Section 295 · Assessment
Section 295 of the Income-tax Act, 2025 — Undisclosed Income of Any Other Person (Block Assessment)
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVI
📜 What the law says — Section 295, Income-tax Act 2025
295. (1) Where the Assessing Officer is satisfied that any undisclosed income
belongs to or pertains to or relates to any person (herein referred to as the
other person), other than the person (herein referred to as the specified person) with
respect to whom search was initiated under section 247 or requisition was made
under section 248, then—
(a) any money, bullion, jewellery, virtual digital asset or other valuable article
or thing or any books of account or other documents seized or requi-
sitioned or any other material or information relating to the aforesaid
undisclosed income shall be handed over to the Assessing Officer having
jurisdiction over such other person; and
(b) Assessing Officer of the other person shall proceed under section 294
against such other person and the provisions of this part shall apply
accordingly.
(2) For the purposes of this section,—
(a) where there is one specified person relevant to such other person, the
block period for such other person shall be the same as that for the
specified person;
(b) where there is more than one specified persons relevant to such other
person, the block period for such other person shall be the same as that
for the specified person in whose case the block period ends on a later
date;
62
[(c) where the undisclosed income of the other person pertains only to the
period—
(i) commencing from the tax year (herein referred to as the specified year)
immediately preceding the year of initiation of search or requisition;
and
(ii) ending on the date of initiation of search or making of requisition,
then irrespective of the provisions of section 301(a), the block period in
respect of such other person shall comprise of the specified year and the
period starting from the 1st April of the tax year in which search was ini-
tiated or requisition was made and ending on the date of the execution of
the last of the authorisations for such search or such requisition;
(d) where the undisclosed income of the other person pertains to a single tax
year out of the five tax years preceding the specified year, then irrespective
of the provisions of section 301(a), the block period in respect of such ot
In plain language
What Section 295 actually deals with
Section 295 of the Income-tax Act, 2025 is titled "Undisclosed income of any other person." It is not the old "power to make rules" clause (that was Section 295 of the 1961 Act — a completely different numbering scheme). In the 2025 Act, Section 295 sits inside the block assessment chapter (Sections 292 to 296) and is the direct successor to Section 153C of the Income-tax Act, 1961.
In plain words: when the tax department carries out a search (raid) under Section 247 or a requisition under Section 248 on Person A, the officers often find money, jewellery, virtual digital assets, books of account, documents or digital data that actually belong to someone else — Person B. Section 295 is the machinery that lets the department pull that other person (Person B) into a block assessment too.
Who it applies to
- The "other person" (Person B): anyone — an individual, firm, company, HUF or trust — whose undisclosed income, assets or documents surface during a search or requisition conducted on a different taxpayer.
- The Assessing Officer of the searched person (Person A): who must be "satisfied" that the seized material relates to Person B and then hand it over.
- The Assessing Officer having jurisdiction over Person B: who receives the material and then proceeds against Person B under Section 294.
Key conditions and how it works
- Satisfaction and hand-over: The searched person's AO must record satisfaction that the money, bullion, jewellery, virtual digital assets, valuables, books or documents belong to / relate to the other person, and then transfer them to that person's jurisdictional AO.
- Proceed under Section 294: The receiving AO issues a notice to the other person to file a block-period return and completes a block assessment exactly as if a search had been carried out on that other person.
- Block period for the other person (Section 295(2)): Where one specified (searched) person is relevant, the other person's block period mirrors that searched person's block period. Where more than one specified person is relevant, the block period is taken with reference to the person whose block period ends later.
- Modified abatement/reference date (Section 295(3)): For the abatement of pending assessments under Section 292(2) and (3), the crucial date is not the search date, but the date on which the seized material or information was received by the other person's AO. This protects the other person's timelines.
The wider block-assessment framework it plugs into
- Section 247 / 248 — the search and requisition that trigger everything.
- Section 292 — assessment of total undisclosed income; the block period is the six tax years preceding plus the broken part of the current year up to the search date.
- Section 293 — how total undisclosed income of the block period is computed (declared income plus income found from evidence).
- Section 294 — the procedure (notice, return within up to 60 days, order) that the other person's AO follows.
- Section 296 — time limit: generally twelve months from the end of the quarter in which material was received (for the other person), with extensions for references.
Practical implications
- Undisclosed income of the block period is taxed at a flat 60% (plus any applicable surcharge) under Section 292 — no basic exemption, no slab benefit. This is a deliberately penal rate.
- You can be dragged into a block assessment even though you were never raided — simply because your papers or assets turned up in someone else's search.
