiation of the search or the date of requisition, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course before the date of initiation of search or the date of requisition;
      2. the period commencing from the 1st April of the tax year in which the search is initiated or requisition is made and ending on the day immediately preceding the date of initiation of search or requisition, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course for such period on or before the day immediately preceding the date of initiation of search or the date of requisition;
      3. the period commencing from the date of initiation of the search or the date of requisition and ending on the date of the execution of the last of the authorisations for search or requisition, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course for such period on or before the date of the execution of the last of the authorisations;
    4. the total income referred to in section 207(8) or section 216 or section 393(1) [Table: Sl. No. 8(iii)] of this Act, or section 115A(5) or section 115G or 194P(1) of the Income-tax Act, 1961 (43 of 1961).
  3. For the purposes of sub-section (2)(c), where the Assessing Officer is of the opinion that any part of the income as computed by the assessee under the said sub-section is undisclosed, he may recompute such income.
  4. The undisclosed income falling within the block period, shall be computed on the basis of following:—
    1. evidence found as a result of search or survey or requisition;
    2. any other material or information as are either available with the Assessing Officer or comes to his notice during the course of proceedings under Part B.
  5. Where any income required to be determined—
    1. as a result of search or requisition of books of account or other documents, or based on any other material or information as are either available with the Assessing Officer or comes to his notice during the course of proceedings under this Part; or
    2. based on entries relating to income or transactions as recorded in books of account and other documents maintained in the normal course on or before the date of the execution of the last of the authorisations,
    relates to any international transaction or specified domestic transaction referred to in section 166, and pertains to the period beginning from the 1st April of the tax year in which last of the authorisations was executed and ending with the date of execution of the last of the authorisations, then irrespective of provisions of section 292(6)—
    1. such income shall not be considered for the purposes of determining the total undisclosed income of the block period; and
    2. such income shall be considered in the assessment made under other provisions of this Act.
  6. For the purposes of determination of undisclosed income,—
    1. of a firm, such income assessed for each of the tax years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration, by whatever name called, to any partner not being a working partner;
    2. the provisions of sections 102, 103, 104 and 105 shall, so far as may be, apply and reference to tax year in those sections shall be construed as references to the relevant tax year falling in the block period;
    3. the provisions of section 166 shall, so far as may be, apply and reference to tax year in that section shall be construed as reference to the relevant tax year falling in the block period excluding the period referred to in sub-section (5).
  7. The tax referred to in section 292(7)59 shall be charged on the total undisclosed income pertaining to the block period determined in the manner specified in sub-sections (1), (2) and (3).
  8. For the purposes of assessment, losses brought forward from the tax year (prior to the first tax year comprising the block period) under Chapter VII or unabsorbed depreciation under section 33(11) shall not be set off against the undisclosed income determined in the block assessment under this part.
  9. Losses or unabsorbed depreciation as referred to in sub-section (8) may be carried forward for being set off in the tax year subsequent to the tax year in which the block period ends, for the remaining period, taking into account the block period and such tax year, and as per the provisions of this Act.

Procedure for block assessment

  1. Where any search has been62 initiated or requisition is made in the case of any person, then,—
    1. the Assessing Officer shall, in respect of such search or requisition, issue a notice to such person, requiring him to furnish within a period specified in the notice, not exceeding sixty days, a return in the form and verified in the manner, as may be prescribed, setting forth his undisclosed income, for the block period, and—
      1. such return shall be considered as if it was a return furnished under section 263 and thereafter notice under section 270(8) shall be issued;
      2. any return furnished beyond the period allowed in the notice shall not be deemed to be a return under section 263;
      3. no notice under section 280 is required to be issued for the purpose of proceeding under this part;
      4. a person who has furnished a return under this clause shall not be entitled to furnish a revised return;
      5. the time allowed for furnishing a return under this clause may be extended by a further period of thirty days, where—
        1. in respect of a tax year immediately preceding the tax year in which the search is initiated or requisition is made, the due date for furnishing the return has not expired prior to the date of initiation of such search or requisition;
        2. the assessee was liable for audit under section 63 for such tax year;
        3. the accounts (maintained in normal course) of such tax year have not been audited on the date of issuance of such notice; and
        4. the assessee requests in writing for extension of time for furnishing such return to get such accounts audited;
    2. the Assessing Officer shall proceed to determine the total undisclosed income of the block period in the manner laid down in section 293 and the provisions of sections 268, 270(8), 270(10), 271, 276, 277 and 278 shall, so far as may be, apply;
    3. the Assessing Officer, on determination of the total undisclosed income of the block period in accordance with this part, shall pass an order of assessment or reassessment and determine the tax payable by him on the basis of such assessment or reassessment, and the provisions of section 275 shall not apply in respect of such order;
    4. the assets seized under section 247 or requisitioned under section 248 shall be dealt with as per section 250.
  2. The provisions of section 270(1) shall not apply to the return furnished under this section.
  3. The Assessing Officer, before issuance of notice under sub-section (1)(a), shall take prior approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director.

