Section 294 · Assessment
Section 294 of the Income-tax Act, 2025 — Procedure for Block Assessment in Search Cases
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVI
📜 What the law says — Section 294, Income-tax Act 2025
294. (1) Where any search has been62 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 may be prescribed, setting forth his
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 263;
(iii) no notice under section 280 is required to be issued for the purpose
of proceeding under this part;
(iv) a person who has furnished a return under this clause shall not be
entitled to furnish a revised return;
(v) the time allowed for furnishing a return under this clause may be
extended by a further period of thirty days, where—
(A) in respect of a tax year immediately preceding the tax year in
which the search is initiated or requisition is made, the due
date for furnishing the return has not expired prior to the date
of initiation of such search or requisition;
(B) the assessee was liable for audit under section 63 for such tax
year;
(C) the accounts (maintained in normal course) of such tax year
have not been audited on the date of issuance of such notice;
and
(D) the assessee requests in writing for extension of time for
furnishing such return to get such accounts audited;
(b) the Assessing Officer shall proceed to determine the total 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, 277 and 278
shall, so far as may be, apply;
(c) the Assessing Officer, on determination of the total undisclosed income
of the block period in accordance with this part, shall pass an order of
asse
In plain language
What Section 294 actually deals with
Section 294 of the Income-tax Act, 2025 lays down the procedure for block assessment — the step-by-step machinery the Income-tax Department must follow to assess a person after a search (under Section 247) or a requisition (under Section 248). It is the direct successor to Section 158BC of the Income-tax Act, 1961. It does not create the tax; it tells the Assessing Officer (AO) how to issue the notice, how the taxpayer must file the block return, and how the block assessment order is to be passed.
Block assessment is special because, instead of assessing each year separately, the AO clubs several years into one consolidated "block period" and assesses only the total undisclosed income of that block in a single order.
Who it applies to
- Any person searched under Section 247, or whose books, assets, money, bullion, jewellery or virtual digital assets are requisitioned under Section 248.
- It also reaches an "other person" — someone other than the searched party — whose undisclosed income is unearthed from the seized material (assessed after the searched person's own block order).
- It applies only where a valid search/requisition has taken place; ordinary taxpayers filing normal returns are not covered.
The block period (Section 301)
Under the definitions in Section 301, the block period covers:
- the six tax years immediately preceding the tax year in which the search/requisition occurred; plus
- the broken part of the current year — from 1 April up to the date the last search authorisation was executed or requisition made.
So a search executed on, say, 10 August 2026 sweeps in roughly six-and-a-half years into one assessment.
Key conditions and the step-by-step procedure
- Prior approval: before issuing the notice, the AO must obtain approval of an Additional/Joint Commissioner or Additional/Joint Director.
- Block return notice: the AO serves a notice requiring the person to file a return of undisclosed income for the block period, in the prescribed form, within a period specified in the notice not exceeding 60 days.
- Deemed regular return: a return filed in time is treated as if furnished under Section 263, and normal assessment provisions (like Section 270(8)) then apply.
- No separate reassessment notice: no notice under Section 280 (reopening) is needed to run the block proceeding.
- No revised return: a person who files the block return cannot file a revised return of block income.
- Late return excluded: a return filed beyond the notice period is not treated as a valid block return under Section 263.
- 30-day extension: the filing window can be extended by a further 30 days in specified situations (e.g., audit of earlier years pending).
- Determination: the AO then computes the total undisclosed income following Section 293 and passes an assessment/reassessment order determining the tax payable.
How it interacts with related sections
- Section 247/248 — the trigger events (search / requisition).
- Section 292 — mandate to assess total undisclosed income of the block period.
- Section 293 — how the undisclosed income is computed (evidence found, entries in seized books, etc.).
- Section 296 — the time limit: the block order must be passed within 12 months from the end of the quarter in which the last search authorisation was executed (13 months if the 30-day extension applies).
- Section 194 (Chapter XIV-B charging provision) — undisclosed income of the block is taxed at the punitive rate of 60%.
Practical implications for taxpayers
- Once searched, expect a block-return notice; respond within the deadline — a late return loses its validity and invites a best-judgment assessment.
- Disclose fully and honestly; the new scheme trusts the taxpayer to declare regular income and reserves the 60% punitive rate only for genuinely undisclosed income.
- Preserve documentary evidence for the six-plus years in the block — proof of source is your best defence against an addition.
- Engage a Chartered Accountant early; block assessments are technical, time-bound and carry heavy tax plus penalty exposure.
💡 Example
Worked example 1 — the block period and the 60% tax. Suppose a search on Mr. Arun's premises is executed on 10 August 2026 (tax year 2026-27). The block period runs across the six preceding tax years (2020-21 to 2025-26) plus 1 April 2026 to 10 August 2026. The AO issues a Section 294 notice asking for the block return within 50 days. From seized diaries and unexplained cash, the AO determines total undisclosed income of the block at ₹80,00,000. At the block rate of 60%, tax works out to ₹48,00,000 (before any surcharge, cess and penalty), payable in one consolidated order — not spread across seven separate assessments.
Worked example 2 — the timeline. If the last search authorisation is executed on 10 August 2026, that quarter ends 30 September 2026. Under Section 296, the block order must ordinarily be passed by 30 September 2027 (12 months from quarter-end). If the AO grants the 30-day filing extension under Section 294, the outer limit stretches to 31 October 2027 (13 months).
A relatable story. Priya, a jeweller in Jaipur, was searched in 2026. She panicked and ignored the block-return notice, assuming her regular ITRs already covered everything. Because she missed the 60-day window, her belated block return was not treated as valid, and the AO proceeded on best judgment — adding disputed cash she could actually have explained with vendor receipts. Her CA later showed that had she filed on time and attached the source documents, most of the addition would have fallen away. The lesson: in a block assessment, meeting the Section 294 deadline with full evidence is half the battle.
| Feature | Position under Section 294 (Act, 2025) |
|---|
| Trigger | Search u/s 247 or requisition u/s 248 |
| Old-law equivalent | Section 158BC, Income-tax Act 1961 |
| Block period | 6 preceding tax years + broken current year up to date of last authorisation (Sec. 301) |
| What is assessed | Total undisclosed income of the block (Sec. 292/293) |
| Notice: return period | Not exceeding 60 days (extendable by 30 days) |
| Prior approval | Addl./Joint Commissioner or Addl./Joint Director |
| Revised return | Not permitted |
| Tax rate on undisclosed income | 60% (Sec. 194, Chapter XIV-B) plus applicable surcharge/cess |
| Time limit for order | 12 months from end of quarter of last authorisation; 13 months if 30-day extension used (Sec. 296) |
Related sections
Section 247 — Search and seizure Section 248 — Requisition of books of account and assets Section 292 — Assessment of total undisclosed income from search Section 293 — Computation of total undisclosed income of block period Section 296 — Time-limit for completion of block assessment Section 301 — Definitions including 'block period'
Frequently asked questions
What is Section 294 of the Income-tax Act, 2025?
It prescribes the procedure for block assessment in search and requisition cases, telling the Assessing Officer how to issue the notice, how the taxpayer files the block return, and how the block order is passed. It replaces Section 158BC of the 1961 Act.
How much time do I get to file the block return?
The Section 294 notice specifies a period not exceeding 60 days to file the block-period return of undisclosed income. This can be extended by a further 30 days in certain situations, such as when an audit of earlier years is pending.
Which years get covered in a block assessment?
Under Section 301, the block period is the six tax years immediately preceding the year of search, plus the broken part of the current year up to the date the last search authorisation was executed or requisition made.
At what rate is undisclosed income taxed?
Undisclosed income of the block period is taxed at the punitive rate of 60% under the Chapter XIV-B charging provision (Section 194), plus applicable surcharge and cess. Only genuinely undisclosed income attracts this rate, not regularly disclosed income.
Can I file a revised block return?
No. A person who has furnished a block return under Section 294 is not entitled to file a revised return of block income, so accuracy on the first filing is critical.
What happens if I miss the deadline in the notice?
A return filed beyond the period allowed in the notice is not treated as a valid block return under Section 263, and the Assessing Officer can proceed on a best-judgment basis, often leading to higher additions.
By when must the block assessment order be passed?
Under Section 296, generally within 12 months from the end of the quarter in which the last search authorisation was executed, extended to 13 months if the 30-day filing extension under Section 294 was granted.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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