Section 120 is the substantive equivalent of 1961 s. 79 A. Where any UNDISCLOSED INCOME is detected as a result of search ( s. 286 -equivalent block / specified-period assessment) or survey ( s. 287 -equivalent), NO LOSS — whether…
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ITA 2025 · Section 120
Section 120 — LOSS-SET-OFF BAR AGAINST SEARCH / SURVEY UNDISCLOSED INCOME
Section 120 is the substantive equivalent of 1961 s. 79A. Where any UNDISCLOSED INCOME is detected as a result of search (s. 286-equivalent block / specified-period assessment) or survey (s. 287-equivalent), NO LOSS — whether brought-forward or current-year, AND NO unabsorbed depreciation — shall be set off against that undisclosed income. Anti-abuse provision: prevents loss-rich entities from absorbing search-detected income tax-free.
PLANNING NOTES
(i) For search/survey-affected entities, the punitive impact is severe: search-detected income → 60% tax (s. 195) + no loss-set-off (s. 120) + 30%-60% additional penalty (s. 286) = effective 100%+ tax. (ii) Voluntary disclosure pre-search retains s. 102-106 + s. 195 60% rate but allows loss-set-off — s. 120 only attaches to search/survey-detected (involuntary) undisclosed. (iii) Critical post-FA 2021: comprehensive disclosure in regular returns is essential — once detected in search, loss-shield evaporates.
CROSS-REFERENCES