Undisclosed income of any other person

  1. Where the Assessing Officer is satisfied that any undisclosed income belongs to or pertains to or relates to any person (herein referred to as the other person), other than the person (herein referred to as the specified person) with respect to whom search was initiated under section 247 or requisition was made under section 248, then—
    1. any money, bullion, jewellery, virtual digital asset or other valuable article or thing or any books of account or other documents seized or requisitioned or any other material or information relating to the aforesaid undisclosed income shall be handed over to the Assessing Officer having jurisdiction over such other person; and
    2. Assessing Officer of the other person shall proceed under section 294 against such other person and the provisions of this part shall apply accordingly.
  2. For the purposes of this section,—
    1. where there is one specified person relevant to such other person, the block period for such other person shall be the same as that for the specified person;
    2. where there is more than one specified persons relevant to such other person, the block period for such other person shall be the same as that for the specified person in whose case the block period ends on a later date;
    3. where the undisclosed income of the other person pertains only to the period—
      1. commencing from the tax year (herein referred to as the specified year) immediately preceding the year of initiation of search or requisition; and
      2. ending on the date of initiation of search or making of requisition,
      then irrespective of the provisions of section 301(a), the block period in respect of such other person shall comprise of the specified year and the period starting from the 1st April of the tax year in which search was initiated or requisition was made and ending on the date of the execution of the last of the authorisations for such search or such requisition;
    4. where the undisclosed income of the other person pertains to a single tax year out of the five tax years preceding the specified year, then irrespective of the provisions of section 301(a), the block period in respect of such other person shall comprise of only that single tax year.
  3. In case of such other person as referred to in sub-section (1), for the purposes or abatement under section 292(2) and (3), the reference to the date of initiation of the search under section 247 or making of requisition under section 248 shall be construed as reference to the date on which such money, bullion, jewellery, virtual digital asset or other valuable article or thing or any books of account or other documents seized or requisitioned or any other material or information relating to the aforesaid undisclosed income were received by the Assessing Officer having jurisdiction over such other person.

Time-limit for completion of block assessment

  1. Irrespective of the provisions of section 286, the order under section 294 shall be passed within eighteen months from the end of the quarter in which the search was initiated or requisition was made.
  2. Where search was initiated or requisition was made, and during the course of assessment or reassessment of the total undisclosed income of the relevant block period, any reference under section 166(1) is made, the period available for completion of such assessment or reassessment proceeding shall be extended by twelve months.
  3. In computing the period of limitation under sub-section (1), the period (not exceeding one hundred and eighty days) commencing from the date on which a search is initiated or a requisition is made and ending on the date on which assets [as provided in section 261(b)] and material seized or requisitioned [as provided in section 261(i)] are handed over to the Assessing Officer having jurisdiction over the assessee shall be excluded.
  4. If after exclusion of the period referred to in sub-section (3), the remaining period of limitation for completion of assessment or reassessment, expires before the end of a month, such period shall be extended to end of such month.
  5. The period of limitation for completion of assessment or reassessment for the block period in the case of the other person referred to in section 295 shall be twelve months from the end of the quarter in which the notice under section 294 in pursuance of section 295, was issued to such other person.
  6. The period available for completion of assessment or reassessment proceeding in respect of the block period in a case referred to in sub-section (5) shall be extended by twelve months, where a reference under section 166(1) is made in such case.
  7. In computing the period of limitation under this section, the following period shall be excluded,—
    1. the period commencing on the date on which stay on assessment proceeding was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by jurisdictional Principal Commissioner or Commissioner;
    2. the period commencing from the date on which a first of the reference for exchange of information (made by an authority competent under an agreement referred to in section 159) is made and ending with the date on which such information requested is last received by the jurisdictional Principal Commissioner or Commissioner or one year, whichever is less;
    3. the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee to be re-heard under section 244(2);
    4. the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited or inventory valued under section 268(5), and—
      1. ending with the last date on which the assessee is required to furnish a report of such audit or inventory valuation under that sub-section; or
      2. where such direction is challenged before a court, ending with the date on which the certified copy of the order setting aside such direction is received by the jurisdictional Principal Commissioner or Commissioner;
    5. the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under section 269(1) and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer;
    6. the period commencing from the date on which the Assessing Officer intimates the Central Government or the prescribed authority, the contravention of the provisions of Schedule III (Table: Sl. No. 23, 24 or 25) as referred to in section 270(11)(i) and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, under those clauses is received by the Assessing Officer;
    7. the period commencing from the date on which the Assessing Officer makes a reference to the Principal Commissioner or Commissioner as per section 270(13) and ending with the date on which the copy of the order under section 351(2)(ii)(A) or (B), is received by the Assessing Officer;
    8. the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the jurisdictional Principal Commissioner or Commissioner under section 274(1) and ending on the date on which a direction under sub-section (3) or (6) or an order under sub-section (5) of the said section is received by the Assessing Officer;
    9. the period commencing from the date on which an application is made before the Board for Advance Rulings under section 383(1) and ending with the date on which the order rejecting the application is received by the jurisdictional Principal Commissioner or Commissioner under section 384(5);
    10. the period commencing from the date on which an application is made before the Board for Advance Rulings under section 383(1) and ending with the date on which the advance ruling pronounced by it is received by the jurisdictional Principal Commissioner or Commissioner under section 384(8).
  8. Where immediately after the exclusion of the period referred to in sub-section (3) or (7), the remaining period of limitation referred to in sub-section (1) or (5) available to the Assessing Officer for completion of assessment under section 294 is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.
  9. Where after extension of the period referred to in sub-section (8), the period of limitation for making an order of assessment or reassessment, expires before the end of a month, such period shall be extended to the end of such month.

