Procedure for Block Assessment
Introduction
Section 158BC lays down the procedure for conducting the block assessment of undisclosed income detected as a result of a search under Section 132 or a requisition under Section 132A. It authorises the Assessing Officer (AO) to issue a notice for filing the return for the block period, determine the total undisclosed income and pass an assessment or reassessment order.
Issue of notice to file a return
Under Section 158BC(1)(a), the AO shall:
- Issue a notice requiring the assessee to furnish the return of undisclosed income for the block period.
- Specify a time limit not exceeding 60 days, extendable as permitted.
- Require filing of the return in Form ITR-B, in the manner prescribed by CBDT.
- Treat a return filed within the permitted period as a return under Section 139, enabling issuance of notice under Section 143(2).
- Disregard returns filed after the permitted period for the purpose of Section 139.
- Proceed under this Chapter without requiring a separate notice under Section 148.
- Not allow filing of a revised return.
Extension of time to file a return
The fifth proviso to Section 158BC(1)(a) permits the AO to extend the time limit by 30 days if:
- The due date for filing the return for the previous year immediately preceding the year of search has not expired on the date of search or requisition;
- The assessee is liable to audit under Section 44AB for that previous year;
- The accounts of that previous year are not audited on the date of notice, and the assessee seeks an extension in writing to enable audit.
Filing of return in Form ITR-B
- Rule 12AE prescribes Form ITR-B for filing returns under Section 158BC.
- Returns must be filed electronically.
- Companies, political parties and assessees liable to audit under Section 44AB must use DSC; others may use DSC or EVC.
Determination of undisclosed income
Under Section 158BC(1)(b), the AO shall determine undisclosed income in accordance with Section 158BB. For this purpose, the AO may:
- Conduct enquiries under Section 142;
- Issue notice under Section 143(2) to require evidence in support of the return;
- Determine the total income under Section 143(3);
- Make a best-judgment assessment under Section 144 if the return is not filed;
- Apply accounting provisions under Sections 145, 145A and 145B.
Assessment or reassessment order
After determining the undisclosed income, the AO shall:
- Pass an assessment or reassessment orderfor the block period;
- Compute the tax payable accordingly.
The provisions of Section 144C (Dispute Resolution Panel) do not apply to orders under this section.
Handling of seized or requisitioned assets
Section 158BC(1)(d) mandates that assets seized or requisitioned shall be dealt with in accordance with Section 132B, which governs the adjustment and application of seized assets.
Returns not processed under section 143(1)
Returns filed under Section 158BC are excluded from processing under Section 143(1). This reflects the special and independent nature of block assessments.
Approval for the issue of notice
Before issuing the notice under Section 158BC(1)(a), the AO must obtain prior approval from an Additional Commissioner, Additional Director, Joint Commissioner or Joint Director.