Introduction of block assessment provisions in cases of search under section 132 and requisition under section 132A (SIMPLIFICATION AND RATIONALISATION)

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Vide Finance Act, 2021 the provisions of section 153A and section 153C of the Act were amended to provide that the said provision shall only apply to search and seizure proceedings under section 132 or requisition under section 132A of the Act initiated on or before 31.03.2021. The separate regime for search assessments was abolished and such assessments were subsumed into the reassessment provisions. Further, sections 147, 148, 149, 151 and 151A of the Act were also amended to provide that in case of search, survey or requisition initiated or conducted on or after the 1st April, 2021, it shall be deemed that the Assessing Officer (AO) has information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the three assessment years immediately preceding the assessment year relevant to the previous year in which the search is initiated or requisition is made or any material is seized or requisitioned. Further, if the AO has information which suggests that the income escaping assessment, represented in the form of asset, amounts to or is likely to amount to fifty lakh rupees or more, notice under section 148 can be issued if ten years have not elapsed from the end of the relevant assessment year.

2. Searches conducted by the Income-tax Department are important means for unearthing black money. However, it has been gathered from the field formations that there are multiple problems that are arising under the present scheme of search assessment under section 148 of the Act. The absence of any legal requirement for consolidated assessments in search cases has led to a situation where every year only the time-barring year is reopened in the case of the searched assessee. This results in staggered search assessments for the same search and consequentially, the searched assessee may be engaged in the search assessment process for almost up to ten years. This is time-consuming process which escalates the litigation cost for the taxpayer as well as for the department. For the duration of such period, legal position on an issue may undergo change, leading to different additions in different years, on the same issue. Moreover, since such a long duration is involved, there is a possibility of change of opinion with respect to the line of enquiry. Further, due to such staggered assessments, coordinated investigation is not feasible in search cases.

3. In order to make the procedure of assessment of search cases cost-effective, efficient and meaningful, it is proposed to introduce the scheme of block assessment for the cases in which search under section 132 or requisition under section 132A has been initiated or made. The main objectives for the introduction of this scheme are early finalization of search assessments, coordinated investigation during search assessments and reduction in multiplicity of proceedings.

3.1 It is proposed to amend the provisions of Chapter XIV-B of the Act, to provide the following for assessment of search cases:

(i) 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, the Assessing Officer shall proceed to assess or reassess the total income of such person in accordance with the provisions of the said Chapter.

(ii) The ‘block period’ shall consist of 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 shall include the period starting from the 1st 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 date of such requisition.

(iii) Regular assessments for the block period shall abate. There will be one consolidated assessment for the block period. Till block assessment is complete, no further assessment/reassessment proceeding shall take place in respect of the period covered in the block.

(iv) The Assessing Officer shall assess the ‘total income’ of the assessee, including the undisclosed income which shall include 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.

(v) The undisclosed income falling within the block period, forming part of the total income, shall be computed in accordance with the provisions of this Act, on the basis of evidence found as a result of search or survey in consequence of such search or requisition of books of account or other documents and such other materials or information as are either available with the Assessing Officer or come to his notice by any means during the course of proceedings under the said Chapter.

(vi) The assessment in respect of any other person shall be governed by the provisions of section 158BD, which provides that 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 or whose books of account or other documents or any assets were requisitioned, 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 the said Chapter shall apply accordingly.

(vii) The tax shall be charged at sixty per cent for the block period, as per section 113 of the Act. The proviso to section 113 has been amended to provide that the tax chargeable under this section shall be increased by a surcharge, if any, which may be levied by any Central Act. However, presently, no surcharge is proposed for income chargeable to tax for the block period. No interest under the provisions of section 234A, 234B or 234C or penalty under the provisions of section 270A shall be levied or imposed upon the assessee in respect of the undisclosed income assessed or reassessed for the block period.

(viii) Penalty on the undisclosed income of the block period as determined by the Assessing officer shall be levied at fifty per cent of the tax payable on such income. No such penalty shall be levied if the assessee offers undisclosed income in the return furnished in pursuance of search and pays the tax along with the return.

(ix) The time-limit for completion of block assessment of the searched assessee shall be 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. The time-limit for completion of block assessment of any other person 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. However, an exclusion of nearly six months shall be available in respect of period from date of search to the date of handing over of seized material to the Assessing Officer.

(x) Where any evidence found as a result of 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.

(xi) The notice under clause (a) of sub-section (1) of section 158BC requiring the searched assessee to furnish his return of income for the block period, as well as the order of assessment for the block period shall be issued or passed, as the case may be, with the previous approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director.

(xii) The provisions of section 144C of the Act shall not apply to any proceeding under the said Chapter.

4. This amendment will take effect from the 1st day of September, 2024.

[Clauses 32, 43, 49, 76 & 85]

Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Dated: 24-7-2024