Section 293 Computation of total undisclosed income of block period.

Income-tax Act, 2025

At a Glance

Clause 293 of the Income Tax Bill, 2025 (Old Version) prescribes rules for computation of the "total income of the block period" in search cases. It sets out categories of income to be aggregated or excluded, the basis of determination from books or material seized or available to the Assessing Officer, special treatment for international/specified domestic transactions, firm-level adjustments, and carry-forward of losses. It matters to taxpayers subject to searches or requisitions, assessing authorities, and tax practitioners. Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 293 operates under the draft Income Tax Bill, 2025 and references section 292(1) (definition of block period), and multiple provisions of the Income-tax Act, 1961 (including sections 143, 144, 147, 153A, 153C, 270, 271, 279, 166, 33(11) etc. mentioned elsewhere). The provision covers computation of "total income" for the block period arising in the context of search, survey or requisition proceedings under the Bill. Definitions or explanations provided within the clause include temporal delineations for book-based computations (three periods) and a list of sources on which undisclosed income may be computed. No separate glossary of defined terms is included in the clause itself. Any broader definition of "block period" or other terms: Not stated in the document.

Statutory Provision Mode

Text & Scope

Clause 293(1) prescribes that total income of the block period is an aggregate of: (a) undisclosed income declared in returns u/s 294; (b) incomes assessed earlier under specified sections (270(10), 271, 279, 153A, 153C) prior to search/requisition; (c) incomes declared in returns u/s 263 or responses to notices u/s 268(1) or 280 (not covered by (a) or (b)); (d) incomes determined by reference to books/entries for three specified temporal scenarios; and (e) undisclosed income determined by AO under sub-section (2). Clause (2) prescribes the basis of AO computation as (a) evidence from search/survey/requisition and (b) other material available or coming to AO's notice during proceedings. Clause (3) excludes certain international/specified domestic transactions from block computation if they pertain to the short inter-authorisation period and arise from search/requisition or book entries. Clause (4) provides firm-specific computation rules and cross-application of sections 102-105 and 166 (with temporal adjustments). Clause (5) provides that tax u/s 292(7) is charged on total income of the block period as reduced by specified sub-items. Clause (6) directs that certain loss situations shall be ignored for the purposes of subsections (1) and (5). Clauses (7)-(8) restrain set-off of brought-forward losses and allow carry-forward after the block period. The clause spans aggregation, exclusion, computation methodology, and loss treatment.

Interpretation

The text indicates legislative intent to assemble a composite tax base for the block period from declared undisclosed amounts, incomes already assessed/declared prior to search, and incomes determinable from books. It distinguishes incomes that must be excluded from block assessment (notably certain transfer-pricing-type transactions for a restricted period) and contemplates AO determination from both physical evidence and other information. The inclusion of both assessed returns and book-based determinations suggests an intent to capture both previously subjected incomes and newly identified amounts. The directive to ignore losses in specified circumstances reflects a policy to prevent negative block-period tax bases. Any legislative history or rationale beyond the clause: Not stated in the document.

Exceptions/Provisos

The key carve-outs are in sub-section (3) for international/specifed domestic transactions that fall within the short period (1 April of the tax year in which last authorisation was executed to the execution date) and are required to be determined from search/requisition/books/other material - such items must be excluded from block-period computation and dealt with under other assessment provisions. Sub-section (6) lists loss conditions that must be ignored when computing the total income and tax payable. Any other provisos: Not stated in the document.

Illustrations

• Example 1: If an assessee files a return u/s 294 declaring undisclosed income for a tax year within the block period, that declared undisclosed income is aggregated under clause (1)(a).
• Example 2: If, during search, books show entries for transactions in the period from 1st April of the tax year up to the day before search, the AO may determine income for that period based on those entries under clause (1)(d)(ii).
• Example 3: If an international transaction occurring between 1st April and the execution date of the last authorisation is detected from requisitioned documents, that income must be excluded from the block-period computation and assessed under other provisions per clause (3).

Interplay

The clause cross-references multiple assessment and procedural provisions of the Income-tax Act, 1961 and the Bill itself: notably sections concerning prior assessments (270, 271, 279, 143, 144, 147, 153A/153C), procedure for declarations (section 294), specified domestic/international transaction provisions (section 166), and carry-forward/set-off provisions (Chapter VII and section 33(11)). The clause directs certain matters (transfer-pricing-type incomes) out of block assessment into ordinary assessment channels, indicating a partitioned regime. Specific rules, notifications or circulars implementing procedural aspects are not contained in the clause. Any cross-notification/rule reference beyond these sections: Not stated in the document.

Differences between the two provisions and practical impact

• Structure and terminology: The Act version (Document 1) is titled "Computation of total undisclosed income of block period" and frames the computation in terms of "total undisclosed income." The Bill old version (Document 2) is titled "Computation of total income of block period" and framed around "total income."

  Practical impact: Shifting the statutory label from "total income" to "total undisclosed income" narrows the statutory focus in the Act text to only undisclosed amounts, which may affect how items admitted or declared are treated in computation and consequential tax charging. It signals an explicit legislative intent to distinguish declared/assessed income from the undisclosed component in block assessments.