Certain interests and penalties not to be levied or imposed

  1. Interest under section 423, 424 or 425 or penalty under section 439 shall not be levied or imposed upon the assessee for the undisclosed income assessed or reassessed for the block period.

Levy of interest and penalty in certain cases

  1. Where the return of undisclosed income as required under a notice under section 294(1)(a), is not furnished within the period specified in such notice, or is not furnished, then—
    1. the assessee shall be liable to pay simple interest at the rate of 1.5% of the tax on undisclosed income determined under clause (c) of said sub-section;
    2. the interest in clause (a) shall be paid for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in said notice, and ending on the date of completion of assessment under clause (c) of said sub-section.
  2. The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Part, may direct that the person shall pay by way of penalty a sum which shall be equal to 50% of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under section 294(1)(c).
  3. The order imposing penalty under this section or section 444(1) or 450 or 451 or 453 shall not be made for the block period in respect of a person, if—
    1. such person has furnished a return under section 294(1)(a);
    2. the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable;
    3. evidence of tax paid is furnished along with the return; and
    4. an appeal is not filed against the assessment of that part of income which is shown in the return.
  4. The provisions of sub-section (3) shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such cases the penalty shall be imposed on that portion of undisclosed income determined, which is in excess of income shown in the return.
  5. The order imposing a penalty under sub-section (2) shall not be made—
    1. unless an assessee has been given a reasonable opportunity of being heard;
    2. by the Deputy Commissioner or Assistant Commissioner or the Deputy Director or Assistant Director, where penalty exceeds ₹ 200000 except with the previous approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director;
    3. in a case where the assessment is the subject-matter of an appeal under section 357 or 362,—
      1. after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed; or
      2. six months from the end of the financial year in which the order of the Commissioner (Appeals) or the Appellate Tribunal is received by the jurisdictional Principal Commissioner or Commissioner,
      whichever period expires later;
    4. in a case where the assessment is the subject-matter of revision under section 377, after the expiry of six months from the end of the financial year in which such order of revision is passed;
    5. in any case other than those mentioned in clauses (c) and (d), after the expiry of the financial year in which the proceedings, in the course of which notice for the imposition of penalty has been issued, are completed, or six months from the end of the financial year in which notice for imposition of penalty is issued, whichever period expires later.
  6. In computing the period of limitation under this section, the following period shall be excluded—
    1. the time taken in giving an opportunity to the assessee to be re-heard under section 244(2); or
    2. the period commencing on the date on which stay on proceeding under sub-section (2) was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by jurisdictional Principal Commissioner or Commissioner.
  7. Where immediately after the exclusion of the period referred to in sub-section (6), the remaining period of limitation referred to in sub-section (5) available to the Assessing Officer for making an order under sub-section (2) of this section is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.
  8. If after exclusion of the period referred to in sub-section (7), the remaining period of limitation for making of an order for imposition of penalty expires before the end of a month, such remaining period shall be extended to the end of such month.
  9. An income-tax authority on making an order under sub-section (2) imposing a penalty, unless he is himself an Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer.

Authority competent to make assessment of block period

  1. The order of assessment for the block period shall be passed by an Assessing Officer not below the rank of a Deputy Commissioner or an Assistant Commissioner or a Deputy Director or an Assistant Director.
  2. The order referred to in sub-section (1) shall be passed with the previous approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director, in respect of search initiated or requisition made on or after the commencement of this Act.

Application of other provisions of Act

  1. Save as otherwise provided in this part, all other provisions of this Act shall apply to assessment made under this part.

Interpretation

  1. For the purposes of this Part—
    1. “block period” means the aggregate of—
      1. the period comprising six tax years preceding the tax year in which the search was initiated or any requisition was made; and
      2. the period starting from the 1st April of the tax year in which search was initiated or requisition was made and ending on the date of the execution of the last of the authorisations for such search or such requisition;
    2. “requisition” means requisition of books of account, other documents or any assets under section 248;
    3. “search” means a search initiated under section 247;
    4. “the last of the authorisations” shall be deemed to have been executed,—
      1. in the case of 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, irrespective of whether or not any seizure is recorded in such panchnama;
      2. in the case of requisition, on the actual receipt of the books of account or other documents or assets by the Authorised Officer;
    5. “undisclosed income” includes any money, bullion, jewellery, virtual digital asset or other valuable article or thing or any expenditure or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, virtual digital asset, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, or any expense, exemption, deduction or allowance claimed under this Act which is found to be incorrect, in respect of the block period.

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