Section 158BC — Procedure for Block Assessment

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

Section 158BC — Procedure for Block Assessment

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

Status: Live (revived regime). The procedural code. Substituted by the Finance (No. 2) Act, 2024 with effect from 1 September 2024 and amended by the Finance Act, 2025. It governs the notice calling for the block return (within a period not exceeding sixty days), imports the assessment machinery of sections 142–145B 'so far as may be', requires prior approval before issue of the notice, and excludes the section 144C (DRP) route.

FA 2026: Section 158BC is not itself amended by the Finance Act, 2026. The Finance Act, 2026 recasts the penal provision section 276CCC (wilful failure to furnish the block-period return required by the section 158BC(1)(a) notice) in the Offences chapter — a cross-referencing change to be read with this section, not an amendment of it.

A. SECTION COMMENTARY

Section 158BC translates the charge into procedure. On a search/requisition initiated on or after 1 September 2024, the Assessing Officer must issue a notice requiring the person to furnish, within a period not exceeding sixty days, a return of the total undisclosed income of the block period. (Note the change from the 1995-Chapter notice period of 'not less than fifteen days'; the older notice-period jurisprudence does not transpose to the recast sixty-day window.) The provisos make the return one 'considered as if' furnished under section 139 (so that a section 143(2) notice follows), deny it the status of a section 139 return if filed late, dispense with any section 148 notice, bar a revised return, and allow a thirty-day extension where an audit under section 44AB is pending in the immediately preceding year.

Clause (b) imports the determination machinery: the Assessing Officer determines the total undisclosed income in the manner of 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'. This express importation of section 143(2) is the textual foundation of the rule that a section 143(2) notice is mandatory before a block assessment that does not simply accept the return — the ratio of Hotel Blue Moon, which governs the revived clause with full force.

Clause (c) requires the Assessing Officer to pass an order of assessment/reassessment and determine the tax; the proviso expressly excludes section 144C, so the Dispute Resolution Panel route is unavailable for a block order. Clause (d) routes the seized/requisitioned assets to section 132B, and sub-section (2) switches off section 143(1) summary processing for the block return.

Sub-section (3) is a significant safeguard: before issuing the notice, the Assessing Officer must take the prior approval of the Additional/Joint Commissioner or Additional/Joint Director. Read with the separate approval for the assessment order in section 158BG, the Chapter contains two distinct approval checkpoints; the settled learning that a statutory approval must reflect the independent application of mind of the designated authority applies to both (see the cognate authority under section 158BG).

The dominant litigation theme is the mandatory section 143(2) notice. Hotel Blue Moon holds that omission of that notice is not a curable irregularity and vitiates the block assessment; because the revived clause re-imports sub-sections (2) and (3) of section 143 in the same terms, that holding is directly in point. The strict sixty-day timeline, the limited thirty-day extension, and the prior-approval requirement are each potential grounds of challenge if not observed.

B. STATUTORY POSITION (verbatim text)

Reproduced from the local Act (base text to the Finance Act, 2025). Note: '***' marks words/a sub-section omitted by the Finance Act, 2025 and retained only to show the omission.

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 *** 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:

Provided also that the time allowed for furnishing a return under this clause may be extended by a further period of thirty days, where—

(i) in respect of a previous year immediately preceding the previous year in which the search is initiated or requisition is made, the due date for furnishing the return has not expired prior to the date of initiation of such search or requisition;

(ii) the assessee was liable for audit under section 44AB for such previous year;

(iii) the accounts (maintained in normal course) of such previous year have not been audited on the date of issuance of such notice; and

(iv) the assessee requests in writing for extension of time for furnishing such return to get such accounts audited;

(b) the Assessing Officer shall proceed to determine the total 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 undisclosed 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: ***

(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

C. AUTHORITIES

The leading authority is Hotel Blue Moon on the mandatory section 143(2) notice; the scope and approval themes are supported by Ravi Kant Jain, the section 158BD reasoned-satisfaction line (Tapan Kumar Dutta), and the cognate approval authority.

1. Notice under section 143(2) is mandatory for a block assessment

Assistant CIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC)

Court: Supreme Court of India; judgment dated 2 February 2010 (229 CTR 219 / 188 Taxman 113).

Held: Where the Assessing Officer repudiates the return filed in response to the section 158BC notice and proposes to make an assessment, issue of notice under section 143(2) within the prescribed time is mandatory; by force of section 158BC(b) the machinery of section 142 and sub-sections (2) and (3) of section 143 is imported into block assessment 'so far as may be'. Omission to issue the section 143(2) notice is not a curable irregularity and vitiates the block assessment.

Significance: The leading authority on block-assessment procedure; applies with full force to the revived regime, whose section 158BC(1)(b) again imports 'sub-sections (2) and (3) of section 143'.

2. Block assessment is confined to undisclosed income found in the search

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)).

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. Where the proceeding is against the other person, a reasoned satisfaction precedes the notice

Tapan Kumar Dutta v. CIT (2018) 255 Taxman 200 / 92 taxmann.com 367 (SC)

Court: Supreme Court of India; judgment dated 24 April 2018.

Held: Although section 158BD does not in terms require 'recording of reasons' as in section 148, since proceedings under it carry monetary implications the satisfaction must reveal the mental and dispassionate thought process of the Assessing Officer and must contain the reasons forming the basis for initiating action against the other person. On the facts, a fresh notice under section 158BD issued after such satisfaction was upheld.

Significance: A further Supreme Court gloss on the quality of the section 158BD satisfaction — it must be a reasoned, applied-mind conclusion, not a formality.

4. Prior approval (section 158BC(3)) must be a real, independent satisfaction (cognate)

Section 158BC(3) requires prior approval before issue of the block notice; the cognate principle is that the designated authority must apply its own mind.

CIT v. SPL's Siddhartha Ltd. (2012) 345 ITR 223 (Delhi) — cognate (section 151 sanction)

Court: High Court of Delhi; judgment dated 14 September 2011.

Held: Where the statute designates a particular authority to grant approval/record satisfaction, that authority alone must apply its own independent mind; approval by a different (even higher) authority, or a mechanical/borrowed satisfaction, does not meet the requirement and is not a curable irregularity.

Significance: Cited as cognate authority on the nature of a mandatory statutory approval. Though on section 151, the 'independent application of mind by the designated authority' principle informs the previous-approval requirements in section 158BG and section 158BC(3).

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.