Sections 296-297 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.
Section 296 sets the time within which the Assessing Officer must pass the block assessment order after a search or requisition, with extensions and a long list of excluded periods. Section 297 says that certain interest and penalty cannot be levied on undisclosed income assessed for the block period. This article reads both as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026; sub-section (1) of section 296 is printed as substituted by the Finance Act, 2026, with effect from 1 April 2026.
Irrespective of section 286, the block assessment order under section 294 must be passed within eighteen months from the end of the quarter in which the search was initiated or requisition made. A transfer pricing reference adds twelve months. For another person under section 295 the limit is twelve months from the end of the quarter in which the section 294 notice is issued. Interest under sections 423, 424 or 425 and penalty under section 439 are not levied on block undisclosed income.
Section 296: the limits
Sub-section (1): eighteen months
Irrespective of the provisions of section 286, the order under section 294 shall be passed within eighteen months from the end of the quarter in which the search was initiated or the requisition was made. The Act does not define "quarter" in this sub-section; check the Act's definitions before relying on a date. The usual time limits of section 286 are in our article on section 286(1) and (2); section 296 replaces them for block assessment.
Sub-section (2): reference to the Transfer Pricing Officer
Where during the assessment or reassessment of the total undisclosed income of the block period any reference under section 166(1) is made, the period available for completing the assessment is extended by twelve months.
Sub-section (3): the first 180 days
In computing the period of limitation under sub-section (1), the period (not exceeding one hundred and eighty days) from the date of initiation of the search or the making of the requisition to the date on which assets (as provided in section 261(b)) and material seized or requisitioned (as provided in section 261(i)) are handed over to the Assessing Officer having jurisdiction over the assessee is excluded. The copy consulted prints the two references to section 261 in square brackets; they are quoted as printed.
Sub-section (4): end-of-month rule
If after excluding the period in sub-section (3) the remaining period expires before the end of a month, it is extended to the end of that month.
Sub-sections (5) and (6): another person under section 295
- (5): the period of limitation for the block period in the case of the other person referred to in section 295 is twelve months from the end of the quarter in which the notice under section 294, issued in pursuance of section 295, was issued to that other person.
- (6): that period is extended by twelve months where a reference under section 166(1) is made in such a case.
Our articles on sections 294 and 295 and sections 292 and 293 explain the procedure these limits attach to. If a block order or notice has reached you, our legal dispute resolution team can help you test it against the time limit.
Sub-section (7): periods excluded
In computing the limitation under section 296, the following periods are excluded:
| Clause | Period excluded |
|---|---|
| (a) | From the date a court stays the assessment proceeding to the date the certified copy of the order vacating the stay is received by the jurisdictional Principal Commissioner or Commissioner |
| (b) | From the first reference for exchange of information (by an authority competent under an agreement referred to in section 159) to the date the information is last received by the jurisdictional Principal Commissioner or Commissioner, or one year, whichever is less |
| (c) | The time taken in reopening the whole or any part of the proceeding, or giving an opportunity to the assessee to be re-heard under section 244(2) |
| (d) | From the date the Assessing Officer directs the assessee to get accounts audited or inventory valued under section 268(5), to (i) the last date for the report; or (ii) where the direction is challenged in court, the receipt of the certified copy of the order setting it aside |
| (e) | From a reference to the Valuation Officer under section 269(1) to receipt of the Valuation Officer's report by the Assessing Officer |
| (f) | From the date the Assessing Officer intimates the Central Government or the prescribed authority of the contravention of Schedule III (Table: serial numbers 23, 24 or 25) as referred to in section 270(11)(i), to the date the copy of the order withdrawing the approval or rescinding the notification is received by him |
| (g) | From a reference to the Principal Commissioner or Commissioner under section 270(13) to receipt of the copy of the order under section 351(2)(ii)(A) or (B) |
| (h) | From receipt of a reference for declaration of an impermissible avoidance arrangement under section 274(1) to the date a direction under sub-section (3) or (6), or an order under sub-section (5), of that section is received by the Assessing Officer |
| (i) | From the date an application is made before the Board for Advance Rulings under section 383(1) to the date the order rejecting the application is received by the jurisdictional Principal Commissioner or Commissioner under section 384(5) |
| (j) | From the date an application is made before the Board for Advance Rulings under section 383(1) to the date the advance ruling is received by the jurisdictional Principal Commissioner or Commissioner under section 384(8) |
For comparison with the general exclusions, see our article on periods excluded under section 286.
Sub-sections (8) and (9): minimums
- (8): if after excluding the period in sub-section (3) or (7) the remaining period under sub-section (1) or (5) is less than sixty days, it is extended to sixty days, and the limitation is deemed extended accordingly.
- (9): if after the extension in sub-section (8) the period expires before the end of a month, it is extended to the end of that month.
Section 297: interest and penalty not to be levied
Interest under section 423, 424 or 425 or penalty under section 439 shall not be levied or imposed upon the assessee for the undisclosed income assessed or reassessed for the block period. Interest and penalty for defaults in the block procedure itself are in section 298; see our article on sections 298 to 301. For the general sections named here, see our articles on section 424 (advance tax interest) and section 439 (under-reporting penalty).
A worked example
Dates are assumed, and the quarter is assumed to end on 30 September 2027 for a search initiated on 10 September 2027.
- Basic limit. Eighteen months from 30 September 2027 end on 31 March 2029. The block order under section 294 must be passed by 31 March 2029.
- Transfer pricing reference. If a reference under section 166(1) is made during the assessment, twelve months are added: 31 March 2029 plus twelve months is 31 March 2030.
- Handing over of seized assets. Suppose assets and material seized are handed over to the Assessing Officer with jurisdiction on 19 November 2027, which is 70 days after the search began (September 10 to November 19 is 70 days, counting the day of the search and not the day of hand-over). The 70 days are excluded under sub-section (3), as they are below the cap of 180 days. 31 March 2029 plus 70 days is 9 June 2029; the figure is for illustration only, as the other exclusions would also be added.
- Another person. A notice under section 294 in pursuance of section 295 is issued to Mohan Estates on 5 November 2027. The quarter in which it was issued ends on 31 December 2027; twelve months from then end on 31 December 2028.
- Interest and penalty. On the Rs. 25,00,000 of undisclosed income assessed for the block period, no interest under section 423, 424 or 425 and no penalty under section 439 is levied (section 297).
Need help with a block assessment deadline?
A block order can only be tested for time if the quarter, the hand-over date, the references and the stays are all known. If you are reviewing a block order, we can help you rebuild the date chain and see whether the order is within time. See our legal dispute resolution service.
Key takeaways
- The block assessment order must be passed within eighteen months from the end of the quarter of the search or requisition (section 296(1), printed as substituted by the Finance Act, 2026).
- A reference under section 166(1) adds twelve months.
- The period (up to 180 days) until seized assets and material are handed to the Assessing Officer with jurisdiction is excluded.
- For another person under section 295, the limit is twelve months from the end of the quarter in which the section 294 notice was issued.
- Ten kinds of period are excluded under sub-section (7), with a minimum of sixty days and an end-of-month rule.
- Section 297 bars interest under sections 423, 424 and 425 and penalty under section 439 on block undisclosed income.
Read next
- Sections 294 and 295: procedure for block assessment
- Sections 298 to 301: interest, penalty, competent authority and definitions
- Section 286(3) to (8): periods excluded
- Chapter XVI: procedure for assessment
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.