[Opinion] Budget 2025 | Amendments Proposed in Computation of Total Income of Block Period in Search Cases

V K Subramani – [2025] 171 taxmann.com 127 (Article)

The Finance Bill, 2025 has many significant proposals for amending various provisions of the Income-tax Act, 1961. Personal taxpayers are euphoric due to the benefit of section 87A rebate being enhanced to Rs.60,000 which if translated in absolute numbers it is for a total income up to Rs.12,00,000. Thus, there would be no tax liability in case of personal taxpayers opting for default tax regime contained in section 115BAC(1A).

One of the significant amendments which set right the error contained in the Finance (No.2) Act, 2024 relates to computation of total income of the block period applicable for search cases. An article titled “Ambiguities in assessment of search cases as proposed in the Finance (No.2) Bill, 2024” was published in 165 taxmann.com 359 by the same author. The focus of this write up is on the amendment which has removed those lacunas and presents a much better mechanism for computation of total income for search cases.

Section 158BA

This section is for assessment of total income as a result of search and was introduced by the Finance (No.2) Act, 2024 w.e.f. 01.09.2024. Sub-section (4) is subjected to an amendment by substituting the words “required to be made” in place of ‘pending’.

In sub-section (5) for the words “the assessment or reassessment relating to any assessment year”, the words “the assessment or reassessment or recomputation or reference or order relating to any assessment year” shall be substituted.

Both the amendments proposed and given above are with effect from 1st February, 2025.

The amended provision would read as under:

Section 158BA(4) “Where any assessment order under the provisions of this chapter is required to be made in the case of an assessee in whose case a subsequent search is initiated, or a requisition is made, such assessment shall be duly completed, and thereafter, the assessment in respect of such subsequent search or requisition shall be made under the provisions of this Chapter”. (emphasis supplied).

Section 158BA(5) “If any proceeding is initiated under this Chapter or any order of assessment or reassessment made under clause (c) of sub-section (1) of section 158BC has been annulled in appeal or any other proceeding, then, notwithstanding anything in this Chapter or section 153, the assessment or reassessment or recomputation or reference or order relating to any assessment year which has abated under sub-section (2) or sub-section (3), shall revive with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner”.

In the Memorandum explaining the provisions of the Finance Bill, 2025 it is stated that the words “recomputation”, “reference”, or “order” have been added to align the sub-sections (2) and (3) of section 158BA.

Similarly, it is explained that the word “pending” substituted by the word “required to be made” is to cover a scenario where the assessment may not be pending due to procedural compliance when the subsequent search is initiated. For example, if a search was conducted in March, 2025 and after the completion of search proceedings and before initiating the process for search assessment say in June, 2025 if another search is made in such of those cases the search assessment consequent to the search conducted in March, 2025 would get completed and thereafter the block assessment for the search conducted in June, 2025 would be made. It a case where the assessment is to be “required to be made” at the time of second search and it is technically not “pending”.

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