A Brief Discussion on the Proposed Chapter XIVB of Income-tax Act, 1961

A BRIEF DISCUSSION ON THE PROPOSED NEW CHAPTER XIV-B IN THE FINANCE BILL

SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES

Text of Section

Definitions.

158B. In this Chapter, unless the context otherwise requires,-

(a) "block period" means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was initiated under section 132 or any requisition was made under section 132A and also includes the period starting from the 1st day

of April of the previous 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;

(b) "undisclosed income" includes any money, bullion, jewellery 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, 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, deduction or allowance claimed under this Act which is found to be incorrect, in respect of the block period.

Explanation.-For the purposes of this Chapter, the last of the authorisations 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 Authorised Officer.

Note

Definitions

Block Period (Section 158B(a))

• The "block period" refers to a specific period for which the assessment is conducted. It includes:
• The previous years relevant to six assessment years preceding the year in which the search was initiated, or requisition was made under sections 132 or 132A of the Income-tax Act.
• It also includes the period starting from April 1st of the year in which the search or requisition was initiated and ending on the date when the last authorization (related to the search or requisition) was executed.

Undisclosed Income (Section 158B(b))

• "Undisclosed income" includes:
• Money, bullion, jewellery, or any other valuable article or thing,
• Any expenditure or income based on entries in books of account or other documents or transactions,
• These items represent income or property that has not been disclosed for taxation purposes under the Income-tax Act.
• It also covers any expense, deduction, or allowance claimed under the Act that is found to be incorrect during the block period.

Explanation

• Execution of Authorizations: The explanation clarifies when the authorization related to search or requisition is considered executed:
• In the case of a search (under section 132), it is deemed executed at the conclusion of the search as recorded in the last "panchnama" (official document) drawn in relation to any person for whom the warrant of authorization was issued.
• In the case of requisition (under section 132A), it is deemed executed upon the actual receipt of books of account, documents, or assets by the Authorised Officer.

this chapter outlines -

- a special assessment procedure for cases where a search operation (section 132) or requisition of documents (section 132A) has been conducted by tax authorities.

- The "block period" refers to the period covered by such operations, including six previous assessment years and the period from April 1st of the year of operation until the completion of the last authorization process.

- "Undisclosed income" encompasses assets or income not previously declared for tax purposes, including inaccuracies in claimed expenses or deductions. The explanation clarifies when the authorization process is considered complete for assessment purposes.

Text of Section

158BA. (1) Notwithstanding anything in any other provisions of this Act, where on or after the 1st day of September, 2024, 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 or reassess the total income of the block period in accordance with the provisions of this Chapter.

(2) The assessment or reassessment or re-computation under the provisions of this Act (other than this Chapter), if any, pertaining to any assessment year falling in the block period, pending on the date of initiation of the search under section 132, or making of requisition under section

132A, as the case may be, shall abate and shall be deemed to have abated on the date of initiation of search or making of requisition.

(3) Where during the course of any pending proceeding for the assessment or reassessment or recomputation under the provisions of this Act (other than this Chapter), a reference under sub-section (1) of section 92CA has been made, or an order under sub-section (3) of section 92CA has been passed, such assessment or reassessment or recomputation, along with such reference made or order passed, as the case may be, shall also abate and shall be deemed to have abated on the date of initiation of search or making of requisition.

(4) Where any assessment under the provisions of this Chapter is pending in the case of an assessee in whose case a subsequent search is initiated, or a requisition is made, such assessment shall be duly completed, and thereafter, the assessment in respect of such subsequent search or requisition shall be made under the provisions of this Chapter:

Provided that in a case where the period of completing the assessment in respect of subsequent search is less than three months such period shall be extended to three months from the end of the month in which the assessment in respect of the earlier search was completed.

(5) If any proceeding initiated under this Chapter or any order of assessment or reassessment made under clause (c) of sub-section (1) of section 158BC has been annulled in appeal or any other legal proceeding, then, notwithstanding anything in this Chapter or section 153, the assessment or reassessment relating to any assessment year which has abated under subsection

(2) or sub-section (3), shall revive with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner:

Provided that such revival shall cease to have effect, if such order of annulment is set aside.

