SPECIAL PROCEDURE FOR ASSESSMENT OF
SEARCH CASES
In this Chapter, unless the context otherwise requires,—
2[J2] [(a) "block period" means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted under section 132 or any requisition was made under section 132A and also includes the period up to the date of the commencement of such search or date of such requisition in the previous year in which the said search was conducted or requisition was made:
Provided that where the search is initiated or the requisition is made before the 1st day of June, 2001, the provisions of this clause shall have effect as if for the words, "six assessment years", the words, "ten assessment years" had been substituted;]
(b) "undisclosed
income" includes any money, bullion, jewellery
or other valuable article or thing or any income based on any entry in the
books of account or other documents or transactions, where such money, bullion,
jewellery, 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 3[J3] [, or any expense, deduction or allowance claimed under
this Act which is found to be false].
158BA. Assessment of undisclosed income as a result of search:-
(1) Notwithstanding anything contained in any other provisions of
this Act, where after the 30th day of June, 1995 a search is initiated under
section 132 or books of account, other documents or any assets are
requisitioned under section 132A in the case of any person, then, the Assessing
Officer shall proceed to assess the undisclosed income in accordance with the
provisions of this Chapter.
(2) The total undisclosed income relating to the block period
shall be charged to tax, at the rate specified in section 113, as income of the
block period irrespective of the previous year or years to which such income
relates and irrespective of the fact whether regular assessment
for any one or more of the relevant assessment years is pending or not.
1[J4] [Explanation.—for the removal of doubts, it
is hereby declared that—
(a) The assessment made under this Chapter shall
be in addition to the regular assessment in respect of each previous year
included in the block period;
(b) The total undisclosed income relating to the
block period shall not include the income assessed in any regular assessment as
income of such block period;
(c) The income assessed in this Chapter shall
not be included in the regular assessment of any previous year included in the
block period.]
(3) Where the assessee proves to the satisfaction of the Assessing
Officer that any part of income referred to in sub-section (1) relates to an
assessment year for which the previous year has not ended or the date of filing
the return of income under sub-section (1) of section 139 for any previous year
has not expired, and such income or the transactions relating to such income
are recorded on or before the date of the search or requisition in the books of
account or other documents maintained in the normal course relating to such
previous years, the said income shall not be included in the block period.
158BB. Computation of undisclosed income of the block period:-
(1) The undisclosed income of the block period shall be the
aggregate of the total income of the previous years falling within the block period
computed, 1[J5] [in accordance with the provisions of this Act, on the
basis of evidence found as a result of search or requisition of books of
account or other documents and such other materials or information as are
available with the Assessing Officer and relatable to such evidence] as reduced
by the aggregate of the total income, or as the case may be, as increased by
the aggregate of the losses of such previous years, determined,—
(a) Where assessments under section 143 or
section 144 or section 147 have been concluded 2[J6] [prior to the date of commencement of the search or the
date of requisition], on the basis of such assessments;
(b) where returns of income have been filed
under section 139 3[J7] [or in response to a notice issued under sub-section (1) of
section 142 or section 148] but assessments have not been made till the date of
search or requisition, on the basis of the income disclosed in such returns;
4[J8] [(c) where the due date for filing a return of
income has expired, but no return of income has been filed,—
(A) on the basis of entries as recorded in the books of account and
other documents maintained in the normal course on or before the date of the
search or requisition where such entries result in computation of loss for any
previous year falling in the block period; or
(B) on the basis of entries as recorded in the books of account and
other documents maintained in the normal course on or before the date of the
search or requisition where such income does not exceed the maximum amount not
chargeable to tax for any previous year falling in the block period;
(ca) where the due date for filing a return of
income has expired, but no return of income has been filed, as nil, in cases
not falling under clause (c);]
(d) Where the previous year has not ended or
the date of filing the return of income under sub-section (1) of section 139
has not expired, 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 on or before the date of the search or requisition
relating to such previous years;
(e) Where any order of settlement has been made
under sub-section (4) of section 245D, on the basis of such order;
(f) Where an assessment of undisclosed income
had been made earlier under clause (c) of section 158BC, on the basis of
such assessment.
