Section 120
Section 120: no set off of losses against undisclosed income from search, requisition or survey
Section 120 stops a taxpayer from using brought-forward losses or unabsorbed depreciation to shelter undisclosed income that comes to light because of a search, requisition, or survey action - ensuring such income is taxed without the cushion of past losses.
The bar on set-off
Irrespective of any other provision of the Act, brought-forward loss (or otherwise) or unabsorbed depreciation cannot be set off against undisclosed income that is included in the total income of any tax year, where that inclusion is consequent to a search conducted under Section 247, a requisition under Section 248, or a survey conducted under Section 253 - except a survey conducted under Section 253(4).
Meaning of "undisclosed income"
For this section, "undisclosed income" for any tax year carries the meaning given to it in Section 301.
Frequently asked questions
Can a business carry forward loss be used to reduce undisclosed income found in a tax search?
No - Section 120 specifically blocks the set-off of brought-forward loss or unabsorbed depreciation against undisclosed income included in total income as a consequence of a search under Section 247, a requisition under Section 248, or a survey under Section 253.
Does the bar apply to every kind of survey?
No - it excludes a survey conducted under Section 253(4). Surveys of that specific kind are not covered by this restriction.
Related sections
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Get help responding to a search, requisition or survey assessmentLast updated 9 September 2026