Income Tax 2025

Appearance

Computation of total income of block period. ​

293(1) ​

The total income of the block period referred to in section 292(1) shall be the aggregate of the following:—

  • (a) undisclosed income declared in the return furnished under section 294;
  • (b) income assessed under section 270(10) or section 271 or 279 of this Act, or section 153A or 153C of the Income-tax Act, 1961, prior to the date of initiation of search or the date of making of requisition in respect of tax years comprising the block period;
  • (c) income declared in the return of income furnished under section 263 or in response to a notice under section 268(1) or 280 in respect of tax years comprising the block period, which is not covered under clause (a) or (b);
  • (d) income determined–– (i) in respect of a tax year, where such tax year has ended and the due date for furnishing the return for such year has not expired prior to the date of initiation of the search or the date of requisition, 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 before the date of initiation of search or the date of requisition; (ii) in respect of period commencing from 1st April of the tax year in which the search is initiated or requisition is made and ending on the day immediately preceding the date of initiation of search or requisition, 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 for such period on or before the day immediately preceding the date of initiation of search or the date of requisition; (iii) in respect of period commencing from the date of initiation of the search or the date of requisition and ending on the date of the execution of the last of the authorisations for search or requisition, 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 for such period on or before the date of the execution of the last of the authorisations;
  • (e) undisclosed income determined by the Assessing Officer under sub-section (2).

293(2) ​

The undisclosed income forming part of the total income referred to in section 292(1) shall be computed on the basis of following:––

  • (a) evidence found as a result of search or survey or requisition; and
  • (b) any other material or information as are either available with the Assessing Officer or comes to his notice during the course of proceedings under this Chapter.

293(3) ​

The relating to any international transaction or specified domestic transaction referred to in section 166, shall not be considered for the purposes of determining the total income of the block period, and shall be considered in the assessment made under other provisions of this Act, if––

  • (a) such income pertains to the period beginning from the 1st April of the tax year in which last of the authorisations was executed and ending with the date of execution of the last of the authorisations; and
  • (b) such income is required to be determined–– (i) as a result of search or requisition of books of account or other documents; or (ii) based on any other material or information as are either available with the Assessing Officer or comes to his notice during the course of proceedings under this Chapter; or (iii) based on entries relating to income or transactions as recorded in books of account and other documents maintained in the normal course on or before the date of the execution of the last of the authorisations.

293(4) ​

For the purposes of determination of undisclosed income,––

  • (a) of a firm, such income assessed for each of the tax 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 102, 103, 104 and 105 shall, so far as may be, apply and reference to tax year in those sections shall be construed as references to the relevant tax year falling in the block period;
  • (c) the provisions of section 166 shall, so far as may be, apply and reference to tax year in that section shall be construed as reference to the relevant tax year falling in the block period excluding the period referred to in sub-section (3).

293(5) ​

The tax referred to in section 292(7) shall be charged on the total income pertaining to the block period determined in the manner specified in sub-section (1) as reduced by the total income referred to in clause (b), (c) and (d) of the said sub-section.

293(6) ​

For the purposes of sub-sections (1) and (5), the following shall be ignored:––

  • (a) the undisclosed income declared under sub-section (1)(a) is a loss; or
  • (b) the income disclosed in respect of any tax year comprising the block period is a loss; or
  • (c) the returned income or assessed income under sub-section (1)(b) or (c) is a loss; or
  • (d) the income as determined under of sub-section (1)(d) is a loss.

293(7) ​

For the purposes of assessment, losses brought forward from the tax year (prior to the first tax year comprising the block period) under Chapter VII or unabsorbed depreciation under section 33(11) shall not be set off against the undisclosed income determined in the block assessment under this Chapter.

293(8) ​

Losses or unabsorbed depreciation as referred to in sub-section (7) may be carried forward for being set off in the tax year subsequent to the tax year in which the block period ends, for the remaining period, taking into account the block period and such tax year, and as per the provisions of this Act.

Explanation

Section Summary: ​

This section outlines how the total income for the block period is computed in cases where a search or requisition has been initiated under the Income Tax Act. The block period refers to a specific timeframe (usually multiple years) during which undisclosed income or other irregularities are identified. The section specifies what types of income are included in the computation and how losses or deductions are treated.

Key Changes: ​

  1. Block Period Income Aggregation: The section clarifies how income from different sources (e.g., undisclosed income, assessed income, declared income) is aggregated to determine the total income for the block period.
  2. Exclusion of International Transactions: Income from international or specified domestic transactions is excluded from the block period computation and is assessed separately under other provisions of the Act.
  3. Treatment of Losses: Losses declared or assessed during the block period are ignored when computing the total income for the block period. However, losses or unabsorbed depreciation from prior years can be carried forward for future set-off.

Practical Implications: ​

  1. For Taxpayers: Taxpayers involved in a search or requisition must ensure that all income (disclosed or undisclosed) is accurately reported. Any undisclosed income identified during the search will be added to the block period income.
  2. For Businesses: Firms must note that income assessed during the block period excludes deductions for payments to non-working partners (e.g., salary, interest, commission).
  3. For Compliance: Taxpayers must maintain proper books of account and documentation, as these will be used to determine income during the block period.

Critical Concepts: ​

  1. Block Period: A specific timeframe (usually multiple years) during which income is reassessed due to a search or requisition.
  2. Undisclosed Income: Income that has not been declared in tax returns but is identified during a search or requisition.
  3. International/Specified Domestic Transactions: Transactions involving cross-border dealings or specified domestic arrangements, which are excluded from block period computations.
  4. Losses Ignored: Losses declared or assessed during the block period are not considered when computing total income for the block period.

Compliance Steps: ​

  1. Maintain Accurate Records: Ensure all income and transactions are properly recorded in books of account.
  2. Report All Income: Declare all income, including undisclosed income, in the relevant tax returns.
  3. Respond to Notices: If a notice is issued under sections like 263, 268(1), or 280, provide accurate and complete information.
  4. Carry Forward Losses: Losses or unabsorbed depreciation from prior years can be carried forward for future set-off, but not during the block period.

Examples: ​

  1. Undisclosed Income: Suppose a taxpayer declares ₹10 lakh in undisclosed income during a search. This amount will be added to the total income for the block period.
  2. Losses Ignored: If a taxpayer reports a loss of ₹5 lakh in one year of the block period, this loss will not reduce the total income computed for the block period.
  3. International Transactions: If a taxpayer earns ₹20 lakh from an international transaction during the block period, this income will not be included in the block period computation but will be assessed separately.

This section ensures that all income (disclosed or undisclosed) during the block period is accounted for, while losses and specific transactions are treated appropriately.