Non-applicability of Section 271AAB Penalty for ‘Block Assessment’ by Finance Bill 2025
The Finance Bill, 2025, proposes several key changes in the Income Tax Act, 1961, to continue reforms in the direct tax system through tax reliefs, removing difficulties faced by taxpayers, and rationalizing1 various provisions. Here are some of the key changes:
Here are the key bullet points regarding the Finance Bill, 2025, proposal for the non-applicability of Section 271AAB of the Act:
Section 271AAB: This section deals with penalties for undisclosed income found during searches initiated after December 15, 2016.
Block Assessment: The Finance Act, 2024, introduced a new regime of Block Assessment for searches initiated on or after September 1, 2024.
Clarification on Applicability: Although Section 271AAB already clarifies that it doesn’t apply to Block Assessments, the Bill aims to remove any ambiguity by explicitly stating that this section will not apply to searches initiated on or after September 1, 2024.
Effective Date: This amendment will take effect from September 1, 2024.
Non-applicability of Section 271AAB of the Act
The existing provisions of sub-section (1A) of section 271AAB of the Act relate to penalty in respect of searches initiated after 15.12.2016.
2. Vide Finance Act, 2024, provisions of ‘Block Assessment (Chapter XIV-B) were introduced for searches initiated under section 132 of the Act on or after the 1st day of September, 2024. Although section 271AAB of the Act is clear that its provisions are not applicable to proceedings conducted under section 158BC of the Act, it is proposed to remove any ambiguous interpretation of its applicability to searches conducted on or after 01.09.2024.
3. Therefore, it is proposed to amend section 271AAB of the Act to provide that its provisions shall not be applicable to the assessee in whose case search has been initiated under section 132 on or after the 1st day of September, 2024.
4. This amendment will take effect from the 1st day of September, 2024.
[Clause 75]