Section 295 Undisclosed income of any other person

Income-tax Act, 2025

At a Glance

Clause 295 of the Income Tax Bill, 2025 - (Old Version). The clause prescribes procedure where undisclosed income seized in a search pertains to a person other than the person searched. It matters for AOs, taxpayers who are "other persons," and the conduct of block (search-related) assessments. Effective date or decision date: Not stated in the document.

Background & Scope

Statutory hooks: Clause 295 appears under the heading "Special procedure for assessment of search cases" in the Income Tax Bill, 2025 (Old Version). The clause deals with handover of seized items and consequent assessment of a person other than the one in respect of whom search or requisition was made. Definitions or explanations: Not stated in the document beyond the operative wording; the clause does not define "other person" or "specified person" explicitly within the text presented.

Statutory Provision Mode

Text & Scope

The clause applies where an Assessing Officer is satisfied that any undisclosed income "belongs to or pertains to or relates to any person, other than the person with respect to whom search was initiated or requisition was made." In such cases:

• (a) any "money, bullion, jewellery, virtual digital asset or other valuable article or thing, or assets, or books of account, other documents, or any information contained therein," seized or requisitioned, shall be handed over to the Assessing Officer having jurisdiction over such other person;
• (b) such other person "shall be assessed u/s 294" and "the provisions of this Chapter shall apply accordingly."

Coverage: The clause covers tangible assets, virtual digital assets, books, documents and information seized in connection with a search or requisition which are found to pertain to a person other than the searched/requisitioned person; it mandates transfer and assessment procedures.

Interpretation

Legislative intent and interpretive principles indicated by the text: The clause intends to provide a mechanism to ensure that undisclosed income found in a search is assessed against the correct person, by transferring materials to the competent AO and applying block-assessment procedure (section 294). The inclusion of "any information contained therein" suggests a broad reach to both documents and information extracted from them. The directive "shall be handed over" and "shall be assessed" signals obligatory procedural duties for the AO. Beyond these textual indications, no explicit legislative purpose statement, policy rationale, or examples are included. (If further intent or legislative history were desired: Not stated in the document.)

Exceptions/Provisos

Carve-outs, thresholds, conditions: Not stated in the document. The clause contains no provisos, conditions, timelines or thresholds governing the handover, transfer, or scope of assessment in the Old Version provided.

Illustrations

• Example 1: A search at A's premises yields jewellery that the AO is satisfied belongs to B. Under Clause 295, the jewellery and related documents shall be handed to the AO having jurisdiction over B, and B shall be assessed u/s 294. (The clause gives the procedural instruction; details of valuation, timing or abatement are Not stated in the document.)
• Example 2: Digital wallets seized from C contain virtual digital assets tied to D. The seized assets and any books or information shall be transferred to the AO of D, and D shall be assessed u/s 294. (Treatment of the block period and abatement is Not stated in the document.)

Interplay

Interaction with Rules/Notifications/Circulars: The clause cross-refers to section 294 for assessment procedure and references the general Chapter containing block assessment provisions. Specific interactions with Rules, Notifications or Circulars, or with sections such as section 292 (abatement) or sections governing search/requisition (e.g., 247/248), are not set out in the clause as presented. Any operational guidance or subordinate legislation for implementation: Not stated in the document.

Differences between Section 295 of the Income-tax Act, 2025 and Clause 295 of the Income Tax Bill, 2025 - (Old Version) and Practical Impact

• Terminology and scope of seized items: The Bill (Old Version) lists "assets" in addition to "money, bullion, jewellery, virtual digital asset or other valuable article or thing, or assets," whereas the enacted Section 295 (as presented) omits the separate word "assets" but retains "other valuable article or thing" and explicitly repeats "any other material or information relating to the aforesaid undisclosed income."
  • Practical impact: The enacted text's broader phrase "any other material or information" emphasizes information and materials beyond documents and assets; the Bill's explicit "assets" word may have stressed tangible assets-difference is semantic but may affect interpretive emphasis when deciding what must be handed over.
• Destination of seized material and procedural detail: Both versions require handing over seized items to the Assessing Officer (AO) having jurisdiction over the "other person." The enacted Section 295 (Document 1) adds procedural sequencing: the AO of the other person "shall proceed u/s 294" (similar to Bill) but the enacted text explicitly states "and the provisions of this part shall apply accordingly." The Bill used "the provisions of this Chapter shall apply accordingly."
  • Practical impact: Change from "Chapter" to "part" is terminology-may affect internal cross-references within the statute but does not materially change the procedural effect unless "part" and "Chapter" have different statutory meanings in the Act; it may require careful cross-reference to determine applicable provisions.
• Block period / temporal rules: The enacted Section 295 contains an expanded subsection (2) specifying how to determine the block period for the other person where there is one or more specified persons, and subsection (3) contains a specific provision treating receipt date by the AO of the other person as the reference for abatement u/s 292(2) and (3). The Bill (Old Version) as presented contains no corresponding subsections (2) or (3).
  • Practical impact: The enacted additions materially clarify temporal rules-how the block period is fixed for the other person and how limitation/abatement is calculated-reducing disputes about periods and abatement dates. Those clarifications impose concrete procedural consequences on assessment timelines and calculation of abatement for the other person's assessment.
• Reference to search/requisition initiation date for abatement: The enacted provision (subsection (3)) expressly replaces the date of initiation of search/requisition (used for the specified person) with the date on which seized items/materials/information were received by the AO having jurisdiction over the other person for purposes of sections 292(2) and (3). The Bill lacks this specific clause.
  • Practical impact: Enacted subsection (3) prevents unfair extension of the abatement period for the other person based solely on the original search/requisition date-provides a new, objectively ascertainable date for limitation calculations for the other person's assessment.
• Cross-reference precision: The enacted version refers to "section 247" and "section 248" as the search/requisition provisions; the Bill's text refers generically to "with respect to whom search was initiated or requisition was made."
  • Practical impact: Minimal, but the enacted text's explicit cross-references aids legal clarity and statutory navigation.

Practical Implications

• Compliance and risk areas: The clause mandates AOs to identify whether seized items pertain to persons other than the searched person and to hand over such items. AOs must be careful in making the factual satisfaction that undisclosed income "belongs to or pertains to or relates to" another person, as that triggers transfer and separate block assessment u/s 294. The clause does not specify evidentiary standards for that satisfaction-procedural risk and disputes may arise over the AO's determination. (Evidentiary standards: Not stated in the document.)
• Record-keeping/evidence points: The AO should record the basis for concluding that seized items pertain to an other person, maintain chain-of-custody records for handover, and document the handover to the AO of the other person. The clause itself does not prescribe forms, timelines, or Custody protocols. (Specific record-keeping requirements or form numbers: Not stated in the document.)

Key Takeaways

• Clause 295 provides a mandatory mechanism to hand over seized money, assets, documents or information to the AO of an "other person" when the AO is satisfied the undisclosed income pertains to that other person.
• The other person is to be assessed u/s 294, and the clause directs application of the block-assessment provisions (the Chapter) to that assessment.
• The Old Version does not specify procedural timelines, criteria for satisfaction, or abatement/block-period rules for the other person; those details are absent in the text provided.
• Practical compliance requires careful factual findings by the AO, documentation of handover, and coordination between assessing officers; the clause itself does not set out mechanisms to govern those processes.
• Where the seized items are information-rich (books, digital records), the clause's inclusion of "any information contained therein" signals that derivative information can trigger transfer and assessment, broadening the clause's practical reach.

Full Text:

Section 295 Undisclosed income of any other person