Income Tax 2025

Appearance

Time-limit for completion of block assessment. ​

296(1) ​

Irrespective of the provisions of section 296, the order under section 294 shall be passed within twelve months from the end of the month in which the last of the authorisations for search was executed, or requisition was made.

296(2) ​

Where search was initiated or requisition was made, and during the course of assessment or reassessment of the total income of the relevant block period, any reference under section 166(1) is made, the period available for completion of such assessment or reassessment proceeding shall be extended by twelve months.

296(3) ​

In computing the period of limitation under sub-section (1), the period (not exceeding one hundred eighty days) commencing from the date on which a search is initiated or a requisition is made and ending on the date on which seized or requisitioned items are handed over to the Assessing Officer having jurisdiction over the assessee shall be excluded.

296(4) ​

If after exclusion of the period referred to in sub-section (3), the remaining period of limitation for completion of assessment or reassessment, expires before the end of a month, such period shall be extended to end of such month.

296(5) ​

The period of limitation for completion of assessment or reassessment for the block period in the case of the other person referred to in section 295 shall be twelve months from the end of the month in which the notice under section 294 in pursuance of section 295, was issued to such other person.

296(6) ​

The period available for completion of assessment or reassessment proceeding in respect of the block period in a case referred to in sub-section (5) shall be extended by twelve months, where a reference under section 166(1) is made in such case.

296(7) ​

In computing the period of limitation under this section, the following period shall be excluded,—

  • (a) the period commencing on the date on which stay on assessment proceeding was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by jurisdictional Principal Commissioner or Commissioner;
  • (b) the period commencing from the date on which a first of the reference for exchange of information (made by an authority competent under an agreement referred to in section 159) is made and ending with the date on which such information requested is last received by the jurisdictional Principal Commissioner or Commissioner or one year, whichever is less;
  • (c) the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee to be re-heard under section 244(2);
  • (d) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited or inventory valued under section 268(5) and— (i) ending with the last date on which the assessee is required to furnish a report of such audit or inventory valuation under that sub-section; or (ii) where such direction is challenged before a court, ending with the date on which the certified copy of the order setting aside such direction is received by the jurisdictional Principal Commissioner or Commissioner;
  • (e) the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under section 269(1) and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer;
  • (f) the period commencing from the date on which the Assessing Officer intimates the Central Government or the prescribed authority, the contravention of the provisions of Schedule III (Table: Sl. No. 23, 24 or 25) as referred to in section 270(11)(i) and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, under those clauses is received by the Assessing Officer;
  • (g) the period commencing from the date on which the Assessing Officer makes a reference to the Principal Commissioner or Commissioner as per section 270(13) and ending with the date on which the copy of the order under section 351(2)(ii)(A) or (B), is received by the Assessing Officer;
  • (h) the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the jurisdictional Principal Commissioner or Commissioner under section 274(1) and ending on the date on which a direction under sub-section (3) or (6) or an order under sub-section (5) of the said section is received by the Assessing Officer;
  • (i) the period commencing from the date on which an application is made before the Board for Advance Rulings under section 381(1) and ending with the date on which the order rejecting the application is received by the jurisdictional Principal Commissioner or Commissioner under section 384(5);
  • (j) the period commencing from the date on which an application is made before the Board for Advance Rulings under section 381(1) and ending with the date on which the advance ruling pronounced by it is received by the jurisdictional Principal Commissioner or Commissioner under section 384(8).

296(8) ​

Where immediately after the exclusion of the period referred to in sub-section (7), the remaining period of limitation referred to in sub-section (1) or (5) available to the Assessing Officer for completion of assessment under section 294 is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.

296(9) ​

Where after extension of the period referred to in sub-section (8), the period of limitation for making an order of assessment or reassessment, expires before the end of a month, such period shall be extended to the end of such month.

Explanation

Section Summary: ​

This section sets the time limits for completing block assessments under the Income Tax Act. A block assessment is a special type of assessment conducted when a search or requisition is initiated by tax authorities. The section specifies the deadlines for completing such assessments and provides for extensions under certain circumstances.

Key Changes: ​

  1. Time Limit for Block Assessment: The order under section 294 must now be passed within 12 months from the end of the month in which the last search authorization or requisition was executed. This is a clear timeline introduced to streamline the process.
  2. Extensions: The section allows for extensions in specific scenarios, such as when references are made under section 166(1) or when certain procedural delays occur (e.g., court stays, audits, or valuation reports).
  3. Exclusions: Certain periods are excluded from the calculation of the time limit, such as delays due to court orders, audits, or exchange of information with foreign authorities.

Practical Implications: ​

  1. For Taxpayers: Taxpayers involved in block assessments must be aware of the strict timelines. Delays caused by procedural issues (e.g., audits or court stays) will extend the assessment period, but the overall process is now more structured.
  2. For Tax Authorities: Assessing Officers must adhere to the 12-month deadline unless specific exclusions apply. This ensures timely completion of assessments and reduces prolonged uncertainty for taxpayers.
  3. For Businesses: Businesses subject to block assessments must ensure proper documentation and cooperation with tax authorities to avoid unnecessary delays.

Critical Concepts: ​

  1. Block Assessment: A special assessment conducted for a "block period" (usually several years) when a search or requisition is initiated. It focuses on undisclosed income detected during the search.
  2. Exclusions: Certain periods are excluded from the 12-month timeline, such as:
    • Time taken for court stays or injunctions.
    • Time for audits, valuations, or exchange of information with foreign authorities.
    • Time for references to Valuation Officers or other authorities.
  3. Extensions: The timeline can be extended by 12 months if a reference under section 166(1) is made during the assessment process.

Compliance Steps: ​

  1. For Taxpayers:
    • Maintain proper records and documentation to facilitate the assessment process.
    • Respond promptly to any notices or requests from tax authorities.
  2. For Assessing Officers:
    • Ensure assessments are completed within the 12-month deadline, excluding permitted exclusions.
    • Document any delays (e.g., court stays, audits) to justify extensions.

Examples: ​

  1. Scenario 1: A search is conducted on a taxpayer on March 15, 2023. The last authorization for the search is executed on March 20, 2023. The block assessment must be completed by March 31, 2024 (12 months from the end of March 2023).

    • If a court stay is granted from June 1, 2023, to September 30, 2023, this 4-month period is excluded. The new deadline becomes July 31, 2024.

  2. Scenario 2: A reference under section 166(1) is made during the assessment process. The timeline is extended by 12 months, so the new deadline becomes March 31, 2025.

  3. Scenario 3: If the remaining period after exclusions is less than 60 days, it is extended to 60 days. For example, if only 30 days remain after exclusions, the deadline is extended to 60 days.

This section ensures a balance between timely assessments and flexibility to account for procedural delays, benefiting both taxpayers and tax authorities.