Section 158BD of the Income-tax Act: Undisclosed Income of Any Other Person

Section 158BD addresses undisclosed income discovered during a search or requisition that belongs to, pertains to or relates to someone other than the person searched. The provision permits the relevant material to be transferred to the Assessing Officer responsible for that other person, who can initiate block assessment proceedings under the applicable law.

What does Section 158BD mean?

The provision concerns a third party whose undisclosed income is revealed by material found in a search of a different person. A search under Section 132 involves authorised search and seizure; a requisition under Section 132A involves calling for books, documents or assets held by another authority.

Specified person means the person searched or the person in whose case a requisition was made. Other person means a different taxpayer to whom the relevant undisclosed income belongs, pertains or relates. Assessing Officer (AO) means the income-tax authority empowered to make the assessment. Block assessment is a special assessment of undisclosed income for the legally defined block period.

Conditions for invoking Section 158BD

1. A valid search or requisition must have occurred in the case of the specified person.
2. The Assessing Officer must be satisfied, on relevant material, that undisclosed income belongs to, pertains to or relates to another person.
3. Relevant seized or requisitioned money, bullion, jewellery, virtual digital assets, valuables, books, documents or other material or information must be handed over to the AO having jurisdiction over the other person.
4. The jurisdictional AO then proceeds under Section 158BC, subject to the requirements of Chapter XIV-B and applicable transitional law.

A third-party name appearing in a seized document does not, by itself, establish undisclosed income. The statutory satisfaction must be based on material relevant to the proposed proceedings and remains open to legal challenge.

How an assessment of another person proceeds

1. Identify the other person and record satisfaction

The AO considers whether the evidence points to undisclosed income of a taxpayer other than the searched person. The scope of the satisfaction and supporting records can be significant in litigation.

2. Transfer the relevant material

The material and information described by Section 158BD are handed over to the AO with jurisdiction over the other person. Where both taxpayers have the same AO, the required satisfaction and procedural safeguards remain relevant.

3. Initiate block assessment proceedings

The AO of the other person follows the procedure prescribed in Section 158BC, including the applicable notice and assessment requirements. Computation of undisclosed income is governed by Section 158BB.

4. Apply limitation and statutory safeguards

Time limits must be checked under Section 158BE for proceedings governed by the 1961 Act. The notice date, applicable amendments and exclusions from limitation can affect the deadline.

Block period and abatement under the amended law

The substituted Section 158BD, effective retrospectively from 1 September 2024, specifies that where there is one specified person, the other person's block period is the same as that specified person's block period. Where multiple specified persons are relevant, the block period follows the specified person whose block period ends on the later date.

For abatement under Section 158BA(2) and (3), the relevant reference date for the other person is the date on which the jurisdictional AO receives the relevant seized or requisitioned material or information, rather than automatically the original search date. Abatement means that certain pending assessment or reassessment proceedings cease separately and are addressed through the special block-assessment process, subject to statutory conditions.

Historical text and legislative background

The earlier version of Section 158BD provided that where the AO was satisfied that undisclosed income belonged to a person other than the person searched or requisitioned, the seized or requisitioned books, documents or assets were to be handed over to the AO having jurisdiction over that other person. That officer would proceed under Section 158BC and Chapter XIV-B would apply.

The original historical provision was amended with effect from 1 June 2002 to expressly refer to proceeding under Section 158BC. The original block assessment regime generally applied to searches initiated from 1 July 1995 until 31 May 2003. The Finance (No. 2) Act, 2024 reintroduced Chapter XIV-B block assessments for searches or requisitions initiated on or after 1 September 2024; the Finance Act, 2025 then substituted Section 158BD retrospectively from that date.

Corresponding provision: Section 295, Income-tax Act, 2025

Section 295 of the Income-tax Act, 2025 deals with undisclosed income of another person. Its principal structure is comparable: the AO must be satisfied that relevant undisclosed income belongs to, pertains to or relates to another person; the relevant material is transferred; and the other person's AO proceeds under Section 294. The corresponding search and requisition provisions are Sections 247 and 248.

Section 295 also addresses determination of the other person's block period and the date relevant to abatement. The applicable text, including any later amendments, should be consulted before determining the block period for a particular search.

Illustration: search reveals another taxpayer's income

Suppose tax authorities search Business A and discover records suggesting undisclosed receipts of Business B. If the statutory conditions are met, the AO dealing with Business A may record the required satisfaction and pass the relevant records to Business B's jurisdictional AO. Business B can then face a separate block assessment under the applicable special procedure. Whether the records establish taxable undisclosed income, and the period to which they relate, must still be determined on the evidence.

Key practical points for taxpayers

• Review the satisfaction recorded by the tax authority and its connection to the seized evidence.
• Verify that the correct AO has jurisdiction and the prescribed procedure has been followed.
• Check the search date, receipt of material, block period and applicable statutory limitation.
• Distinguish income already disclosed in regular records from undisclosed income supported by search-related evidence.
• Review the notice, computation and available appeal remedies within statutory time limits.

Official statutory references

• Income Tax Department: Section 158BD (amended text)
• Finance Act, 2025: Section 52 substituting Section 158BD
• Income Tax Department: Block assessment guidance
• Income-tax Act, 1961 as amended by Finance Act, 2025 (PDF)
• Income Tax Department: Section correspondence table (1961 and 2025 Acts)

This article is general legal information. The applicable law depends on the date and facts of the search or requisition and on transitional and saving provisions.