• Placement and sequencing of previously assessed/declared incomes: In the Bill (Doc 2) sub-section (1) enumerates a mix of declared undisclosed income, incomes assessed previously under certain sections, returned incomes in response to notices, and incomes determined from books (clauses (a)-(e)). The Act (Doc 1) simplifies subsection (1) into (a) undisclosed income declared u/s 294 and (b) undisclosed income determined by Assessing Officer under sub-section (4). The Act moves much of the Bill's list into exclusions in subsection (2).

  Practical impact: The Act's reorganisation clarifies that the "total undisclosed income" comprises two components - declared and AO-determined - while specifying many previously listed categories as exclusions. This reordering makes the scope of block assessment narrower and more precise for practitioners calculating the taxable base.

• Exclusions/ignored items: The Bill (Doc 2) contains explicit clauses (1)(b) and (c) listing incomes assessed under specified sections prior to the search and incomes declared in response to certain notices. It also has a separate sub-section (6) listing categories to be ignored when they are losses. The Act (Doc 1) places many of these under subsection (2) as items that "shall not be included" in total undisclosed income, and expands clause (2)(c) into three detailed subclauses regarding computation based on books for different periods. The Act also adds clause (2)(d) excluding specified incomes referred in many sections (207(8), 216, 393(1), 115A(5), 115G, 194P(1)).

  Practical impact: The Act provides a more comprehensive exclusion list (including specific sections and categories of incomes) and formalises the treatment of book-based computations. This clarity reduces ambiguity about what must be removed from the block undisclosed computation and may reduce litigation on inclusion of certain incomes (e.g., specified incomes under cited sections).

• Computation basis and AO powers: Both texts provide that AO computes undisclosed income based on evidence from search/survey/requisition and other material. The Act places this in subsection (4), while the Bill has it as subsection (2). The Act also expressly allows the AO under subsection (3) to recompute where the assessee computed income under the book-based exclusions and AO believes part is undisclosed.

  Practical impact: The Act explicitly empowers reassessment/recomputation by the AO of book-based declared incomes that are partly undisclosed, creating clearer statutory authority for AOs to adjust assessee-computed figures within the block assessment process.

• Treatment of international/specified domestic transactions (transfer-pricing-type items): The Bill (Doc 2) places the non-consideration rule in subsection (3) with a three-part condition list (a) and (b)(i)-(iii). The Act (Doc 1) places a similar rule in subsection (5) but phrases it negatively: if such income pertains to specified shorter period and arises from search/requisition or books entries, then irrespective of section 292(6) (i) such income shall not be considered for block undisclosed computation; (ii) it shall be considered in assessment under other provisions.

  Practical impact: Both texts exclude certain international/domestic specified transactions from block computation for a limited period, but the Act's drafting emphasises "irrespective of provisions of section 292(6)" and separates the consequences into two sub-clauses, perhaps strengthening its non-application to block undisclosed income and directing such matters to regular assessment routes.

• Losses and ignored losses: The Bill (Doc 2) explicitly lists (in sub-section (6)) various situations where losses should be ignored in computation. The Act (Doc 1) omits that specific "ignored losses" list but retains a prohibition on setting off brought-forward losses/unabsorbed depreciation against undisclosed income in sub-section (8), and provides carrying forward in sub-section (9).

  Practical impact: The Act's omission of an explicit "ignored losses" clause may lead to interpretive questions about loss treatment in other contexts, but the Act preserves the principal restriction on setting off prior losses against block undisclosed income while allowing carry-forward post-block period. Practitioners must note the change in expressness.

• Tax charging clause: The Bill (Doc 2) in sub-section (5) states the tax u/s 292(7) shall be charged on the total income of the block period as reduced by listed incomes. The Act (Doc 1) in sub-section (7) simply says tax referred to in section 292(7) shall be charged on the total undisclosed income determined in the manner specified in sub-sections (1), (2) and (3).

  Practical impact: The Act's language narrows the tax base to total undisclosed income as defined by the Act rather than a residual "total income" reduced by certain items; this is a substantive reorientation that benefits taxpayers by limiting the charge to undisclosed components only.

Practical Implications

• Compliance and risk areas: Taxpayers must identify and segregate declared undisclosed income, incomes previously assessed or returned before search, and book-based incomes for the three temporal windows to determine block-period exposure. Particular care is required to identify international/specified domestic transactions that may be carved out and assessed separately.
• Record-keeping/evidence points: Maintenance of books and contemporaneous documents for the three delineated periods is critical to support income determinations made on the basis of entries "maintained in the normal course." Copies of prior assessments, responses to notices and declarations u/s 294 will be needed to establish exclusions. Any guidance on formats or timelines for records: Not stated in the document.

Key Takeaways

• Clause 293 constructs the block-period tax base as an aggregate of declared undisclosed income, certain previously assessed/declared incomes, and incomes determinable from books or AO material.
• It prescribes detailed temporal windows for book-based determinations (completed tax years, period up to day before search, and period up to execution of last authorisation).
• International and specified domestic transactions pertaining to the short inter-authorisation period are to be excluded from block computation and assessed separately.
• Certain loss situations are to be ignored for the purpose of computing total income and tax in the block assessment, preventing negative computation outcomes.
• Brought-forward losses and unabsorbed depreciation cannot be set off against undisclosed/block income but may be carried forward for use after the block period.
• The AO's basis for computation includes both physical evidence from search/survey/requisition and any other material available to or coming to the AO's notice.
• Many operational details (effective date, procedural forms, timelines, and administrative guidance) are not stated in the clause.

Full Text:

Section 293 Computation of total undisclosed income of block period