New Form ITR-BN for Block Assessments: Filing Requirements, Issues & Challenges

New Form ITR-BN for Block Assessments: Filing Requirements, Practical Issues & Key Challenges

Summary: Article examines CBDT Notification No. 97/2026-Income Tax dated 24 July 2026, which notifies Form ITR-BN for block assessment proceedings under the Income-tax Act, 2025. Applicable to searches under section 247 or requisitions under section 248 initiated on or after 1 April 2026, the form is linked to a notice under section 294 and requires disclosure of undisclosed income for the block period. The article explains that the filing period is determined by the notice, subject to a maximum of 60 days, with a limited 30-day extension available only if specified audit-related conditions are satisfied, and that the return cannot be revised. It describes the year mapping used in the form, the need to reconcile prior returns, assessments, pending proceedings, disclosed and undisclosed income, and the requirement to classify undisclosed income both head-wise and item-wise. The article also discusses provisions relating to tax at 60%, surcharge, health and education cess, interest under section 298, reconciliation of tax credits, consequences of delayed filing, and suggests maintaining detailed working papers, evidence registers, and review procedures because the return serves as the starting point of block assessment proceedings and is not revisable.

ITR-BN Is Not a Consolidated ITR:

What Search Cases Will Require in Practice

A practical reading of the new block-assessment return under the Income-tax Act, 2025

The notification of an income-tax return form is usually treated as a procedural development. Form ITR-BN deserves closer attention. It is the prescribed return for block-assessment proceedings under the new search regime, and its design shows that filing will involve much more than adding together six years of figures.

CBDT notified the form through Notification No. 97/2026 dated 24 July 2026. The amendment applies to a search initiated under section 247 or a requisition made under section 248 of the Income-tax Act, 2025 on or after 1 April 2026. The form is linked to the notice issued under section 294 and requires the assessee to disclose undisclosed income for the block period.

Calling it an ITR may encourage a familiar return-filing approach. In my view, that would be the first mistake. An ordinary return starts with books and annual financial statements. ITR-BN starts with the search chronology, the material found, the history of returns and assessments for several tax years, and a careful separation between income already disclosed and income that is truly undisclosed.

1. The legal position at a glance

2. The due date is linked to the notice – not automatically to the search date

Section 294 requires the Assessing Officer to specify the filing period in the notice. That period cannot exceed 60 days. The distinction matters. If the notice grants 30 or 45 days, the assessee cannot assume that the balance up to 60 days is available as a matter of right.

The additional 30-day window is also narrow. It is available only where the due date for the immediately preceding tax year had not expired before the search or requisition; the assessee was liable to audit under section 63; the normal-course accounts had not been audited when the notice was issued; and the assessee makes a written request so that the accounts can be audited. All four conditions must be examined. A pending audit, by itself, is not enough.

The practical response should therefore begin on the date the notice is served. The team should record the notice date, the exact due date stated in it, the date of initiation of search or requisition, and the date on which the last authorisation was executed. Waiting for the portal utility or for seized-data copies before organising the regular records may consume the most useful part of the available time.

3. Y6 to Y1, Y0 and sometimes Y+1: one form, different time periods

The form uses a year map rather than ordinary assessment-year labels. Y6 to Y1 represent the six tax years preceding the tax year in which the search was initiated or requisition was made. The treatment of Y0 depends on when the last authorisation is executed.

If the search or requisition concludes in the same tax year in which it began, Y0 runs from 1 April of that tax year up to the date of execution of the last authorisation. If the last authorisation is executed in the next tax year, Y0 becomes the complete tax year in which the search began, and Y+1 covers the period from 1 April of the following tax year up to the date of the last authorisation.

This is not only a labelling issue. The cut-off determines which books, bank statements, stock records, digital evidence and transaction reports belong in each column. It also affects the treatment of normal-course income recorded before the search and during the period until the last authorisation.

4. The form requires a reconciliation of history, not merely a disclosure of additions

Part A asks for the details of returns previously filed for each tax year falling within the block period. It also asks whether an assessment, reassessment or recomputation was pending when the search was initiated. These fields are important because section 293 excludes specified income already assessed or declared before the search from total undisclosed income.

For each year, the working papers should separately identify: income already assessed; income declared in a return filed before the search; specified income for which the filing due date had not expired; income recorded in normal-course books before the search; and the balance, if any, proposed to be offered as undisclosed income. A single consolidated computation will not provide a reliable audit trail.

The notes to the form also require provisional figures for certain years whose regular return due date has not expired. Those provisional figures do not replace the regular return. The relevant income must still be included in the regular return for that tax year. This is a small note in the form, but it can easily lead to omission or double counting if separate reconciliation schedules are not maintained.

