Procedure for block assessment.
294(1)
Where any search has been initiated or requisition is made in the case of any person, then,––
- (a) the Assessing Officer shall, in respect of such search or requisition, issue a notice to such person, requiring him to furnish within a period specified in the notice, not exceeding sixty days, a return in the form and verified in the manner, as prescribed, setting forth his total income, including the undisclosed income, for the block period, and–– (i) such return shall be considered as if it was a return furnished under section 263 and thereafter notice under section 270(8) shall be issued; (ii) any return furnished beyond the period allowed in the notice shall not be deemed to be a return under section 259; (iii) no notice under section 280 is required to be issued for the purpose of proceeding under this Chapter; (iv) a person who has furnished a return under this clause shall not be entitled to furnish a revised return;
- (b) the Assessing Officer shall proceed to determine the total income including the undisclosed income of the block period in the manner laid down in section 293 and the provisions of sections 268, 270(8), 270(10), 271, 276, 287 and 288 shall, so far as may be, apply;
- (c) the Assessing Officer, on determination of the total income of the block period as per 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, so, however that— (i) the provisions of section 275 shall not apply in respect of such order; (ii) where the order of assessment or reassessment is made in pursuance of section 295, the block period for such assessment or reassessment shall be the same as that determined in respect of the person in whose case search was initiated or requisition was made and proceedings under the said section were initiated due to such search or requisition;
- (d) the assets seized under section 247 or requisitioned under section 248 shall be dealt with as per section 250.
294(2)
The provisions of section 270(1) shall not apply to the return furnished under this section.
294(3)
The Assessing Officer, before issuance of notice under sub-section (1)(a), shall take prior approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director.
Section Summary:
This section outlines the procedure for block assessment, which is a special assessment process triggered when a search or requisition is conducted on a person. The purpose is to assess the total income, including undisclosed income, for a specific block period (a defined timeframe) following such actions. The section specifies the steps the Assessing Officer must follow, including issuing notices, determining income, and passing assessment orders.
Key Changes:
- Notice Requirement: The Assessing Officer must issue a notice to the person, requiring them to file a return of income for the block period within 60 days. This is a specific requirement under this section.
- Revised Returns: Unlike regular tax returns, a person cannot file a revised return under this section once the initial return is submitted.
- Exclusion of Certain Provisions:
- No notice under Section 280 is required for block assessments.
- The time limit for passing an assessment order under Section 275 does not apply.
- Prior Approval: The Assessing Officer must obtain prior approval from higher authorities (e.g., Additional Commissioner) before issuing the notice.
Practical Implications:
For Taxpayers:
- If a search or requisition is conducted, the taxpayer must file a return for the block period within 60 days, including any undisclosed income.
- Taxpayers cannot revise this return, so accuracy is critical.
- The assessment process is expedited, and the usual time limits for passing orders do not apply.
For Assessing Officers:
- They must follow a structured process, including obtaining prior approval before issuing notices.
- They must determine the total income for the block period, including undisclosed income, and pass an assessment order accordingly.
For Compliance:
- Taxpayers must ensure timely and accurate filing of returns for the block period.
- Assessing Officers must adhere to the procedural requirements, including prior approval and timely assessments.
Critical Concepts:
- Block Period: A specific timeframe (defined elsewhere in the law) for which income, including undisclosed income, is assessed following a search or requisition.
- Undisclosed Income: Income that has not been previously disclosed or reported in tax returns.
- Search or Requisition: Actions taken by tax authorities to seize assets or documents, often as part of an investigation into tax evasion.
- Prior Approval: The Assessing Officer must seek approval from higher authorities (e.g., Additional Commissioner) before initiating the block assessment process.
Compliance Steps:
For Taxpayers:
- Upon receiving a notice, file a return for the block period within 60 days, including all income (disclosed and undisclosed).
- Ensure accuracy in the return, as revisions are not allowed.
For Assessing Officers:
- Obtain prior approval from the Additional Commissioner or equivalent authority before issuing the notice.
- Determine the total income for the block period, including undisclosed income, and pass an assessment order.
- Handle seized or requisitioned assets as per Section 250.
Examples:
Scenario 1: A taxpayer, Mr. A, is subject to a search operation by tax authorities. The Assessing Officer issues a notice requiring Mr. A to file a return for the block period (e.g., the last 6 years). Mr. A must file the return within 60 days, including any undisclosed income. Once filed, Mr. A cannot revise this return. The Assessing Officer determines the total income, including undisclosed income, and passes an assessment order.
Scenario 2: During a search, tax authorities seize assets belonging to Mr. B. The Assessing Officer follows the procedure under this section, obtains prior approval, and issues a notice to Mr. B. Mr. B files the return, and the Assessing Officer assesses the total income for the block period, including the value of the seized assets as undisclosed income. The assessment order is passed without applying the usual time limits under Section 275.