Attention Tax Professionals: Key Changes to Form No. 7 You Can't Ignore

New Delhi. The Central Board of Direct Taxes (CBDT) has amended Form No. 7, the notice of demand issued under Section 156 of the Income-tax Act, 1961. This change aims to simplify tax assessment procedures. The revised form will now clearly include "Assessment Year" and "Block Period." This amendment takes effect on September 1, 2025. It is part of the Income-tax (Twenty-First Amendment) Rules, 2025, which aims to provide better clarity and legal support for demand notices issued in block assessments.

A key change in Form No. 7 replaces the phrase "assessment year…….a sum" with "assessment year……… or the block period………., as the case may be, a sum." Although this seems minor, it has important implications for taxpayers and tax authorities, especially regarding search and seizure assessments.

Understanding the Amendment: What is a Block Period?

The term "Block Period" is central to this amendment. A block period refers to a period of multiple assessment years for which a single, consolidated assessment is carried out. This situation usually arises when the Income Tax Department conducts a search and seizure operation under Section 132 of the Income-tax Act due to suspected undisclosed income. The block period typically covers the six financial years before the year of the search. Any undisclosed income found in this period is taxed at a higher rate.

Reasons for the Change

Before this change, Form No. 7 only mentioned the "assessment year," which led to confusion when issuing demand notices for block assessments covering multiple years. The amendment fixes this by officially including the term "block period" in the demand notice.

This change is expected to:

• Improve Legal Clarity. The revised form will provide a straightforward legal basis for demand notices in block assessment cases, reducing potential legal challenges on procedural issues.
• Simplify Compliance. For taxpayers and tax authorities, this change will make it easier to issue and respond to demand notices in complex search and seizure cases.
• Ensure Consistency. The amendment aligns Form No. 7 with the relevant provisions of the Income-tax Act, 1961, regarding block assessments, ensuring uniformity in the legal framework.
• Minimize Administrative Challenges. By having one clear format for demand notices that addresses both regular and block assessments, the CBDT aims to lower administrative complications and promote consistency.

Impact on Taxpayers

Taxpayers who might face search and seizure operations should pay attention to this change. While the main law concerning block assessments remains unchanged, the process for the demand notice will now be clearer. When receiving a Form No. 7 that includes a "block period," it will be evident that the notice relates to the combined assessment of undisclosed income over several years.

Tax experts view this as a positive move toward greater transparency and efficiency in tax administration. By clearly distinguishing between regular assessments for individual years and block assessments, this amendment is expected to add more accuracy to post-assessment processes.

The Income-tax (Twenty-First Amendment) Rules, 2025, which introduce this change, were officially announced on August 14, 2025, through notification G.S.R. 553(E). As the September 1, 2025, deadline approaches, taxpayers and tax professionals should become familiar with the updated Form No. 7 and its implications.

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