(6) The total income (other than undisclosed income) of the assessment year relevant to the previous year in which the last of the authorisations for a search is executed or a requisition is

made, shall be assessed separately in accordance with the other provisions of this Act.

(7) The total 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.

Note:

Section 158BA: Special Procedure for Assessment of Search Cases

1. Assessment of Block Period (Section 158BA(1)):
   • From September 1, 2024, onwards, if a search is initiated under section 132 or if books of account, documents, or assets are requisitioned under section 132A for any person, the Assessing Officer will assess or reassess the total income of the block period according to the provisions of this Chapter (Chapter XIV-B).
2. Abatement of Pending Assessments (Section 158BA(2) and (3)):
   • Any assessment, reassessment, or re-computation under other provisions of the Income-tax Act pertaining to any assessment year falling within the block period, which is pending as of the date of search initiation or requisition making, will abate.
   • This includes cases where references under section 92CA (dealing with international transactions) have been made or orders have been passed. These proceedings will also abate from the date of search or requisition.
3. Assessment in Case of Subsequent Search (Section 158BA(4)):
   • If an assessment under Chapter XIV-B is pending for an assessee in whose case a subsequent search or requisition is initiated, the current assessment will be completed first.
   • Then, assessment for the subsequent search or requisition will be made under Chapter XIV-B.
   • There's a provision for extending the assessment period to three months from the end of the month in which the assessment for the earlier search was completed, if the assessment period for the subsequent search is less than three months.
4. Revival of Abated Assessments (Section 158BA(5)):
   • If any proceeding initiated under Chapter XIV-B or any assessment or reassessment order made under clause (c) of sub-section (1) of section 158BC (relating to undisclosed income) has been annulled in appeal or any other legal proceeding, the assessments or reassessments related to any assessment year that had abated will revive.
   • This revival is effective from the date the Principal Commissioner or Commissioner receives the order of annulment.
   • However, if the order of annulment is later set aside, the revival will cease to have effect.
5. Separate Assessment of Non-Undisclosed Income (Section 158BA(6)):
   • The total income (excluding undisclosed income) of the assessment year relevant to the previous year in which the last authorization for search or requisition is executed will be assessed separately under the regular provisions of the Income-tax Act.
6. Taxation of Block Period Income (Section 158BA(7)):
   • The total income relating to the block period (including undisclosed income) will be charged to tax at the rate specified in section 113, regardless of the specific previous years to which the income relates.

Section 158BA outlines -

- the procedural aspects of assessing income in cases where searches or requisitions are conducted.

- It mandates assessment under Chapter XIV-B for the block period for searches initiated on or September 1, 2024.

- It also addresses the abatement of pending assessments, the treatment of subsequent searches, the revival of annulled assessments,

- and the separate assessment of non-undisclosed income.

- Income for the block period is taxed uniformly under section 113.

Text of Section

158BB. (1) The total income referred to in sub-section (1) of section 158BA of the block period shall be the aggregate of the following, namely:--

(i) total income disclosed in the return furnished under section 158BC;

(ii) total income assessed under sub-section (3) of section 143 or section 144 or section 147 or section 153A or section 153C prior to the date of initiation of the search or the date of requisition, as the case may be;

(iii) total income declared in the return of income filed under section 139 or in response to a notice under subsection (1) of section 142 or section 148 and not covered under clause (i) or clause (ii);

(iv) total income determined where the previous year has not ended, 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 last of the authorisations for the search or requisition relating to such previous year;

(v) undisclosed income determined by the Assessing Officer under sub-section (2).

(2) The undisclosed income falling within the block period, forming part of the total income referred to in sub-section (1) of section 158BA, shall be computed in accordance with the provisions of this Act, on the basis of evidence found as a result of search or survey or requisition of books of account or other documents and such other materials or informations as are either available with the Assessing Officer or come to his notice during the course of proceedings under this Chapter.

