TaxTMI 
TaxTMI 
Transforming the Framework for Search-Based Income Tax Assessments : Clause 294 of the Income Tax Bill, 2025 and Section 158BC of the Income-tax Act, 1961
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....hind Clause 294 is to provide a comprehensive and efficient procedure for the assessment of undisclosed income discovered during search or requisition proceedings. The primary objectives are: * To ensure expeditious assessment of income not disclosed to tax authorities, thereby curbing tax evasion. * To lay down clear timelines and procedural safeguards for both the taxpayer and the revenue authorities. * To harmonize the assessment process with advancements in technology and evolving compliance norms. * To remove ambiguities and procedural bottlenecks observed under the regime of Section 158BC and to align the process with contemporary tax administration principles. The historical background of block assessment traces its origins to the 1995 amendments to the Income-tax Act, which introduced Chapter XIV-B to address the challenges of assessing undisclosed income detected during search operations. Over time, judicial pronouncements and administrative experience highlighted the need for greater clarity, procedural efficiency, and technological integration, culminating in the proposed changes under Clause 294. Detailed Analysis of Clause 294 of the Income Tax Bill, 2025 Cl....
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....eturn by thirty days under specified circumstances (e.g., audit not completed); Clause 294 does not expressly provide for such extension. Rule 12AE: Prescribes the form (ITR-B) and manner of furnishing the return, including electronic filing and digital signature requirements, aligning with the technological advancements anticipated under Clause 294. 3. Determination of Total Income and Application of Other Provisions Clause 294(1)(b): The AO is to determine total income, including undisclosed income, for the block period as per Section 293, and apply provisions of Sections 268, 270(8), 270(10), 271, 276, 287, and 288 "so far as may be." Comparison: Section 158BC(1)(b) directs the AO to determine "total undisclosed income" as per Section 158BB, with application of Sections 142, 143(2), 143(3), 144, 145, 145A and 145B. Key Differences: * Scope of Income: Clause 294 refers to "total income including undisclosed income," whereas Section 158BC (as amended) refers to "total undisclosed income." This signals a possible shift towards comprehensive assessment of all income for the block period, not merely the undisclosed portion. * Applicable Provisions: The cross-refere....
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....tory for all block assessment returns post-September 2024. * Electronic Filing: Companies, political parties, and audit-assessees must file electronically under digital signature. Others may use digital signature or electronic verification code. * Security and Data Transmission: The Principal DGIT(Systems) is responsible for secure data capture and archival. * Credit of Tax Payments: Claims against undisclosed income (other than self-assessment tax) are subject to AO's verification and satisfaction. Observation: Rule 12AE aligns with the digitalization and security focus of the new regime, facilitating efficient compliance and data integrity. Practical Implications The procedural and substantive changes introduced by Clause 294, when read with Rule 12AE, have significant implications for taxpayers, tax professionals, and the revenue authorities. * Efficient Compliance: Clear timelines (sixty days), prescribed forms, and electronic filing reduce ambiguity and promote timely compliance. * Restrictive Filing: The prohibition on revised returns and strict adherence to notice periods curtail opportunities for post-facto adjustments, placing a premium on accuracy and pro....
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....; Clause 294 refers to section 293, which presumably serves a similar function in the new Bill. * Applicability of Other Provisions: Section 158BC applied sections 142, 143(2)/(3), 144, 145, and 145A/B "so far as may be." Clause 294 applies sections 268, 270(8)/(10), 271, 276, 287, and 288, indicating a restructuring of procedural and penalty provisions. * Assessment/ Reassessment Orders: Both provisions empower the AO to pass assessment or reassessment orders based on the block period income. * Time Limit Exclusion: Section 158BC excluded section 144C (Dispute Resolution Panel) from applying; Clause 294 excludes section 275 (presumably relating to time limits), suggesting a focus on speedy finality. * Block Period Consistency: Both provisions ensure that assessments of other persons (triggered by the search) are aligned with the main searched person's block period. Seized Assets * Section 158BC: Assets seized are dealt with u/s 132B. * Clause 294: Refers to section 250 for asset disposition, indicating a possible reorganization or update of the relevant provisions. Exclusion of Summary Assessment Section 158BC(2) excluded section 14....