Section 120 - No set off of losses against undisclosed income consequent to search, requisition and survey
No loss - current, brought forward or otherwise - and no unabsorbed depreciation may be set off against undisclosed income included in total income because of a qualifying search, requisition or survey. A survey under section 253(4) is excluded from this specific bar.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current-law control
This page uses the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026. Earlier years and saved proceedings remain subject to the repeal-and-savings framework.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
No loss - current, brought forward or otherwise - and no unabsorbed depreciation may be set off against undisclosed income included in total income because of a qualifying search, requisition or survey. A survey under section 253(4) is excluded from this specific bar.
Who should use this section
Businesses and successors involved in amalgamation, demerger, restructuring, ownership change, search/requisition or other special loss situations This applicability note is specific to section 120.
Old-law bridge
1961 Act section 79A
The bridge is navigational only. A 1961 Act case or rule is carried forward only after checking wording, transition provisions and the current 2025 Act text.
Professional alert
Exception / professional alert The bar is outcome-specific. The meaning of undisclosed income is tied to section 301, so classification of the addition matters.
Connected Income-tax Rules, 2026 and Forms
No provision-specific Rule/Form is independently mapped in this tranche. General return, procedure and evidence rules can still apply.
Worked application
An assessment following a search includes ₹40 lakh of undisclosed income and the assessee has ₹25 lakh of brought-forward business loss. Section 120 prevents using that loss against the undisclosed income.
Evidence / compliance checklist
- Build a section 120 loss ledger showing source, head, tax year of origin, amount used and balance carried forward.
- Preserve the timely return and assessment/intimation that determines the loss where the statute makes filing a condition (section 120: No set off of losses against undisclosed income consequent to search, requisition and survey).
- For reorganisations, retain scheme orders, ownership continuity, asset/business continuity and predecessor-successor tax records (section 120: No set off of losses against undisclosed income consequent to search, requisition and survey).
- Prevent double use by reconciling the carry-forward schedule to each later return before set-off (section 120: No set off of losses against undisclosed income consequent to search, requisition and survey).
Common mistake
Using a single “loss carried forward” figure for section 120 without preserving head/source restrictions, filing conditions and the remaining statutory period.
Recommended approach
For section 120, fix the governing tax year, identify the operative sub-section for “No set off of losses against undisclosed income consequent to search, requisition and survey”, trace every amount to evidence, apply only verified Rule/Form links, and retain a computation that another reviewer can reproduce from the primary source.
Thresholds, periods and timing checkpoints
- in the total income of any tax year, consequent to a search conducted under section
- tax year shall have the meaning as referred to in section 301.
Judicial / interpretive bridge
No section-specific Supreme Court bridge is included for section 120 unless text-equivalence with the 2025 Act has been checked. Legacy cases should not be transplanted into section 120 merely because the subject is similar.
Related provisions
- Section 247
- Section 248
- Section 253
- Section 301
- Section 119
- Section 121
Current statutory text
Primary-source trail
FAQs
What does section 120 of the Income-tax Act, 2025 cover?
Section 120 covers no set off of losses against undisclosed income consequent to search, requisition and survey. The operative result depends on the exact statutory conditions shown on this page and applies from 1 April 2026, subject to transition/savings provisions.
Who should check section 120?
Businesses and successors involved in amalgamation, demerger, restructuring, ownership change, search/requisition or other special loss situations This applicability note is specific to section 120.
Are there specific Rules or Forms for section 120?
No provision-specific Rule/Form independently mapped in this tranche.