(3) Where any evidence found as a result of search or requisition of books of account or other documents and such other materials or informations as are either available with the Assessing Officer or come to his notice during the course of proceedings under this Chapter, or determined on the basis of entries relating to such income or transactions as recorded in books of account and other documents maintained in the normal course on or before the date of the search or requisition, relates to any international transaction or specified domestic transaction referred to in section 92CA, pertaining to the period beginning from the 1st day of April of the previous year in which last of the authorisations was executed and ending with the date on which last of the authorisations was executed, such evidence shall not be considered for the purposes of determining the total income of the block period and such income shall be considered in the assessment made under the other provisions of this Act.

(4) For the purposes of determination of undisclosed income,--

(a) of a firm, such income assessed for each of the previous 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;

(b) 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;

(c) the provisions of section 92CA shall, so far as may be, apply and references to "previous year" in that section shall be construed as reference to the relevant previous year falling in the block period excluding the period referred to in sub-section (3).

(5) The tax referred to in sub-section (7) of section 158BA shall be charged on the total income determined in the manner specified in sub-section (1) as reduced by the total income referred to in clause (ii), clause (iii) and clause (iv) of subsection (1).

(6) For the purposes of sub-section (1) and sub-section (5), if the disclosed income under clause (i) of sub-section (1) or where the income disclosed in respect of any previous year comprising the block period, or the returned income or assessed income under clause (ii) or clause (iii) of sub-section (1) or where the income as determined under clause (iv), is a loss, it shall be ignored.

(7) For the purposes of assessment under this Chapter, losses brought forward from the previous year (prior to the first previous year comprising the block period) 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 previous year subsequent to the assessment year in which the block period ends, for the remaining period, taking into account the block period and such assessment year, and in accordance with the provisions of this Act.

Note:

Section 158BB: Computation of Total Income of Block Period

1. Components of Total Income (Section 158BB(1)):
   • The total income of the block period, referred to in Section 158BA(1), includes:
   • Total income disclosed in the return furnished under section 158BC.
   • Total income assessed under sections 143(3), 144, 147, 153A, or 153C before the date of initiation of the search or requisition.
   • Total income declared in the return of income filed under section 139 or in response to a notice under section 142(1) or section 148, not covered under clauses (i) or (ii).
   • Total income determined based on entries in books of account and documents maintained before the date of the last authorization for search or requisition related to that previous year.
   • Undisclosed income determined by the Assessing Officer under Section 158BB(2).
2. Computation of Undisclosed Income (Section 158BB(2)):
   • Undisclosed income within the block period, forming part of the total income under Section 158BA(1), is computed based on evidence found during the search or requisition, or from other materials available or discovered during proceedings under this Chapter.
3. Exclusion of Certain Evidence (Section 158BB(3)):
   • Evidence found during search or requisition related to international transactions or specified domestic transactions is not considered for determining the total income of the block period. Such income is assessed under other provisions of the Income-tax Act.
4. Special Provisions for Firms (Section 158BB(4)(a)):
   • In case of a firm, undisclosed income assessed for each previous year within the block period does not allow deduction of salary, interest, commission, bonus, or remuneration to any partner who is not a working partner.
5. Application of Specific Sections (Section 158BB(4)(b) and (c)):
   • Provisions of sections 68, 69, 69A, 69B, and 69C (dealing with unexplained cash credits, investments, etc.) apply mutatis mutandis for determining undisclosed income.
   • Section 92CA (relating to international transactions) applies for determining undisclosed income, with adjustments for the relevant previous years within the block period.
6. Taxation of Total Income (Section 158BB(5)):
   • Tax as per Section 158BA(7) is charged on the total income determined under Section 158BB(1), reduced by income referred to in clauses (ii), (iii), and (iv) of Section 158BB(1).
7. Treatment of Losses (Section 158BB(6) and (7)):
   • If any income referred to in clauses (i), (ii), (iii), or (iv) of Section 158BB(1) is a loss, it is ignored for the purposes of computation under this Chapter.
   • Losses brought forward from previous years (before the first previous year comprising the block period) or unabsorbed depreciation cannot be set off against undisclosed income determined in the block assessment. They may be carried forward for set off in subsequent years, as per regular provisions of the Income-tax Act.