Explanation.—For the purposes of determination of undisclosed income,—
(a) The total income or loss of each previous
year shall, for the purpose of aggregation, be taken as the total income or
loss computed in accordance with the provisions of 5[J9] [this Act] without giving effect to set off of brought
forward losses under Chapter VI or unabsorbed depreciation under sub-section
(2) of section 32:
6[J10] [Provided
that in computing deductions under Chapter VI-A for the purposes of the said
aggregation, effect shall be given to set off of brought forward losses under
Chapter VI or unabsorbed depreciation under sub-section (2) of section 32;]
7[J11] [(b) of a
firm, returned income and total income assessed for each of the previous years
falling within the block period shall be income determined before allowing
deduction of salary, interest, commission, bonus or remuneration by whatever
name called 8[J12] [to any partner
not being a working partner]:
Provided that undisclosed income of the firm so determined shall not
be chargeable to tax in the hands of the partners, whether on allocation or on
account of enhancement;]
(c) Assessment under section 143 includes
determination of income under sub-section (1) or sub-section (1B) of section
143.
(2) In computing the undisclosed income of the block period, the
provisions of sections 68, 69, 69A, 69B and 69C shall, so far as may be, apply
and references to "financial year" in those sections shall be
construed as references to the relevant previous year falling in the block
period including the previous year ending with the date of search or of the
requisition.
(3) The burden of proving to the satisfaction of the Assessing
Officer that any undisclosed income had already been disclosed in any return of
income filed by the assessee before the commencement of search or of the
requisition, as the case may be, shall be on the assessee.
(4) For the purpose of assessment under this Chapter, losses
brought forward from the previous year under Chapter VI or unabsorbed
depreciation under sub-section (2) of section 32 shall not be set off against
the undisclosed income determined in the block assessment under this Chapter,
but may be carried forward for being set off in the regular assessments.
Where any search has been
conducted under section 132 or books of account, other documents or assets are
requisitioned under section 132A, in the case of any person, then,—
1[J13] [(a) the Assessing Officer shall—
(i) in respect of search initiated or books of
accounts or other documents or any assets requisitioned after the 30th day of
June, 1995 but before the 1st day of January, 1997 serve a notice to such
person requiring him to furnish within such time not being less than fifteen
days;
(ii) in respect of search initiated or books of
accounts or other documents or any assets requisitioned on or after the 1st day
of January, 1997 serve a notice to such person requiring him to furnish within
such time not being less than fifteen days but not more than forty-five days,
as may be specified in the notice a return in the prescribed form2[J14] and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth
his total income including the undisclosed income for the block period:
Provided that no notice under section 148 is required to be issued
for the purpose of proceeding under this Chapter:
Provided further that a person who has furnished a return under
this clause shall not be entitled to file a revised return;]
(b) The Assessing Officer shall proceed to
determine the undisclosed income of the block period in the manner laid down in
section 158BB and the provisions of section 142, sub-sections (2) and (3) of
section 143 3[J15] [, section 144
and section 145] shall, so far as may be, apply;
(c) The Assessing Officer, on determination of
the undisclosed income of the block period in accordance with this Chapter,
shall pass an order of assessment and determine the tax payable by him on the
basis of such assessment;
4[J16] [(d) The assets seized
under section 132 or requisitioned under section 132A shall be dealt with in
accordance with the provisions of section 132B.]
158BD. undisclosed income of any other person:-
Where the Assessing Officer is
satisfied that any undisclosed income belongs to any person, other than the
person with respect to whom search was made under section 132 or whose books of
account or other documents or any assets were requisitioned under section 132A,
then, the books of account, other documents or assets seized or requisitioned
shall be handed over to the Assessing Officer having jurisdiction over such
other person and that Assessing Officer shall proceed 1[J17] [under section
158BC] against such other person and the provisions of this Chapter shall apply
accordingly.
