[Opinion] Welcome Changes Providing Clarity for Computing Total Undisclosed Income in Search Cases

V K Subramani – [2025] 173 taxmann.com 668 (Article)

The Finance (No.2) Act, 2024 rediscovered the block assessment concept in respect of search cases which was in statute 2 decades ago. When it was reintroduced, there were lots of confusion due to ambiguities in the method of computation of undisclosed income. When the Finance Bill, 2025 was presented, it was apparent that the lawmakers became aware of the shortcomings in the re-introduced legal provisions and therefore proposed many changes afresh to provide clarity in this regard. But when the Bill was passed in Lok Sabha the fine print shows that, at last the draftsmen have reconciled to the realities and have put adequate care to provide proper computation mechanism for total undisclosed income to exhibit the legislative intent in the proper perspective. At the threshold, it may be noted that all the amendments made in respect of Chapter XIV-B dealing with block assessment in the Finance Act, 2025 have been given retrospective effect from 1st day of September, 2024. This is a very important one since the clarity achieved in the Finance Act, 2025 will apply right from the date of substitution of Chapter XIV-B vide Finance (No.2) Act, 2024. Thus, the relevant amendments would apply in respect of any search initiated on or after the 1st day of September, 2024.

This refresher discusses the amendments relating to block assessment which is applicable for search cases.

1. Coverage – Assessment of total undisclosed income – Section 158BA

The provisions meant for search assessment are intended to compute and tax total undisclosed income. Hence wherever, the word ‘total income’ was mentioned previously, now got replaced with the expression ‘total undisclosed income’. The FAQ released by CBDT in FAQ 8 – Q.1 says that this reflects a paradigm shift where the main objective of a search or requisition is to identify income that has not been disclosed. Regular income will continue to be determined based on entries or transactions recorded in the books of account or documents maintained in the normal course before initiation of search or requisition. The changes in Chapter XIV-B aim to focus only on assessing total undisclosed income. Thus, section 158BA wherever used the expression ‘total income’ has been amended and has to be read as “total undisclosed income”.

Click Here To Read The Full Article