Section 158BB outlines -

- how the total income for the block period is computed under Chapter XIV-B of the Income-tax Act.

- It includes disclosed income, assessed income, and income declared in returns, along with undisclosed income determined during search or requisition.

- Special provisions apply to firms, and specific sections govern the treatment of certain types of income and deductions.

- Losses cannot offset undisclosed income in the block assessment but can be carried forward for future set offs.

Text of Section

158BC. (1) Where any search has been initiated under section 132 or books of account, other documents or assets are requisitioned under section 132A, in the case of any person, then,-

(a) the Assessing Officer shall, in respect of search initiated, or books of account or other documents or any assets requisitioned, on or after the 1st day of September, 2024, issue a notice to such person, requiring him to furnish within such period, not exceeding a period of sixty days, as may be specified in the notice, a return in the form and verified in the manner, as may be prescribed, setting forth his total income, including the undisclosed income, for the block period:

Provided that such return shall be considered as if it was a return furnished under the provisions of section 139 and notice under sub-section (2) of section 143 shall thereafter be issued:

Provided further that any return of income, required to be furnished by an assessee under this section and furnished beyond the period allowed in the notice shall not be deemed to be a return under section 139:

Provided also that no notice under section 148 is required to be issued for the purpose of proceeding under this Chapter:

Provided also that a person who has furnished a return under this clause shall not be entitled to furnish a revised return;

(b) the Assessing Officer shall proceed to determine the total income including 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, section 144, section 145, section 145A and section 145B shall, so far as may be, apply; (c) the Assessing Officer, on determination of the total

income of the block period in accordance with this Chapter, shall pass an order of assessment or reassessment and determine the tax payable by him on the basis of such assessment or reassessment:

Provided that nothing in the provisions of section 144C shall apply in respect of such order:

Provided further that where the order of assessment or reassessment is made in pursuance of section 158BD, the block period for such assessment or reassessment shall be the same as that determined in respect of the person in whose case search was made under section 132, or whose books of account or other documents or any assets were requisitioned under section 132A, and proceedings under section 158BD were initiated due to such search or requisition, as the case may be;

(d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B.

(2) The provisions of sub-section (1) of section 143 shall not apply to the return furnished under this section.

(3) The Assessing Officer, before issuance of notice under clause (a) of sub-section (1), shall take prior approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director, as the case may be

Note:

Section 158BC: Procedure for Filing Return and Assessment in Search Cases

1. Furnishing of Return (Section 158BC(1)(a)):
   • When a search is initiated under section 132 or books of account, documents, or assets are requisitioned under section 132A for any person on or after September 1, 2024:
   • The Assessing Officer (AO) must issue a notice requiring the person to furnish a return within a specified period not exceeding sixty days.
   • This return should disclose the total income, including undisclosed income, for the block period.
   • The return is treated as if it was furnished under section 139 of the Income-tax Act.
   • Subsequent to this return, a notice under section 143(2) will be issued for further processing.
   • If the return is furnished beyond the specified period, it will not be considered a return under section 139.
   • No separate notice under section 148 is required to proceed under Chapter XIV-B (Special Procedure for Assessment of Search Cases).
   • Once a return is filed under this clause, no revised return can be filed by the taxpayer.
2. Assessment Procedure (Section 158BC(1)(b) and (c)):
   • The Assessing Officer will determine the total income, including undisclosed income, for the block period as per the provisions of Section 158BB.
   • Certain procedural provisions from the Income-tax Act such as section 142, sub-sections (2) and (3) of section 143, section 144, section 145, section 145A, and section 145B will apply mutatis mutandis (with necessary modifications).
   • The Assessing Officer will then pass an order of assessment or reassessment based on the determined total income.
   • The tax payable by the taxpayer will be calculated based on this assessment or reassessment.
   • Section 144C (relating to draft assessment in transfer pricing cases) does not apply to assessments under Chapter XIV-B.
3. Assets Seized or Requisitioned (Section 158BC(1)(d)):
   • Any assets seized under section 132 or requisitioned under section 132A will be dealt with according to the provisions of section 132B.
4. Non-application of Section 143(1) (Section 158BC(2)):
   • The provisions of sub-section (1) of section 143 (which pertains to preliminary assessment) do not apply to returns furnished under Section 158BC.