SUPREME COURT RULING
1. Before
the provisions of section 158BD are invoked against a person other than the
person whose premises have been searched under section 132 or documents and
other assets have been requisitioned under section 132A, the conditions
precedent have to be satisfied. [Manish Maheshwari
v ACIT (2007) 289 ITR 341 (SC)]
158BE. Time limit for completion of block assessment:-
1[J18] [(1) the order under section 158BC shall be
passed—
(a) within one year from the end of the month
in which the last of the authorisations for search
under section 132 or for requisition under section 132A, as the case may be,
was executed in cases where a search is initiated or books of account or other
documents or any assets are requisitioned after the 30th day of June, 1995 but
before the 1st day of January, 1997;
(b) within two years from the end of the month
in which the last of the authorisations for search
under section 132 or for requisition under section 132A, as the case may be,
was executed in cases where a search is initiated or books of account or other
documents or any assets are requisitioned on or after the 1st day of January,
1997.
(2) The period of limitation for completion of block assessment in
the case of the other person referred to in section 158BD shall be—
(a) one year from the end of the month in which
the notice under this Chapter was served on such other person in respect of
search initiated or books of account or other documents or any assets
requisitioned after the 30th day of June, 1995 but before the 1st day of
January, 1997; and
(b) Within two years from the end of the month
in which the notice under this Chapter was served on such other person in
respect of search initiated or books of account or other documents or any
assets are requisitioned on or after the 1st day of January, 1997.]
2[J19] [Explanation
1.—In computing the period of limitation for
the purposes of this section,—
(i) The period during which the assessment
proceeding is stayed by an order or injunction of any court; or
(ii) The period commencing from the day on which
the Assessing Officer directs the assessee to get his accounts audited under
sub-section (2A) of section 142 and ending on the day on which the assessee is
required to furnish a report of such audit under that sub-section; or
(iii) 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 the proviso to section 129; or
(iv) In a case where an application made before
the Settlement Commission under section 245C is rejected by it or is not
allowed to be proceeded with by it, the period commencing on the date on which
such application is made and ending with the date on which the order under
sub-section (1) of section 245D is received by the Commissioner under
sub-section (2) of that section,
Shall be excluded:
Provided that where immediately after the exclusion of the
aforesaid period, the period of limitation referred to in sub-section (1) or
sub-section (2) available to the Assessing Officer for making an order under
clause (c) of section 158BC 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.]
3[J20] [Explanation
2. — For the removal of doubts, it is hereby declared that the authorisation referred to in sub-section (1) shall be
deemed to have been executed,—
(a) 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;
(b) In the case of requisition under section
132A, on the actual receipt of the books of account or other documents or
assets by the Authorized Officer.]
158BF. Certain
interests and penalties not to be levied or imposed:-
No interest under the provisions
of sections 234A, 234B or 234C or penalty under the provisions of clause (c)
of sub-section (1) of section 271 or section 271A or section 271B shall be
levied or imposed upon the assessee in respect of the undisclosed income
determined in the block assessment.
1[J21] [158BFA. Levy of interest and penalty in certain cases:-
(1) Where the return of total income including undisclosed income
for the block period, in respect of search initiated under section 132 or books
of account, other documents or any assets requisitioned under section 132A on
or after the 1st day of January, 1997 as required by a notice under clause (a)
of section 158BC, is furnished after the expiry of the period specified in such
notice, or is not furnished, the assessee shall be liable to pay simple
interest at the rate of 2[J22] [one per cent] of
the tax on undisclosed income, determined under clause (c) of section
158BC, for every month or part of a month comprised in the period commencing on
the day of immediately following the expiry of the time specified in the
notice, and—
(a) Where the return is furnished after the
expiry of the time aforesaid, ending on the date of furnishing the return; or
(b) Where no return has been furnished, on the
date of completion of assessment under clause (c) of section 158BC.
(2) The Assessing Officer or the Commissioner (Appeals), in the
course of any proceedings under this Chapter, may direct that a person shall
pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount
of tax so leviable in respect of the undisclosed
income determined by the Assessing Officer under clause (c) of section
158BC:
Provided that no order imposing penalty shall be made in respect of
a person if—
(i) Such person has furnished a return under
clause (a) of section 158BC;
(ii) 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;
(iii) Evidence of tax paid is furnished along with
the return; and
(iv) An
appeal is not filed against the assessment of that part of income which is
shown in the return:
Provided further that the provisions of the preceding proviso 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 the amount of undisclosed income shown in the return.
