Search Assessment Under Old Act vs New Act: Notice Triggers, Response Strategy & Penalties for 2026
Reviewed by CA Nikhil Gupta · Last reviewed 26 September 2026
Corrected 26 September 2026: the earlier version cited Sections 281, 440, 445 and 483 for search assessment, penalty and prosecution (they are Sections 292–301, 439, 298 and 478), gave the old 30% / 60% penalty as current law, and measured the 12-month limit from the end of the tax year instead of the end of the quarter of the last authorisation.
An income tax search (commonly called an "IT raid") triggers a special assessment process with tighter timelines, higher penalties, and stricter evidentiary standards than regular assessment. The Income-tax Act 2025 carries the block-assessment code for searches (Sections 292 to 301): the six tax years before the search and the part-year up to the last authorisation are assessed together, and the order must be passed within 12 months from the end of the quarter in which the last authorisation was executed. Understanding what triggers a search, what rights you have, and how the new Act changes the process is essential for anyone who runs a business or holds significant assets.
Old Act vs New Act — Search Assessment Framework
| Parameter | Old Act (1961) | New Act — Tax Year 2026-27 Onwards |
|---|---|---|
| Search authorisation | Section 132 | Section 247 |
| Assessment after a search | Section 153A for searches before 1 September 2024; block assessment (Sections 158BA–158BI) for later searches | Block assessment of total undisclosed income — Sections 292 to 301 |
| Period assessed (block period) | Six years before the search year, plus the period from 1 April of the search year to the last authorisation | Six tax years before the tax year of the search, plus the period from 1 April of that tax year to the date the last authorisation was executed (Section 301) |
| Time limit for the assessment order | 12 months from the end of the quarter in which the last authorisation was executed (Section 158BE) | 12 months from the end of the quarter in which the last authorisation was executed or requisition made (Section 296) |
| Interest and penalty on undisclosed income | Section 271AAB (30% / 60%) for searches before 1 September 2024; Section 158BFA for later searches | Section 298 — simple interest at 1.5% a month, and a penalty of 50% of the tax on the undisclosed income |
| Tax on undisclosed income | Section 115BBE | Section 195 — 60%, plus surcharge and cess |
| Penalty for under-reporting or misreporting (ordinary cases) | Section 270A (Section 271(1)(c) for older years) | Section 439 — 50% of tax on under-reported income; 200% for misreporting |
| Prosecution for tax evasion | Section 276C | Section 478 |
What Triggers a Search Under Income-tax Act 2025
Under Section 247 of the new Act (equivalent to old Section 132), the Director General / Director of Income Tax can authorise a search when there is reason to believe that:
- A person has concealed income or undisclosed assets not shown in returns
- Books of accounts, documents, or assets would not be produced if summoned
- Cash, jewellery, bullion, or valuables have been omitted from returns
High-risk triggers in practice include: cash deposits significantly exceeding income, property registrations not matching ITR, large cash withdrawals, tip-offs from third parties, digital footprint analysis, and mismatch between ITR and Annual Information Statement (AIS).
Your Rights During a Search — What the New Act Preserves
- Right to verify the search authorisation — confirm it is signed and valid
- Right to call a CA or legal counsel to be present (they cannot interfere with the search process)
- Statements recorded under Section 247 are admissible — you have the right to not answer questions that may incriminate you
- You can apply for provisional release of seized assets against security
- Books and documents seized must be inventoried — demand copies
Case Study: Search Triggered by AIS Mismatch — How Arun Navigated It
Arun ran a textile business. His AIS showed cash deposits of ₹1.8 crore in FY2024-25 while his ITR declared income of ₹42 lakh. An IT search was conducted in August 2026. Arun's approach:
- Did NOT make numerical admissions during the search — requested 48 hours to collate documentation
- Called his CA within the first 2 hours of search
- Provided tally backup, ledgers, and GST returns showing business turnover of ₹3.2 crore — the deposits were traceable to trade receipts
- Undisclosed income found: ₹18 lakh (cash not recorded in books)
- Disclosed the ₹18L in the block-assessment return → tax at 60% (Section 195) = ₹10.8L, before surcharge, cess and interest
- Total payout: ₹10.8L tax plus surcharge, cess and interest — no penalty, because he filed the return, paid the tax and did not appeal that portion (Section 298). Without that relief, the 50% penalty (₹5.4L) would have taken the bill to ₹16.2L
Arun's preparation — clean books, GST-verified turnover, immediate CA engagement — meant the search was completed in 3 days with minimal disruption to business.
Penalty Framework Under New Act for Search Cases
| Situation | Old Act Section | New Act Section | Rate |
|---|---|---|---|
| Tax on undisclosed income found in the search | 115BBE | Section 195 | 60%, plus surcharge and cess |
| Interest on tax if the block-assessment return is not filed in time | 158BFA | Section 298 | 1.5% a month, simple interest |
| Penalty on undisclosed income | 271AAB (searches before 1 Sept 2024); 158BFA (later) | Section 298 | 50% of the tax on the undisclosed income |
| Relief from that penalty | 158BFA | Section 298 | None on income shown in a return filed under Section 294, with the tax paid and no appeal on that income |
| Penalty in ordinary (non-search) cases — under-reporting | 270A | Section 439 | 50% of tax on the under-reported income |
| Penalty in ordinary cases — misreporting | 270A | Section 439 | 200% of tax on the under-reported income |
After the Search — Assessment Timeline Under New Act
- Search concludes — ITIO prepares inventory and seizes documents/assets
- Notice under Section 294 issued — a return of the undisclosed income for the block period is to be filed
- Assessee files the block-period return including disclosures, and pays the tax
- Order passed within 12 months from the end of the quarter in which the last authorisation was executed (Section 296)
- Demand raised — option to appeal to CIT(A) then ITAT under new Act's appeal provisions
Search Assessment — Key Actions If You Receive a Notice
- Immediately engage a CA experienced in search/survey matters
- Verify the authorisation document — check officer name, designation, and your name/address
- Do not make numerical admissions without documentation to support
- Facilitate the search — obstruction is a criminal offence
- Keep a detailed record of all seized documents and assets (demand inventory)
- If disclosing undisclosed income, do so precisely with documentation, file the return and pay the tax — that avoids the 50% penalty (Section 298)
- The order must be passed within 12 months from the end of the quarter of the last authorisation — track that date
- Pre-search: reconcile AIS vs ITR annually; maintain clean books with GST-verified transactions
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
Page source links
The prior page did not embed a page-specific external source. The category authority above is the minimum verification starting point; a specific instrument should be added when available.
Primary sources & related provisions
Statutory provisions referenced in this guide: