CBDT Notification No. 30/2025: New Digital ITR B for Block Assessment Returns Under Search Cases
The CBDT notified their orders on April 7, 2025, under section 158BC read with section 295 of the Income-tax Act, 1961, Notification No. 30/2025. This notification brings in a lot of changes in the presently existing Income-tax Rules, 1962 by inserting anew rule called Rule 12AE. The principal aim is to streamline the filing process for cases where undisclosed income is identified in connection with search or requisition operations that began on or after September 1, 2024. Among the critical provisions, the introduction of a specialized form, ITR B, is intended for block assessment returns under section 158BC(1)(a).
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Background and Rationale
Addressing Complex Search and Seizure Cases
Tax disputes arising out of search and requisition operations have historically presented challenges for the tax administration. Prior to this notification, taxpayers were required to furnish regular returns even when undisclosed income was identified as part of ongoing investigations. The existing framework was often seen as cumbersome, especially when dealing with multiple assessment years bundled under a single “block” assessment. In response to these challenges—and to foster transparency and ease the resolution of long-standing disputes—the government has adopted a digital and standardized method of reporting such undisclosed income.
Retrospective Application
The notification takes retrospective effect from September 1, 2024. That is, any search under Section 132 or any requisition made under Section 132A on or after this date will take place along with the new reporting requirements. This retrospective application serves to ensure uniformity in filing standards and enables the tax department to capture all relevant information across years.
Key Features of the Notification
1. Insertion of New Rule 12AE
The Notification No. 30/2025 is the insertion of Rule 12AE into the Income-tax Rules, 1962. Rule 12AE explicitly mandates:
- Mandatory Use of Form ITR B: Taxpayers involved in search or requisition operations (under section 132/132A) must file their return in Form ITR B.
- Digital Verification Requirements:
- For certain categories, such as individuals whose accounts are audited under section 44AB, companies, and political parties—the return must be filed electronically using a digital signature.
- For all other taxpayers, the return can be submitted either using a digital signature or by transmitting data electronically using an electronic verification code (EVC).
- Secure Digital Infrastructure: The notification assigns responsibility to the Principal Director General of Income tax (Systems) (or the Director General) to establish procedures, formats, and standards ensuring secure capture, transmission, archival, and retrieval of data.
- Verification of Tax Credit Claims: When taxpayers claim credit against undisclosed income (other than self-assessment tax), the allowability of such claims is subject to verification and the satisfaction of the Assessing Officer.
This rule reflects the CBDT’s commitment to modernizing the tax compliance process by leveraging digital technologies and ensuring that the filing process is both secure and efficient.
2. Introduction of Form ITR B
The new Form ITR B is specifically designed for the “block” assessment of undisclosed income revealed in search or requisition cases. Key aspects include:
- Block Assessment Filing: Unlike traditional annual returns, ITR B is intended for block assessment periods, where multiple assessment years are addressed collectively.
- Detailed Disclosure Requirements: Taxpayers must classify income under various heads, provide an itemized listing of assets (e.g., money, bullion, jewellery, and digital assets), and specify the undisclosed amounts for each assessment year.
- Technical and Verification Provisions: Apart from Digital Filing System, the form prescribes declarations of tax credits and required further investigations by tax authorities.
The insertion of this form is an important step towards enhancing transparency and ensuring that undisclosed income is comprehensively reported in a structured manner.
3. Categorization of Taxpayers and Filing Modes
The notification provides a clear table categorizing the manner in which different taxpayers must file ITR B:
• Category 1:
- Who: Persons whose accounts are audited under section 44AB, companies, and political parties.
- How: Must file the return electronically with a digital signature.
• Category 2:
- Who: All other taxpayers not falling under the first category.
- How: May file either by using a digital signature or by transmitting the data using an electronic verification code.
This differentiation ensures that technically advanced entities with higher compliance requirements, such as companies and audited individuals, follow a stricter verification protocol, while offering flexibility to others.
4. Technical Infrastructure and Data Security
Ensuring that the filing process is secure and resistant to tampering is of paramount importance. Under Notification No. 30/2025:
- The Principal Director General (Systems) is charged with specifying the operational procedures, formats, and data security standards.
- The responsibility extends to implementing policies for secure data capture, archival, and prompt retrieval during audits or examinations.
- This focus on technical robustness reflects the CBDT’s broader goal of digital transformation and strengthening taxpayer data security.
5. Assessment Year Dynamics and Special Notes
The notification also clarifies the treatment of assessment years related to the block assessment:
• Assessment Year Series (AY Y6 to Y1):
These cover the six preceding assessment years relative to the earlier year when the search or requisition operation began.
• AY Y0:
- For cases where the search/requisition is concluded in the same year it was initiated: Y0 is defined from April 1 of that year until the date of the final authorization.
- If the conclusion of authorizations happens in a subsequent year: Y0 becomes the complete assessment year from April 1 to March 31.
• AY Y+1:
Applicable where the last authorization in the sequence occurs in the following year.
Additionally, specific notes in the notification outline how provisional figures should be furnished in cases where the accounts are not audited, and how they should subsequently be integrated into the regular income tax return under section 139(1). These detailed instructions help avoid any misinterpretation and ensure consistency in reporting.
Implications for Taxpayers and the Tax Administration
Enhancing Compliance and Reducing Disputes
The introduction of ITR B under Rule 12AE is expected to:
- Streamline the Block Assessment Process: With a unified form to disclose undisclosed income over multiple assessment years, both the taxpayers and the tax authorities can handle disputes more efficiently.
- Reduce Litigation: By providing a clear route for resolving cases involving search and requisition operations, the CBDT aims to lower the volume of prolonged tax litigation.
- Improve Data Transparency: The detailed classification and digital filing norms enhance transparency, making it easier for authorities to verify and audit the reported figures.
For Tax Professionals
Tax practitioners are advised to familiarize themselves with the nuances of the new ITR B form and the associated technical requirements. The digital nature of filings, mandatory use of digital signatures or electronic verification codes, and the defined timelines and provisional requirements represent a huge shift from the olden day practices. It is imperative to keep up with these new changes to be able to offer accurate advice to the client and consequently maintain compliance.
Conclusion
Notification No. 30/2025 represents a landmark reform in the way undisclosed income arising from search and requisition operations is reported in India. By introducing the new ITR B form along with Rule 12AE, the CBDT is not only modernizing the filing process but also creating a more secure and transparent framework for block assessment returns. With effect from 1 September 2024, these amendments clearly emphasize the intention of the government to enhance compliance and reduce disputes concerning taxes.
Adapting to these changes will be important for taxpayers and tax professionals. The procedural guidelines and digital verification mechanisms pioneered under this notification are bound to positively affect the tax administration system in the long run.