Income Tax 2025

Appearance

Interpretation ​

301 ​

In this Chapter––

  • (a) “block period” means the aggregate of–– (i) the period comprising six tax years preceding the tax year in which the search was initiated or any requisition was made; and (ii) the period starting from the 1st April of the tax year in which search was initiated or requisition was made and ending on the date of the execution of the last of the authorisations for such search or such requisition;
  • (b) “requisition” means requisition of books of account, other documents or any assets under section 248;
  • (c) “requisitioned items” means the books of account, or other documents or money or bullion or jewellery or other valuable article or thing requisitioned under section 248;
  • (d) “search” means a search initiated under section 247;
  • (e) “seized items” means the books of account, or other documents or money or bullion or jewellery or other valuable article or thing seized under section 247;
  • (f) “the last of the authorisations” shall be deemed to have been executed,—
  • (i) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued, irrespective of whether or not any seizure is recorded in such panchnama; (ii) in the case of requisition, on the actual receipt of the books of account or other documents or assets by the Authorised Officer; and
  • (g) “undisclosed income” includes–– (i) any money, bullion, jewellery, virtual digital asset or other valuable article or thing or any expenditure or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, virtual digital asset, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act, in respect of the block period; or (ii) any expense, exemption, deduction or allowance claimed under this Act which is found to be incorrect, in respect of the block period.
Explanation

Section Summary: ​

Section 301 of the new income tax law provides definitions and interpretations for key terms related to searches, requisitions, and undisclosed income. It clarifies the scope of the "block period," which is the timeframe during which undisclosed income or assets can be assessed for tax purposes following a search or requisition. This section is crucial for understanding how tax authorities handle cases involving undisclosed income or assets discovered during investigations.

Key Changes: ​

  1. Introduction of "Block Period": The concept of a "block period" is explicitly defined, encompassing six tax years preceding the search or requisition and the period from the start of the tax year in which the search/requisition was initiated until the conclusion of the search or receipt of requisitioned items.
  2. Inclusion of Virtual Digital Assets: Undisclosed income now explicitly includes virtual digital assets (e.g., cryptocurrencies), reflecting the evolving nature of assets and income sources.
  3. Clarification on "Last of the Authorisations": The section provides clear guidelines on when a search or requisition is deemed concluded, which is important for determining the end of the block period.

Practical Implications: ​

  1. For Taxpayers: Taxpayers must ensure accurate reporting of all income and assets, including virtual digital assets, to avoid being subject to scrutiny under this section. Any undisclosed income or incorrect claims during the block period can lead to penalties.
  2. For Businesses: Businesses should maintain proper documentation of transactions, especially those involving high-value items like bullion, jewellery, or virtual digital assets, to avoid disputes during searches or requisitions.
  3. For Tax Authorities: This section provides a structured framework for assessing undisclosed income over a defined period, making it easier to enforce compliance.

Critical Concepts: ​

  1. Block Period: A defined timeframe (six preceding tax years + the current tax year up to the conclusion of the search/requisition) during which undisclosed income or assets can be assessed.
  2. Undisclosed Income: Includes any income, assets, or expenses that were not reported or were incorrectly claimed during the block period. This now explicitly covers virtual digital assets.
  3. Search vs. Requisition:
    • Search: Conducted under Section 247, involving physical inspection and seizure of items.
    • Requisition: Conducted under Section 248, involving the formal request for books of account, documents, or assets.

Compliance Steps: ​

  1. Maintain Accurate Records: Ensure all income, assets, and transactions are properly documented and reported in tax filings.
  2. Monitor Virtual Digital Assets: Keep detailed records of cryptocurrency or other virtual digital asset transactions, as they are now explicitly included in undisclosed income.
  3. Prepare for Searches/Requisitions: Have all relevant documents readily available in case of a search or requisition to demonstrate compliance.

Examples: ​

  1. Example of Block Period Calculation: If a search is initiated on 15th October 2023, the block period would include:
    • Six preceding tax years (2017-18 to 2022-23).
    • The period from 1st April 2023 (start of the tax year) to 15th October 2023 (date of search conclusion).
  2. Example of Undisclosed Income: A taxpayer fails to report cryptocurrency holdings worth ₹50 lakh during the block period. This amount would be treated as undisclosed income and subject to tax and penalties under this section.

This section ensures clarity and consistency in handling cases involving undisclosed income, particularly in the context of searches and requisitions.