Library / Income-tax Act, 2025: The Professional's Master Guide

43. Search, Survey and Block Assessment

Search and survey are the department's most intrusive powers. Professionals should know the procedure and the taxpayer's rights and obligations, and should advise clients to cooperate while protecting their legal position.

43.1 Search and seizure

A search is authorised by senior officers where they have information that a person has not produced books when required, will not do so, or possesses undisclosed money, bullion, jewellery or other valuables.
Officers can enter premises, break open locks where keys are not given, search persons, seize books, documents and undisclosed assets, and record statements on oath. A panchnama is prepared listing everything seized; ask for a copy.
Stock-in-trade is not seized but its inventory is taken. Books and documents can be retained for a limited period, with access given to the taxpayer.
Statements recorded during search can be used as evidence, but a retraction made promptly with reasons is considered by courts.

Judicial view: Search: evidence and completed assessments

Pooran Mal v. Director of Inspection (Supreme Court, 1974): material seized in a search can be used as evidence even if the search is later found to be irregular.

PCIT v. Abhisar Buildwell (P) Ltd. (Supreme Court, 2023): for years where assessments were already completed on the date of search, additions in search assessments can be made only on the basis of incriminating material found during the search; otherwise the department must use the reassessment route.

43.2 Block assessment after search

For searches initiated after 1 September 2024, the law provides a block assessment: a single assessment of undisclosed income for the block period, which covers the six tax years before the year of search and the period of the year of search up to the date of the last authorisation. Undisclosed income found is taxed at a flat 60% (section 192 of the 2025 Act for the rate), plus surcharge and cess, without deductions or set off. The assessment is to be completed within 12 months from the end of the month in which the last authorisation was executed.

Illustration 149: Block assessment

A search is conducted on a trader on 10 January 2027. Unaccounted cash of Rs. 40 lakh and unrecorded sales of Rs. 1.2 crore over three earlier years are found. The block period covers Tax Years 2020-21 to 2025-26 and 1 April 2026 to 10 January 2027. Undisclosed income determined, say Rs. 1.6 crore, is taxed at 60% = Rs. 96 lakh plus surcharge and cess, in the block assessment. Penalty may also be levied.

43.3 Survey

A survey is conducted at a place of business or profession during working hours to inspect books, verify cash and stock, and collect information. Officers can impound books with approval, place identification marks, and record statements (not on oath). There is no seizure of cash or valuables. A survey can also be conducted after a function or ceremony to verify expenses. Survey findings often lead to scrutiny or reassessment.

Practice note

During a search or survey: be present, cooperate, check the identity and authorisation of the team, do not sign statements you do not understand, ask for a copy of the panchnama and the statement, and seek professional help immediately. Afterwards, reconcile every seized document with the books and prepare explanations before the assessment notices arrive.

Chapter summary

• Search allows seizure; survey allows inspection and impounding but not seizure.

• Block assessment covers six years plus the year of search; undisclosed income taxed at 60%.