- Keep clean, contemporaneous records (loan confirmations, gift deeds, source-of-funds proof), because in a block assessment the burden of explaining the source shifts heavily onto you.
- The "date received" rule in Section 295(3) means your assessment clock and abatement start when your AO gets the file — a genuinely taxpayer-protective feature to watch.
💡 Example
Worked example 1 — the "other person." The department searches Mr. Sharma (a builder) under Section 247 on 10 August 2028. Among the seized documents is a signed cash-loan ledger showing ₹40,00,000 received in cash by his brother-in-law Mr. Verma, who was never searched. Sharma's AO records satisfaction and hands the ledger to Verma's AO on 5 January 2029. Under Section 295, Verma's AO now proceeds under Section 294 and assesses Verma's undisclosed income for the block period. If ₹40,00,000 is held to be Verma's unexplained income, tax under Section 292 is 60%: ₹24,00,000, plus surcharge and cess — even though Verma was never raided.
Worked example 2 — the block period and "later ending" rule. Suppose the search on Sharma covers block years 2022-23 to 2027-28 plus the broken 2028-29 period. Because Verma's material came from Sharma's search, Section 295(2) makes Verma's block period mirror Sharma's. If material relating to Verma had come from two different searched persons whose blocks ended in different years, the block period would be taken from the person whose block ends later, giving the department the wider window.
A relatable story. Priya, a salaried professional, was stunned to receive a block-assessment notice. She had never been raided. But two years earlier she had lent ₹15 lakh in cash to a jeweller friend, and when that jeweller was searched, a diary in his safe recorded the loan against Priya's name. Under Section 295, the diary was handed to Priya's AO, who opened a block assessment. Because Priya could produce bank statements showing the ₹15 lakh had already come out of taxed savings, she explained the source and escaped the 60% charge — proving why documentation is everything.
| Aspect | Section 295 (Income-tax Act, 2025) | Equivalent under 1961 Act |
|---|
| Subject | Undisclosed income of any other person | Section 153C |
| Trigger | Search u/s 247 or requisition u/s 248 on a different person | Search u/s 132 / requisition u/s 132A |
| Who is assessed | The "other person" whose assets/documents were found | The other person |
| Procedure followed | AO of other person proceeds under Section 294 | Section 153A procedure |
| Block period | 6 preceding tax years + broken current period; mirrors searched person (later-ending if multiple) | Similar block/relevant years |
| Key date for abatement | Date material is received by other person's AO (Sec 295(3)) | Date of receiving books/assets |
| Tax rate on undisclosed income | 60% + surcharge (via Section 292) | 60% (Sec 113 in earlier block scheme) |
| Time limit | ~12 months from end of quarter material received (Section 296) | Time limits under 153B |
Related sections
Section 294 — Procedure for block assessment in search cases Section 292 — Assessment of total undisclosed income (60% rate) Section 293 — Computation of total undisclosed income of block period Section 296 — Time-limit for completion of block assessment Section 247 — Search and seizure Section 248 — Powers to requisition books, assets
Frequently asked questions
Does Section 295 of the 2025 Act deal with the CBDT's power to make rules?
No. That was Section 295 of the old 1961 Act. In the Income-tax Act, 2025 the section numbers were re-cast, and Section 295 now deals with 'undisclosed income of any other person' in a block assessment — the successor to Section 153C of the 1961 Act.
Can I face a block assessment even if I was never searched?
Yes. If your money, jewellery, virtual digital assets, books or documents are found during a search or requisition on someone else, Section 295 allows the department to hand that material to your Assessing Officer, who can then assess your undisclosed income under Section 294.
At what rate is the undisclosed income taxed?
Under Section 292, the total undisclosed income of the block period is taxed at a flat 60%, plus any applicable surcharge and cess. There is no basic exemption or slab benefit.
What is the block period for the 'other person'?
It mirrors the block period of the searched person — broadly the six tax years preceding the search plus the broken current-year period up to the search date. If more than one searched person is involved, the block period is taken from the one whose block ends later.
From which date does my assessment timeline start under Section 295?
Section 295(3) provides that, for abatement of pending assessments, the relevant date is the date your Assessing Officer receives the seized material or information — not the original search date. This is a protective rule for the other person.
How can I defend myself in such an assessment?
Explain the source of the money or assets with solid documentation — bank statements, loan/gift deeds, invoices and ITRs. If you satisfactorily explain the source and show it was already taxed or exempt, the amount should not be charged at 60%.
What is the time limit for completing this assessment?
Under Section 296, the order is generally to be passed within about twelve months from the end of the quarter in which the last authorisation was executed or the material was received, subject to extensions where a reference (for example to a Valuation Officer or Transfer Pricing Officer) is made.
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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