Prior Approval Requirement (Section 158BC(3)):

• • • Before issuing a notice under clause (a) of sub-section (1), the Assessing Officer must obtain prior approval from the Additional Commissioner, Additional Director, Joint Commissioner, or Joint Director, as applicable.

Section 158BC lays down -

- the procedure for filing returns and conducting assessments in cases where a search or requisition of documents/assets has been initiated under sections 132 or 132A.

- It mandates issuance of a notice for filing a return within a specified period, assessment of total income including undisclosed income, and subsequent determination of tax liability.

- Special procedural provisions and approvals are required, and assets seized or requisitioned are dealt with under specific provisions.

Text of Section

158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to or pertains to or relates 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, any money, bullion, jewellery or other valuable article or thing, or assets, or expenditure, or books of account, other documents, or any information contained therein, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly.

Section 158BD: Treatment of Undisclosed Income of Other Persons

1. Scope of Section (Section 158BD):
   • When the Assessing Officer (AO) is satisfied that any undisclosed income belongs to, pertains to, or relates to any person other than the person in whose case a search was conducted under section 132 or whose books of account, documents, or assets were requisitioned under section 132A:
   • The AO will transfer any money, bullion, jewellery, valuable article, thing, assets, expenditure, books of account, documents, or information seized or requisitioned to the Assessing Officer having jurisdiction over such other person.
2. Proceedings under Section 158BC:
   • The Assessing Officer to whom the assets and information are transferred will proceed under Section 158BC against the other person.
   • This means that the Assessing Officer will follow the procedures outlined in Section 158BC for filing a return, assessment of total income (including undisclosed income), and determination of tax liability.

Section 158BD provides -

- a mechanism for handling cases where undisclosed income discovered during a search or requisition is found to belong to someone other than the person originally targeted.

- In such cases, the assets and information relating to the undisclosed income are transferred to the jurisdictional Assessing Officer of the other person.

- This officer will then initiate proceedings under Section 158BC to assess and determine tax liability based on the undisclosed income.

Text of Section

158BE. (1) Notwithstanding the provisions of section 153, the order under section 158BC shall be passed within twelve months from the end of the month in which the last of the authorisations for search under section 132, or requisition under section 132A, was executed or made, as the case may be:

Provided that in a case where search under section 132 was initiated, or requisition under section 132A was made, and during the course of the proceedings for the assessment or reassessment of the total income of the relevant block period, any reference under sub-section (1) of section 92CA is made, the period available for making an order of assessment or reassessment in respect of the block period shall be extended by twelve months.

(2) 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 under section 132 or a requisition is made under section 132A and ending on the date on which the books of account, or other documents or money or bullion or jewellery or other valuable article or thing seized under section 132 or requisitioned under section 132A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee, in whose case such search is initiated under section 132 or such requisition is made under section 132A, as the case may be, shall be excluded:

Provided that where after exclusion of the period referred to in this sub-section, the period of limitation for making an order of assessment or reassessment, as the case may be, expires

before the end of a month, such period shall be extended to the end of such month.

(3) 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 158BD shall be twelve months from the end of the month in which the notice under section 158BC in pursuance of section 158BD, was issued to such other person:

Provided that in case where during the course of the proceedings for the assessment of undisclosed income of the block period in case of other person referred to in section

158BD, a reference under sub-section (1) of section 92CA is made, the period available for making an order of assessment in respect of the block period in case of such other person shall be extended by twelve months.

