Block assessments on way out, audit limit to go up

NEW DELHI: The budget is expected to do away with the system of block assessments under the Income-tax Act. The budget is also expected to raise the limit for tax audits under Section 44 AB.
Block assessments were introduced by ex-finance minister Manmohan Singh wherein unaccounted income found in raids, search and seizure was taxed at a flat rate of 60%. This was introduced to do away with the time consuming exercise and litigation involved in segregating the unaccounted income among various assessment years.
After block assessments are done away with, the unaccounted income would be added to the income of the year in which it would be deemed to have accrued. Besides additional tax payable on the added income, the assessees would be liable to pay interest and penalty as well. In many cases, the total amount payable by the assessee could work out to more than the concealed income.
CBDT had noted that block assessments had in fact become an incentive for concealing income. Because, practically assessees used to conceal income with an objective that if and when the concealment is discovered, they would pay a flat 60% tax compared to 35% tax normally.