Section 158BA — Assessment of Total Undisclosed Income as a Result of Search

CHAPTER XIV-B — SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES (BLOCK ASSESSMENT)

Section 158BA — Assessment of Total Undisclosed Income as a Result of Search (Charge and Abatement)

Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise

Status: Live (revived regime). The charging and machinery hub. Substituted by the Finance (No. 2) Act, 2024 with effect from 1 September 2024 and amended by the Finance Act, 2025. It directs assessment of the total undisclosed income of the block period, provides for abatement of pending proceedings, and charges the total undisclosed income at the section 113 rate (sixty per cent).

FA 2026: No amendment by the Finance Act, 2026.

A. SECTION COMMENTARY

Section 158BA is the operative core. On a search/requisition initiated on or after 1 September 2024, the Assessing Officer 'shall proceed to assess or reassess the total undisclosed income of the block period'. The non obstante opening signals that, for the block period and to the extent of undisclosed income, the Chapter's special procedure displaces the ordinary assessment machinery.

A defining feature is abatement: any assessment, reassessment or recomputation under the ordinary provisions pertaining to an assessment year in the block period, pending on the date of initiation of the search/requisition, abates and gives way to the single block proceeding. Sub-sections (2)–(3) work this out, including the special treatment of transfer-pricing references under section 92CA, and provide for revival of an abated proceeding if a block order is annulled (the revival ceasing if the annulment is set aside).

The Chapter keeps the two streams separate. Sub-section (6) preserves the regular assessment of the 'total income (other than undisclosed income)' of the year in which the last authorisation is executed; the block deals only with undisclosed income. This embodies the long-settled principle that block assessment is not a substitute for regular assessment.

Sub-section (7) is the charge: the total undisclosed income is charged at the section 113 rate — a flat sixty per cent — irrespective of the previous year(s) to which it relates. The elevated, year-blind rate is what makes the disclosed/undisclosed boundary, and the search-evidence requirement, so consequential; whatever is properly outside 'undisclosed income' is taxed in the ordinary way.

B. STATUTORY POSITION (verbatim text)

Reproduced from the local Act (base text to the Finance Act, 2025).

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 undisclosed income of the block period in accordance with the provisions of this Chapter.

(2) The assessment or reassessment or recomputation 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 required to be made 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 or recomputation or reference or order relating to any assessment yearwhich has abated under sub-section

(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 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.

C. AUTHORITIES

The recast section 158BA corresponds to the old charge-and-scope provisions; the authorities (Supreme Court, High Court and Tribunal) construe those materially identical provisions.

1. Block assessment is confined to undisclosed income and is not a substitute for regular assessment

CIT v. Ravi Kant Jain (2001) 250 ITR 141 (Delhi)

Court: High Court of Delhi; Division Bench, judgment dated 15 March 2001.

Held: Block assessment under Chapter XIV-B is not a substitute for a regular assessment; its scope is limited to the undisclosed income unearthed as a result of the search. Income not detected on the basis of material gathered in the search cannot be brought to tax under the block; the regular and block streams run separately.

Significance: The classic High Court statement of the limited, search-anchored scope of block assessment, preserved by the recast scheme (section 158BA(6)).

CIT v. Shamlal Balram Gurbani (2001) 249 ITR 501 (Bombay)

Court: High Court of Bombay.

Held: Income which has been reflected in the accounts/returns filed for the relevant assessment years cannot be treated as 'undisclosed income' for the purpose of a block assessment; the block reaches only what is genuinely undisclosed, not what stands disclosed in the regular record.

Significance: A High Court application of the disclosed/undisclosed dichotomy that defines the Chapter; complements Ravi Kant Jain and A. R. Enterprises.

2. What is 'undisclosed' — payment of tax is not disclosure; no presumption-based additions

Assistant CIT v. A. R. Enterprises (2013) 350 ITR 489 (SC)

Court: Supreme Court of India; judgment dated 30 January 2013 (350 ITR 489 / 213 Taxman 64).

Held: Payment of advance tax (or deduction of tax at source) does not by itself amount to disclosure of income so as to take it outside 'undisclosed income'. Where the due date for the return under section 139(1) had expired and no return was filed when the search took place, the income was 'undisclosed', notwithstanding advance tax referable to it had been paid. Disclosure is tested by the filing of a return, not by tax payment alone.

Significance: The leading gloss on 'undisclosed income' — the gateway concept of the Chapter (section 158B(b)); continues to inform the recast definition.

Sunder Agencies v. DCIT (1997) 63 ITD 245 (Mumbai ITAT)

Court: Income-tax Appellate Tribunal, Mumbai Bench.

Held: The scheme of Chapter XIV-B does not empower the Revenue to presume or draw assumptions about undisclosed income. Additions or disallowances in a block assessment must be based on evidence found at the time of the search, and cannot rest on presumptions or inferences drawn from the material otherwise on record.

Significance: An early and frequently-cited Tribunal authority establishing that block additions must be evidence-based, not presumption-based — the principle now embedded in section 158BB(2).

3. The search presumption does not, by itself, sustain the assessment

P. R. Metrani v. CIT (2006) 287 ITR 209 (SC)

Court: Supreme Court of India; judgment dated 15 November 2006 (206 CTR 290 / 157 Taxman 325).

Held: The presumption under section 132(4A) — that seized books/assets belong to the person searched and that their contents are true — is confined to the summary adjudication under section 132(5) and to retention/release of seized assets; it is not available while framing a regular (or block) assessment, though the seized material may be used as evidence in other proceedings.

Significance: Marks the boundary between the search presumption and the assessment; in block assessment the Department must prove undisclosed income on evidence, not on the section 132(4A) presumption alone.

Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the local Act (base text amended up to the Finance Act, 2025), with the publisher's footnote apparatus and amendment-marker brackets removed; three asterisks (***) denote words or a sub-section omitted by amendment. Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported and have been cross-checked; decisions of the Income-tax Appellate Tribunal and High Courts are identified as such, and decisions rendered under the 1995–2003 Chapter XIV-B or the cognate sections 153A–153C are flagged where relied upon, since the revived sections are not yet judicially construed. Where a section is genuinely sparse of authority, that is stated candidly rather than padded. Not legal advice.