(4) In computing the period of limitation under this section, the following period shall be excluded,-

(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 date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; 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) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited or inventory valued under sub-section (2A) of section 142 and-

(a) 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

(b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or

(v) the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer; or (vi) 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 clause (21) or clause (22B) or clause (23A) or clause (23B) of section 10, under sub-clause (i) of the first proviso to subsection

(3) of section 143 and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those clauses is

received by the Assessing Officer; or (vii) the period commencing from the date on which the

Assessing Officer makes a reference to the Principal Commissioner or Commissioner under the second proviso to sub-section (3) of section 143 and ending with the date on which the copy of the order under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB, as the case may be, is received by the Assessing Officer; or

(viii) 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 Principal Commissioner or Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the Assessing Officer; or

(ix) the period commencing from the date on which an application is made before the Authority for Advance Rulings or before the Board for Advance Rulings under subsection (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Principal Commissioner or Commissioner under sub-section (3) of section 245R; or

(x) the period commencing from the date on which an application is made before the Authority for Advance Rulings or before the Board for Advance Rulings under subsection (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under sub-section (7) of section 245R: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in

sub-section (1) or sub-section (3) available to the Assessing Officer for making an order under clause (c) of sub-section (1) 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:

Provided further that where after extension of the period referred to in the first proviso, the period of limitation for making an order of assessment or reassessment, as the case may be, expires before the end of a month, such period shall be extended to the end of such month.

Note

Section 158BE: Period of Limitation for Orders under Section 158BC

1. Time Limit for Passing Orders (Section 158BE(1)):
   • An order under Section 158BC must be passed within twelve months from the end of the month in which the last of the authorizations for search under section 132 or requisition under section 132A was executed or made.
   • If during the assessment or reassessment proceedings for the block period, a reference under section 92CA(1) is made, the period for passing the order shall be extended by an additional twelve months.
2. Exclusion of Time Periods (Section 158BE(2)):
   • In computing the period of twelve months mentioned above, certain periods are excluded:
   • A period not exceeding 180 days from the date of initiation of search under section 132 or requisition under section 132A until the assets or documents are handed over to the Assessing Officer having jurisdiction.
   • Any period during which assessment proceedings are stayed by a court order or injunction.
   • Time taken in certain specific proceedings such as reopening of proceedings, conducting audits or valuations, making references for exchange of information, etc.
3. Limitation for Other Persons (Section 158BE(3)):
   • In cases where proceedings under Section 158BD are initiated against another person (as per Section 158BD), the period of limitation for completing the assessment or reassessment for the block period is also twelve months from the end of the month in which the notice under Section 158BC was issued to such other person.
   • Similar provisions apply for extension if a reference under section 92CA(1) is made during those proceedings.
4. Additional Provisions (Section 158BE(4)):
   • Further exclusions from the period of limitation include such as periods relating to international transactions under transfer pricing rules, actions related to impermissible avoidance arrangements, and applications before Advance Rulings authorities.

Section 158BE ensures -

- that orders under Section 158BC, which pertain to assessments or reassessments of undisclosed income discovered during searches or requisitions, are passed within a stipulated time frame.

- It allows for extensions under specific circumstances such as pending transfer pricing references.

- The exclusion of certain time periods aims to accommodate procedural delays or complexities that may arise during the assessment process.

Text of Section

158BF. No interest under section 234A, 234B or 234C or penalty under section 270A shall be levied or imposed upon the assessee in respect of the undisclosed income assessed or reassessed for the block period.

Section 158BF: Exemption from Interest and Penalties

1. Interest Exemption (Section 158BF):
   • No interest shall be levied under sections 234A (related to delay in filing income tax return), 234B (related to default in payment of advance tax), or 234C (related to deferment of advance tax) in respect of undisclosed income assessed or reassessed for the block period.
   •  
2. Penalty Exemption (Section 158BF):
   • No penalty shall be imposed under section 270A, which pertains to under-reporting and misreporting of income, in respect of the undisclosed income assessed or reassessed for the block period.