(3) No order imposing a penalty under sub-section (2) shall be
made—
(a) Unless an assessee has been given a
reasonable opportunity of being heard;
(b) By the Assistant Commissioner 3[J23] [or Deputy
Commissioner] or the Assistant Director 4[J24] [or Deputy
Director], as the case may be, where the amount of penalty exceeds twenty
thousand rupees except with the previous approval of the 5[J25] [Joint]
Commissioner or the 6[J26] [Joint] Director,
as the case may be;
(c) In a case where the assessment is the
subject-matter of an appeal to the Commissioner (Appeals) under section 246 7[J27] [or section 246A]
or an appeal to the Appellate Tribunal under section 253, 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 six months from
the end of the month in which the order of the Commissioner (Appeals) or, as
the case may be, the Appellate Tribunal is received by the Chief Commissioner
or the Commissioner, whichever period expires later;
(d) In a case where the assessment is the
subject-matter of revision under section 263, after the expiry of six months
from the end of the month in which such order of revision is passed;
(e) 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 action for the imposition of
penalty has been initiated, are completed, or six months from the end of the
month in which action for imposition of penalty is initiated, whichever period
expires later;
(f) in respect of search initiated under
section 132 or books of account, other documents or any assets requisitioned
under section 132A, after the 30th day of June, 1995 but before the 1st day of
January, 1997.
Explanation.—in computing the
period of limitation for the purpose of this section,—
(i) The time taken in giving an opportunity to
the assessee to be re-heard under the proviso to section 129;
(ii) The period during which the immunity
granted under section 245H remained in force; and
(iii) The period during which the proceedings
under sub-section (2) are stayed by an order or injunction of any court,
Shall be
excluded.
(4) 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.]
1[J28] [158BG. Authority competent to make block assessment:-
The order of assessment for the
block period shall be passed by an Assessing Officer not below the rank of an
Assistant Commissioner 2[J29] [or Deputy
Commissioner] or an Assistant Director 3[J30] [or Deputy
Director], as the case may be:
Provided that no such order shall be passed without the previous
approval of—
(a) The Commissioner or Director, as the case
may be, in respect of search initiated under section 132 or books of account,
other documents or any assets requisitioned under section 132A after the 30th
day of June, 1995 but before the 1st day of January, 1997;
(b) The 4[J31] [Joint]
Commissioner or the 5[J32] [Joint] Director, as the case may be, in respect of search initiated under
section 132 or books of account, other documents or any assets requisitioned
under section 132A, on or after the 1st day of January 1997.]
158BH. Application of other provisions of this Act:-
Save as otherwise provided in
this Chapter, all other provisions of this Act shall apply to assessment made
under this Chapter.]
DEPARTMENTAL VIEW
1. The
term "case", as defined in section 245A(b)
includes the block assessments to be made in search cases. As such, search
cases under this Chapter fall within the jurisdiction of the Settlement
Commission. [Instruction No. 1962, dated 12th February, 1999]
1[J33] [158 BI. Chapter not to apply after certain
date:-
The provisions of this Chapter
shall not apply where a search is initiated under section 132, or books of
account, other documents or any assets are requisitioned under section 132A
after the 31st day of May, 2003.]
[J1]Inserted by the Finance Act, 1995, w.e.f. 1-7-1995. Earlier Chapter XIVB was inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. It dealt altogether with a different subject, namely, charge of additional income-tax in certain cases. It was omitted by the Direct Tax Laws (Amendment) Act, 1989 with effect from the same date and is thus of only academic interest.
[J2]Substituted by the Finance Act, 2001, w.e.f.
