Search Assessment Under Old Act vs New Act: Notice Triggers, Response Strategy & Penalties for 2026

By Finin2min Research Desk Updated Jun 2026 Income-tax Act 2025 Enforcement

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 fundamentally restructures the search assessment framework: block assessment (covering 6 years of undisclosed income) replaces the old 10-year look-back, and the assessment must be completed within 12 months. 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.

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Old Act vs New Act — Search Assessment Framework

Parameter	Old Act (Pre-April 2026)	New Act — Tax Year 2026-27 Onwards
Search authorisation	Section 132	Section 247
Undisclosed income period (look-back)	Old: block period — 6 AYs before search year + search year (effective 7 years)	New Act: 6 Tax Years before Tax Year of search
Assessment of search year income	Section 153A	Section 281 of new Act
Time limit for completing search assessment	21 months from end of FY of search	12 months from end of Tax Year of search (faster)
Penalty on undisclosed income found in search	Section 271AAB — 30% if admitted; 60% if not	Section 445 of new Act — 30% / 60% — same rates
Penalty on concealment	Section 271(1)(c)	Section 440 of new Act
Prosecution for concealment	Section 276C	Section 483 of new Act

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12-Month Completion Deadline is Tighter: Under the new Act, the Assessing Officer must complete search-related assessments within 12 months from the end of the Tax Year in which the search was conducted (down from 21 months). This means faster resolution — but also faster demand notices and less time for the assessee to respond if not prepared.

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
Seized assets must be returned within 60 days unless extended by PCIT approval
You can apply for provisional release of seized assets against security
Books and documents seized must be inventoried — demand copies

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Do NOT Make Hasty Admissions: Statements made during a search are considered admissible. A statement admitting undisclosed income attracts a 30% penalty (vs 60% if not admitted). However, consult your CA/legal counsel before making any specific numerical admissions — numbers stated without documentation support can create problems later.

Case Study: Search Triggered by AIS Mismatch — How Arun Navigated It

Business Owner, Surat — Cash Deposits vs ITR Mismatch

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 2025. 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)
Admitted ₹18L undisclosed income → 30% penalty = ₹5.4L + 60% tax (Section 115BBE equivalent) = ₹10.8L
Total payout: ₹10.8L tax + ₹5.4L penalty = ₹16.2L (vs ₹21.6L if not admitted — 60% penalty)

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	Penalty Rate
Undisclosed income admitted in statement & included in return	271AAB(1)(a)	Section 445(1)(a)	30% of undisclosed income
Undisclosed income admitted but not returned	271AAB(1)(b)	Section 445(1)(b)	60% of undisclosed income
Undisclosed income not admitted	271AAB(1)(c)	Section 445(1)(c)	60% of undisclosed income
Tax on undisclosed income	Section 115BBE	Corresponding section in new Act	60% flat rate + 25% surcharge = effective 75%
Concealment penalty (non-search cases)	Section 271(1)(c)	Section 440	100%–300% of concealed tax

After the Search — Assessment Timeline Under New Act

Search concludes — ITIO prepares inventory and seizes documents/assets
Notice under Section 281 (new Act) issued — 6 years of returns to be filed/revised
Assessee files returns for all 6 years including disclosures
Assessment completed within 12 months of end of Tax Year of search (tighter under new Act)
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 admitting undisclosed income, do so precisely with documentation — attracts 30% penalty vs 60%
Assessment must be completed within 12 months (new Act) — track the timeline
Pre-search: reconcile AIS vs ITR annually; maintain clean books with GST-verified transactions

Frequently Asked Questions

Under Income-tax Act 2025, the search assessment covers 6 Tax Years preceding the Tax Year in which the search was conducted (Section 281). For a search conducted in Tax Year 2026-27 (April 2026 to March 2027), the Assessing Officer can assess undisclosed income from Tax Years 2020-21 to 2025-26 — 6 preceding years. The assessment for the current search year is also covered. The assessment must be completed within 12 months of the end of the Tax Year in which the search was conducted.

Under Section 445 of Income-tax Act 2025: if you admit the undisclosed income in your statement AND include it in your return filed after the search — penalty is 30%. If you admit in statement but don't include in return — 60%. If you don't admit — 60%. Additionally, undisclosed income is taxed at a flat 60% rate (plus 25% surcharge), making the effective tax + penalty burden up to 90%+ on unaccounted income.