Implications

• Interest Exemption: This provision ensures that taxpayers assessed for undisclosed income during a block period are not liable to pay interest for delays in filing returns or paying advance tax related to that undisclosed income.
• Penalty Exemption: It protects taxpayers from penalties that would normally be imposed for under-reporting or misreporting income, providing relief specifically for undisclosed income identified during search or requisition proceedings.

Section 158BF aims to provide -

- relief to taxpayers in cases where undisclosed income is assessed or reassessed for a block period following a search or requisition under sections 132 or 132A.

- By exempting them from interest and penalties under specified sections of the Income-tax Act, it mitigates additional financial burdens that would otherwise be imposed due to procedural delays or non-compliance related to undisclosed income.

Text of Section

158BFA. (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 September, 2024, as required by a notice under clause (a) of sub-section (1) of section 158BC, is not furnished within the time specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest at

the rate of one and one-half per cent. of the tax on undisclosed income determined under clause (c) of sub-section (1) of section 158BC, 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 the notice, and ending on the date of completion of assessment under clause (c) of sub-section (1) of section 158BC.

(2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that the person shall pay by way of penalty a sum which shall be equal to fifty per cent. of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of sub-section (1) of section 158BC: Provided that no order imposing penalty under this section or sub-section (1) of section 271AAD or section 271D or section 271DA or section 271E shall be made for the block period in respect of a person if-

(i) such person has furnished a return under clause (a) of sub-section (1) 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 first 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 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 Deputy Commissioner or Assistant Commissioner or the Deputy Director or Assistant Director, as the case may be, where the amount of penalty exceeds two lakh rupees except with the previous approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the 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 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 financial year in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Commissioner or 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 financial year in which such order of revision is passed;

(e) in any case other than those mentioned in clause (c) and clause (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.

(4) In computing the period of limitation under this section, the following period shall be excluded--

For the purposes of this section,-

(i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129; or

(ii) the period during which the proceedings under subsection (2) are stayed by an order or injunction of any court:

Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in subsection (3) 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:

Provided further that where after exclusion of the period referred to in the first proviso, the period of limitation for making of an order for imposition of penalty expires before the end of a month, such period shall be extended to the end of such month.

(5) An income-tax authority on making an order under subsection (2) imposing a penalty, unless he is himself an Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer.

Note:

Section 158BFA: Consequences of Non-Compliance and Penalty Imposition

1. Interest for Non-Furnishing of Return:
   • If an assessee fails to furnish the return of total income including undisclosed income within the specified time under section 158BC(1)(a), they are liable to pay simple interest at the rate of one and one-half per cent. of the tax on undisclosed income determined under section 158BC(c), for every month or part thereof from the day immediately after the expiry of the specified time up to the date of completion of assessment under section 158BC(c).
2. Penalty Imposition:
   • The Assessing Officer or Commissioner (Appeals) may direct the assessee to pay a penalty equal to fifty per cent. of the tax leviable on the undisclosed income determined under section 158BC(c).
   • Conditions for Non-Application of Penalty: Penalty shall not be imposed if:
   • The assessee has furnished a return under section 158BC(1)(a).
   • Tax payable based on such return has been paid, or if the assets seized consist of money, the assessee offers the seized money to be adjusted against the tax payable.
   • Evidence of tax paid is furnished along with the return.
   • No appeal is filed against the assessment of the income shown in the return.
   • If undisclosed income determined by the Assessing Officer exceeds the income shown in the return, penalty shall be imposed only on the excess amount.
3. Procedure for Imposing Penalty:
   • Penalty shall not be imposed without giving the assessee a reasonable opportunity to be heard.
   • The Deputy Commissioner or Assistant Commissioner requires previous approval from the Additional Commissioner or Additional Director if the penalty amount exceeds two lakh rupees.
   • Time limits for imposing penalty:
   • After completion of appeal proceedings: within six months from the end of the financial year in which the appeal order is received.
   • After revision proceedings under section 263: within six months from the end of the financial year in which the revision order is passed.
   • Other cases: within six months from the end of the financial year in which penalty notice is issued.
4. Exclusions in Computing Period of Limitation:
   • Periods such as those during which proceedings are stayed by a court order or during re-hearing under section 129 are excluded from the calculation of limitation periods.
5. Reporting of Penalty Orders:
   • Any income-tax authority other than the Assessing Officer issuing a penalty order under section 158BFA(2) must promptly send a copy of the order to the Assessing Officer.

Section 158BFA outlines -

- the penalties and interest provisions applicable when an assessee fails to comply with the requirements related to undisclosed income during a block period assessment initiated by search or requisition.

- It emphasizes adherence to procedural fairness while allowing for certain exemptions and exclusions in penalty imposition based on specific conditions.

Text of Section

158BG. 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, as the case may be:

Provided that 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, 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 September, 2024

Note

Section 158BG: Authority for Passing Order of Assessment

1. Authority for Passing Order:
   • The order of assessment for the block period shall be passed by an Assessing Officer who holds the rank of Deputy Commissioner, Assistant Commissioner, Deputy Director, or Assistant Director. This ensures that the assessment is conducted by an officer of sufficient seniority.
2. Approval Requirement:
   • Before passing the order of assessment, in cases where the search is initiated under section 132 or requisition under section 132A is made on or after the 1st day of September, 2024, the Assessing Officer must obtain previous approval from an officer holding the rank of Additional Commissioner, Additional Director, Joint Commissioner, or Joint Director. This requirement ensures oversight and compliance with procedural norms.

Summary

Section 158BG ensures -

- that assessments related to block periods following search or requisition actions are conducted by designated senior officers.

- The provision of obtaining prior approval from a higher-ranking authority in specified cases adds a layer of supervision to the assessment process initiated under section 132 or 132A.

Text of Section

158BH. Save as otherwise provided in this Chapter, all other provisions of this Act shall apply to assessment made under this Chapter

Note:

Section 158BH: Applicability of Other Provisions

1. General Applicability:
   • Section 158BH states that except for any specific provisions mentioned within Chapter XIV-B (which covers sections 158BA to 158BH), all other provisions of the Income-tax Act shall apply to assessments made under this Chapter.
2. Implication:
   • This section ensures that while Chapter XIV-B provides special provisions for block assessments in the context of search or requisition actions, the general procedural and substantive provisions of the Income-tax Act apply unless explicitly overridden by provisions within Chapter XIV-B.
3. Comprehensive Application:
   • It means that matters such as computation of income, applicability of tax rates, allowance of deductions, and procedural aspects not covered specifically under Chapter XIV-B will be governed by the general provisions of the Income-tax Act, ensuring consistency and coherence in tax administration.

Section 158BH serves -

- to maintain the coherence of the Income-tax Act while accommodating the specific procedures and assessments related to block periods resulting from search or requisition actions under Chapter XIV-B.

- It underscores the integration of special provisions with the broader framework of tax laws in India.

Text of Section

158BI. The provisions of this Chapter shall not apply where a search was initiated under section 132, or books of account, other documents or any assets were requisitioned under section 132A, before the 1st day of September, 2024, and proceedings in relation to such search or requisition, as the case may be, shall be governed by the other provisions of this Act.'.

Section 158BI: Applicability of Chapter XIV-B

1. Scope:
   • This section explicitly states that the provisions of Chapter XIV-B shall not apply in cases where a search was initiated under section 132 or books of account, other documents, or any assets were requisitioned under section 132A before the 1st day of September, 2024.
2. Transitional Provision:
   • It provides a transitional arrangement where searches or requisitions conducted prior to September 1, 2024, will continue to be governed by the general provisions of the Income-tax Act, 1961, instead of the special provisions outlined in Chapter XIV-B.
3. Implication:
   • For assessments arising from searches or requisitions conducted before the specified date, the other assessment procedures and provisions of the Income-tax Act will apply. This ensures consistency in the treatment of cases based on the timing of the search or requisition action.

Section 158BI ensures -

- that the special provisions related to block assessments under Chapter XIV-B are applicable only to searches or requisitions initiated on or after September 1, 2024.

- Searches or requisitions conducted prior to this date will follow the other assessment provisions of the Income-tax Act.