1-6-2001. Prior to the substitution, clause (a), as originally enacted,
read as under:
"(a) "block period" means the
1[previous years relevant to ten assessment years] preceding the previous year
in which the search was conducted under section 132 or any requisition was made
under section 132A, and includes, in the previous year in which such search was
conducted or requisition made, the period up to the date of the commencement of
such search or, as the case may be, the date of such requisition;"
1 Substituted for the words "period of ten previous years" by the Finance (No. 2) Act, 1996, w.r.e.f. 1-7-1995.
[J3]Inserted by the Finance Act, 2002, w.r.e.f. 1-7-1995.
[J4]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f. 1-7-1995.
[J5]Substituted for "in accordance with the provisions of Chapter IV, on the basis of evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer," by the Finance Act, 2002, w.r.e.f. 1-7-1995.
[J6]Inserted by the Finance Act, 2002, w.r.e.f. 1-7-1995.
[J7]Substituted for "or section 147" by the Finance Act, 2002, w.r.e.f. 1-7-1995.
[J8]Substituted by the Finance Act, 2002, w.r.e.f. 1-7-1995. Prior to the substitution, clause (c)
read as under:
"(c) where the due date for filing a return of income has expired but no return of income has been filed, as nil;"
[J9]Substituted for "Chapter IV" by the Finance Act, 2002, w.r.e.f. 1-7-1995.
[J10]Inserted by the Finance Act, 2002, w.r.e.f. 1-7-1995.
[J11]Substituted for clause (b) by the Finance (No. 2) Act, 1996, w.r.e.f. 1-7-1995.
[J12]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
[J13]Substituted by the Income-tax (Amendment) Act, 1997, w.e.f. 1-1-1997.
[J14]See rule 12(1A) and Form 2B.
[J15]Substituted for "and section 144" by the Finance Act, 2002, w.r.e.f. 1-7-1995.
[J16]Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. Prior to the substitution, clause (d)
read as under:
"(d) The assets seized under section 132 or requisitioned under section 132A shall be retained to the extent necessary and the provisions of section 132B shall apply subject to such modifications as may be necessary and the references to "regular assessment" or "reassessment" in section 132B shall be construed as references to "block assessment"."
[J17]Inserted by the Finance Act, 2002, w.e.f. 1-6-2002.
[J18]Substituted by the Income-tax (Amendment) Act, 1997, w.e.f. 1-1-1997.
[J19]Substituted by the Finance Act, 2002, w.e.f. 1-6-2002. Prior to the substitution, Explanation
1, as inserted by the Finance (No. 2) Act, 1996, w.r.e.f.
1-7-1995, read as under:
"Explanation
1[1].—In computing the period of limitation for the purposes of this
section, the period—
(i) during which the
assessment proceeding is stayed by an order or injunction of any court, or
(ii)
commencing from the day on which the Assessing Officer directs the assessee to
get his accounts audited under sub-section (2A) of section 142 and ending on
the day on which the assessee is required to furnish a report of such audit
under that sub-section,
shall be
excluded."
1 Inserted by the Finance (No. 2) Act, 1998, w.r.e.f. 1-7-1995.
[J20]Inserted by the Finance (No. 2) Act, 1998, w.r.e.f. 1-7-1995.
[J21]Inserted by the Income-tax (Amendment) Act, 1997, w.e.f. 1-1-1997.
[J22]Substituted for "one and one-fourth per cent" by the Taxation Laws (Amendment) Act, 2003, w.e.f. 8-9-2003 which was substituted for "two per cent" by the Finance Act, 2001, w.e.f. 1-6-2001.
[J23]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
[J24]Ibid.
[J25]Substituted for "Deputy" by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
[J26]Ibid.
[J27]Inserted by the Finance Act, 2000, w.e.f. 1-6-2000.
[J28]Substituted by the Income-tax (Amendment) Act, 1997, w.e.f. 1-1-1997. It was amended by the Finance (No. 2) Act, 1996, w.r.e.f. 1-7-1995.
[J29]Inserted by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
[J30]Ibid.
[J31]Substituted for "Deputy" by the Finance (No. 2) Act, 1998, w.e.f. 1-10-1998.
[J32]Ibid.
[J33]Inserted by the Finance Act, 2003, w.e.f. 1-6-2003.