Section 295 Income Tax Act 2025: Can Another Person Face Block Assessment?

A search may uncover undisclosed income belonging to someone other than the person searched. Section 295 explains when the evidence can be transferred to that other person's Assessing Officer and how block assessment proceeds.

Current law: Section 295 of the Income-tax Act, 2025, effective from 1 April 2026, read with amendments made by the Finance Act, 2026. The exact block period depends on the facts and the special rules in subsection (2).

What is the purpose of Section 295?

Section 295 is titled Undisclosed income of any other person. It addresses evidence discovered during a search under Section 247 or requisition under Section 248 that indicates undisclosed income belonging to, pertaining to, or relating to a different person. It does not require that the other person was themselves searched.

The provision is part of the special block assessment framework. Section 292 governs assessment of undisclosed income arising from a search; Section 293 concerns its computation; Section 294 prescribes the block assessment procedure.

Section 295(1): When can proceedings begin against another person?

The Assessing Officer must be satisfied that undisclosed income belongs to, pertains to, or relates to a person other than the person searched or subjected to requisition. In that event:

Transfer of relevant material: Money, bullion, jewellery, virtual digital assets, other valuable articles or things, books of account, documents, and other material or information concerning that undisclosed income are to be handed over to the Assessing Officer having jurisdiction over the other person.
Block assessment: The Assessing Officer of that other person proceeds under Section 294, with the applicable provisions of the block assessment part operating accordingly.

Important distinction: Mere mention of a person's name in seized records does not by itself establish undisclosed income. The statutory satisfaction and connection between the material and the alleged undisclosed income must be examined on the facts.

Section 295(2): Which tax years form the block period?

One relevant searched person - clause (a)

Where only one specified person is relevant to the other person, the block period is generally the same as the block period of that specified person, subject to the special rules below.

More than one searched person - clause (b)

Where more than one specified person is relevant, the block period is tied to the specified person whose block period ends on the later date, subject to the special rules below.

Income relating only to the immediately preceding year and search-year period - clause (c)

Where the undisclosed income relates only to the period beginning with the tax year immediately preceding the year of initiation of search or requisition and ending on the date of initiation of search or requisition, the special block period comprises that immediately preceding tax year and the period from 1 April of the search/requisition tax year until execution of the last relevant authorisation.

Income relating to only one earlier year - clause (d)

Where the undisclosed income relates to a single tax year among the five tax years preceding the immediately preceding year, the block period comprises only that single tax year. These special rules were introduced through the Finance Act, 2026 to avoid unnecessarily broad block periods for other persons where income relates to a narrower period.

Section 295(3): What date matters for abatement?

For the other person, when applying the abatement rules under Section 292(2) and (3), the relevant reference date is the date on which the Assessing Officer having jurisdiction over that other person receives the transferred assets, records, material or information. It is not automatically the date on which the original search began.

Relevant statutory expressions

Specified person: The person in whose case a search was initiated under Section 247 or requisition was made under Section 248.

Other person: A person other than the specified person to whom the alleged undisclosed income belongs, pertains or relates.

Block period: The period defined by Section 301(a), modified for the other person by the applicable rules of Section 295(2).

Undisclosed income: The expression governed by the special interpretation provisions of Section 301; its application requires examination of the relevant material and statutory conditions, rather than an assumption that every receipt is undisclosed.

Assessing Officer: The income-tax authority empowered under the Act to exercise assessment functions in the relevant case.

Illustration: Documents found during a search of another business

Assume officers search Business A and recover records suggesting that Business B has undisclosed income. If the statutory conditions are met, the relevant evidence is transferred to the Assessing Officer having jurisdiction over Business B, who proceeds under Section 294. If the evidence concerns only one qualifying earlier tax year, Section 295(2)(d) may confine the block period to that year. The illustration does not establish liability without verification of the records and applicable statutory procedure.

Practical points for the taxpayer

Examine the notice and identify the specific seized material said to concern the taxpayer.
Check the Assessing Officer's jurisdiction and the recorded basis for proceeding against the other person.
Verify the correct block period under Section 295(2), including the Finance Act, 2026 changes.
Review the date the material was received by the other person's Assessing Officer for the abatement rules.
Reconcile alleged undisclosed income with returns, books, bank records and other contemporaneous evidence.

Frequently asked questions

Can block assessment apply even if my premises were not searched?

Yes. Section 295 expressly addresses undisclosed income of a person other than the person searched, provided the statutory conditions are met.

Must seized documents be transferred to my Assessing Officer?

Section 295(1)(a) requires the relevant assets, documents, material or information to be handed over to the Assessing Officer having jurisdiction over the other person.

Does every other-person case cover six earlier tax years?

No. Section 295(2)(c) and (d) contain narrower block-period rules for certain cases, depending on the period to which the undisclosed income pertains.

What is the corresponding provision under the 1961 Act?

Section 158BD of the Income-tax Act, 1961 is the broadly corresponding other-person block assessment provision. Differences in wording and applicable periods must be checked for the relevant proceedings.

Official statutory references

Income-tax Act 2025 - official amended text Income Tax Department - Act and rules Budget 2026 FAQs - block assessment

Updated: 11 November 2026. This article provides general statutory information; apply the operative law and facts of the individual case.