5. Two classifications of undisclosed income must agree

Part D first requires a head-wise break-up under salary, house property, business or profession, capital gains and other sources. It then requires an item-wise break-up. The item categories include money, bullion, jewellery, other valuable articles or things, virtual digital assets, expenditure, incorrect claims of expense, exemption, deduction or allowance, entries in books or other documents, and a residual category.

That dual classification is useful, but it will test the quality of the computation. For example, an unrecorded property transaction may have a capital-gain consequence under the head-wise schedule, while the underlying search material may involve money, expenditure or entries in documents under the item-wise schedule. Both descriptions must lead to the same total without describing the same amount twice.

In my view, the working paper that matters most will be an evidence register. Each proposed disclosure should carry the tax year, income head, item category, seized-document or digital-reference number, amount, computation basis, explanation and cross-reference to the supporting document. This will make the return defensible when the notice under section 270(8) follows.

6. Tax payment and credit claims need an independent reconciliation

Part E calculates tax at 60% of the undisclosed income, adds surcharge where applicable and health and education cess at 4%, and captures interest under section 298(1). Part F records self-assessment tax paid for the block period.

Parts G and H deal with advance tax, self-assessment tax and TDS/TCS credits not claimed earlier. The form itself states that the credit is subject to verification and the satisfaction of the Assessing Officer. A claim should therefore be backed by challans, tax-credit statements, earlier returns and a year-wise explanation showing why the credit was not already absorbed.

One combined 26AS or AIS download is not sufficient for this exercise. Credits must be mapped to the correct tax year, linked to the underlying income and checked against every return previously filed. A credit claimed twice can weaken an otherwise sound block-return computation.

7. Delay and an incomplete return carry unusual consequences

A return furnished beyond the time allowed in the notice is not deemed to be a return under section 263. Further, section 298 can impose interest at 1.5% of the tax on undisclosed income determined in the assessment for every month or part of a month from the day after expiry of the notice period until completion of assessment.

Section 298 also provides for a penalty equal to 50% of the tax on undisclosed income determined by the Assessing Officer, subject to the statutory conditions and exclusions. Protection in respect of income shown in the return is linked, among other things, to filing the return, paying the tax, furnishing evidence of payment and not appealing the assessed part that was already admitted in the return. The decision to offer an amount should therefore be taken with full awareness of its later appellate effect.

There is also no revised ITR-BN. A clerical error, a duplicated item, a missed tax credit or an incorrect year mapping cannot be cured through the familiar revised-return route. This makes internal review a legal necessity, not merely an office procedure.

8. A workable filing process

Step 1 – Freeze the notice and search chronology

Record the DIN, date of notice, stated due date, initiation date, last-authorisation date and the person to whom the notice is addressed. Confirm whether the return is for the searched person or another person under section 295.

Step 2 – Prepare the block-period map before computing income

Create separate columns for Y6 to Y1, Y0 and Y+1 where applicable. Do not begin with one aggregate disclosure figure and attempt to split it later.

Step 3 – Reconcile every prior return and proceeding

Collect return acknowledgements, processing intimations, assessment orders, pending notices, tax audit reports and computation statements. Mark the position as it stood on the date of initiation of search or requisition.

Step 4 – Build the evidence register

Map each seized or requisitioned item to a tax year, income head and item category. Record the explanation, whether it is already reflected in normal books, and whether it has already been taxed or returned.

Step 5 – Reconcile tax and credits separately

Prepare a challan and TDS/TCS schedule independent of the income computation. Cross-check credits against earlier returns so that only unclaimed amounts are carried to Parts G and H.

Step 6 – Conduct a no-revision review

Before filing, obtain sign-off on the block-period dates, year-wise totals, head-wise and item-wise matching, tax payment, credit claims, partner or director authority, and the verification clause. The final review should be performed from the filed form, not only from the Excel computation.

9. Issues on which implementation guidance will matter

The notified form provides the statutory architecture. Actual filing will also depend on the e-filing utility, data validations and portal workflow. Practitioners should watch for guidance on pre-filled search dates and DIN, the handling of multiple notices, validation of year labels, the manner of claiming older tax credits, and the treatment of corrections where pre-filled data is inaccurate.

The form itself gives useful directions for international transactions and specified domestic transactions relating to the part tax year. Such undisclosed income is to be assessed under the other provisions of the Act and is not required to be reported as part of the block return. This boundary should be applied carefully; it is not an exclusion for the entire transaction history of the block period.

Conclusion

ITR-BN brings structure to the new block-assessment procedure, but it does not simplify the underlying judgement. The form requires the assessee to reconcile several tax years, prior returns, pending proceedings, normal-course records, seized material, tax payments and item-wise disclosures within the period stated in the notice.

The filing team should resist the urge to treat the exercise as a data-entry assignment. The real work is deciding what is already disclosed, what is excluded by section 293, what must be offered as undisclosed income, and how every figure can be supported when assessment proceedings begin. Because the return cannot be revised, the first filing must be approached as a considered litigation document.