Section 294: procedure for block assessment

Introduction

Section 294 governs the notice, return and determination process for a block assessment. It also connects the proceeding to the specified assessment authority and procedural safeguards.

Key takeaways

Notice requiring a return of undisclosed income

Where a search has been initiated or a requisition made, the Assessing Officer must issue a notice requiring the person to furnish, within a period specified in the notice not exceeding sixty days, a return (in the prescribed form and manner) setting out his undisclosed income for the block period.

• The return is treated as if furnished under section 263, and a notice under section 270(8) is then issued.
• A return furnished beyond the period allowed in the notice is not deemed to be a return under section 263.
• No notice under section 280 (the normal reassessment notice) is required for this block-assessment procedure.
• A person who has furnished a return under this clause is not entitled to furnish a revised return.
• The time allowed to furnish the return may be extended by a further thirty days where: the due date for the immediately preceding tax year's return had not expired before the search/requisition, the assessee was liable for audit for that year, the accounts for that year have not yet been audited when the notice is issued, and the assessee requests an extension in writing to get the accounts audited.

Determining the assessment

The Assessing Officer determines the total undisclosed income of the block period as laid down in section 293, applying (so far as relevant) sections 268, 270(8), 270(10), 271, 276, 277 and 278.

On determining the total undisclosed income, the Assessing Officer passes an order of assessment or reassessment and determines the tax payable on that basis - and section 275 (the Dispute Resolution Panel draft-order process) does not apply to such an order.

Assets seized under section 247 or requisitioned under section 248 are dealt with as per section 250.

Other procedural points

Section 270(1) (regular intimation processing) does not apply to a return furnished under this section.

Before issuing the notice under sub-section (1)(a), the Assessing Officer must take the prior approval of the Additional Commissioner, Additional Director, Joint Commissioner or Joint Director.

Step-by-step flow for the block assessment procedure under Section 294

1. 1

   Has prior approval been taken?

   Under Section 294(3), the Assessing Officer needs prior approval of the Additional Commissioner, Additional Director, Joint Commissioner or Joint Director before the notice.

2. 2

   Issue the notice for the return of undisclosed income

   Section 294(1)(a): the period given in the notice cannot exceed sixty days. The return is treated as a return under Section 263, and no Section 280 notice is needed. A revised return is not allowed, and a late return is not treated as a Section 263 return.

3. 3

   Are all four conditions for extra time met?

   (A) The due date for the year before the search year had not expired at the search date; (B) the assessee was liable to audit under Section 63 for that year; (C) those accounts were not audited when the notice was issued; (D) the assessee asks in writing for time to get them audited.

   • Yes: The time may be extended by a further thirty days.
   • No: The time stated in the notice applies.
4. 4

   Determine the total undisclosed income

   Section 294(1)(b): the Assessing Officer follows Section 293. Sections 268, 270(8), 270(10), 271, 276, 277 and 278 apply, so far as may be. Section 270(1) does not apply to this return (Section 294(2)).

5. 5

   Pass the order and deal with seized assets

   Section 294(1)(c): the order of assessment or reassessment fixes the tax payable, and Section 275 does not apply. Section 294(1)(d): seized or requisitioned assets are dealt with under Section 250.

Practical checklist

Frequently asked questions