Sections 294-295 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
After a search or requisition, section 294 sets out the steps: a notice calling for a return of undisclosed income of the block period, assessment under section 293, and an order of assessment. Section 295 deals with the case where the seized material shows undisclosed income that belongs to someone other than the person searched. This article reads both as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026. Section 295 is printed with clauses (c) and (d) of sub-section (2) inserted by the Finance Act, 2026, with effect from 1 April 2026.
The Assessing Officer issues a notice requiring a return of undisclosed income of the block period within a period not exceeding sixty days. That return is treated as a return under section 263, no revised return is allowed, and the order of assessment is passed without the Dispute Resolution Panel route of section 275. Where undisclosed income belongs to another person, the seized material is handed to that person's Assessing Officer, who proceeds under section 294 against that person.
Section 294: procedure for block assessment
Sub-section (1)(a): notice and block return
Where a search is initiated or a requisition is made in the case of any person, the Assessing Officer issues a notice requiring him to furnish, within a period specified in the notice not exceeding sixty days, a return in the form and verified in the manner as may be prescribed, setting forth his undisclosed income for the block period. The form and manner are left to the Income-tax Rules, 2026. Five consequences are listed:
| Clause | Consequence |
|---|---|
| (i) | The return is considered as a return furnished under section 263, and thereafter a notice under section 270(8) is issued |
| (ii) | A return furnished beyond the period allowed in the notice is not deemed to be a return under section 263 |
| (iii) | No notice under section 280 is required for proceeding under this Part |
| (iv) | A person who has furnished a return under this clause is not entitled to furnish a revised return |
| (v) | The time for furnishing the return may be extended by a further thirty days if all four conditions (A) to (D) are met |
The four conditions in clause (v) are: (A) for the tax year immediately preceding the tax year of the search or requisition, the due date for the return had not expired before that date; (B) the assessee was liable for audit under section 63 for that tax year; (C) the accounts of that tax year have not been audited on the date of the notice; and (D) the assessee requests in writing for extension to get those accounts audited. For the audit provision, see our article on section 63.
Because of clause (iv), the block return must be prepared with care: once furnished, it cannot be revised. If you are preparing one, our legal dispute resolution team can help with the facts and the figures.
Sub-section (1)(b) to (d): assessment and order
- (b) The Assessing Officer determines the total undisclosed income of the block period in the manner of section 293, and sections 268, 270(8), 270(10), 271, 276, 277 and 278 apply so far as may be. See our articles on sections 292 and 293, and sections 276 to 278.
- (c) On determining the total undisclosed income, he passes an order of assessment or reassessment and determines the tax payable, and section 275 does not apply to that order, so there is no draft order and no reference to the Dispute Resolution Panel for it.
- (d) Assets seized under section 247 or requisitioned under section 248 are dealt with as per section 250.
Sub-sections (2) and (3)
- (2): section 270(1) does not apply to the return furnished under section 294.
- (3): before issuing the notice under sub-section (1)(a), the Assessing Officer takes the prior approval of the Additional Commissioner, the Additional Director, the Joint Commissioner or the Joint Director.
Section 295: undisclosed income of any other person
Sub-section (1): hand-over and proceeding against the other person
Where the Assessing Officer is satisfied that any undisclosed income belongs to, pertains to or relates to a person (the "other person") other than the person (the "specified person") with respect to whom the search was initiated under section 247 or the requisition made under section 248, then:
- (a) any money, bullion, jewellery, virtual digital asset or other valuable article or thing, any books of account or other documents seized or requisitioned, or any other material or information relating to the undisclosed income, is handed over to the Assessing Officer having jurisdiction over the other person; and
- (b) the Assessing Officer of the other person proceeds under section 294 against that person, and the provisions of this Part apply accordingly.
Sub-section (2): the block period of the other person
| Clause | Block period of the other person |
|---|---|
| (a) | Where there is one specified person relevant to the other person: the same as for the specified person |
| (b) | Where there is more than one specified person: the same as for the specified person in whose case the block period ends on a later date |
| (c) | (Inserted by the Finance Act, 2026) Where the undisclosed income pertains only to the period (i) commencing from the tax year immediately preceding the year of initiation of search or requisition (the "specified year") and (ii) ending on the date of initiation of search or making of requisition: irrespective of section 301(a), the block period comprises the specified year and the period from 1 April of the tax year of search or requisition to the date of execution of the last of the authorisations |
| (d) | (Inserted by the Finance Act, 2026) Where the undisclosed income pertains to a single tax year out of the five tax years preceding the specified year: irrespective of section 301(a), the block period is only that single tax year |
The block period is defined in section 301; see our article on sections 298 to 301. In the copy consulted the stray number 62 appears before clause (c) and after "has been" in section 294(1); these are footnote marks, and the footnote itself says that clauses (c) and (d) of section 295(2) were inserted by the Finance Act, 2026, with effect from 1 April 2026.
Sub-section (3): the date for abatement
For the other person, for the purpose of abatement under section 292(2) and (3), the reference to the date of initiation of search or making of requisition is construed as a reference to the date on which the seized money, bullion, jewellery, virtual digital asset, article, books, documents or other material or information were received by the Assessing Officer having jurisdiction over the other person.
A worked example
All names and dates are assumed.
Section 294. A search is initiated on 10 September 2027 in the case of Kiran Builders. The Assessing Officer, with the prior approval required by section 294(3), serves a notice requiring a block return within a period specified in it, not exceeding sixty days. Suppose the period fixed is 60 days. The return is furnished on day 55. It is treated as a return under section 263; a notice under section 270(8) follows; and Kiran Builders cannot furnish a revised return. If instead the return arrives on day 70, it is not deemed a return under section 263.
Suppose the accounts of the immediately preceding tax year were not audited, the due date for that year's return had not expired on the date of the search, and the firm was liable for audit under section 63. If it requests extension in writing to get those accounts audited, the 60 days can be extended by a further 30, making 90 days.
Section 295. During the search of Kiran Builders, documents are found showing cash of Rs. 15,00,000 that belongs to Mohan Estates, a person not searched. Kiran Builders is the specified person; Mohan Estates is the other person. The documents and cash are handed to the Assessing Officer having jurisdiction over Mohan Estates, who proceeds under section 294 against it. If Mohan's undisclosed income pertains only to the tax year immediately preceding the year of search and to the period up to the date of search, clause (2)(c) fixes its block period as that preceding year plus the period from 1 April of the year of the search to the date of the last authorisation. For abatement purposes the "date of search" is read as the date the material was received by Mohan's Assessing Officer.
Need help with a block return or a hand-over to another person?
A block return cannot be revised after it is filed, and a person who is not searched can still be drawn in under section 295. If you have received a notice, or documents about you were found in someone else's search, our team can help you plan the return and the response. See our legal dispute resolution service.
Key takeaways
- The notice under section 294(1)(a) requires a block return within a period not exceeding sixty days, which may be extended by thirty days on four conditions.
- A late block return is not deemed to be a return under section 263, and a revised return is not allowed.
- No notice under section 280 is needed, and section 275 does not apply to the block assessment order.
- The notice needs the prior approval of an Additional or Joint Commissioner or Director.
- Under section 295, seized material relating to another person is handed to that person's Assessing Officer, who proceeds under section 294.
- Section 295(2)(c) and (d), inserted by the Finance Act, 2026, give a shorter block period in two cases.
Read next
- Sections 292 and 293: undisclosed income and its computation
- Sections 296 and 297: time limit for block assessment
- Section 247: search and seizure
- Section 275: Dispute Resolution Panel
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.