Reassessment under Sections 147, 148 and 148A: How the Law Reopens a Closed Year

From “reason to believe” to “information which suggests” – and what changed on 1 September 2024.

Suppose a professional filed her return for a year long past. It was processed electronically, no officer ever examined it, and she heard nothing further. Six years later an email arrives from the Income-tax Department. It says the Department has “information” that a large sum in cash was deposited in her name during that year which does not sit with her declared income, and it asks her to show cause why a notice should not be issued to reassess her. She has changed banks twice since and no longer holds the statements. Can the Department reopen a year she reasonably took to be closed? On what material? Within what time? And what must it tell her before it does so? Those four questions – whether, on what material, within what time, and after what hearing – are substantially the whole law of Income Tax Reassessment in India. This article examines the reassessment framework under the Income-tax Act, 1961, how the law has evolved through successive amendments, and how it now operates under the Income-tax Act, 2025. The power to reopen an assessment exists because income does escape assessment; the limits on it exist because finality is itself a value the law protects. Both propositions are respectable, and the cases below are best read as the courts holding them in tension rather than choosing between them.

The Meaning of Income Tax Reassessment and Why the Power Exists

An assessment is the determination of a taxpayer’s income and tax for a year. Most returns are never examined: they are processed under section 143(1) of the Income-tax Act, 1961 by way of an intimation, an arithmetic check rather than an adjudication. A small proportion are picked for scrutiny under section 143(3), where an Assessing Officer applies his mind to the return. Reassessment under Section 147, read with sections 148 to 153 of the Income-tax Act, 1961, is the mechanism by which either kind of year may be reopened where income “has escaped assessment”. This concept of income escaping assessment covers income chargeable to tax that was not brought to tax at all, was under-assessed, or was assessed at too low a rate.

The distinction matters greatly, because much of the case law on reopening protects a considered decision from being revisited, and there is no considered decision to protect where none was ever made. The Supreme Court settled that in ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC), holding that a section 143(1) intimation is not an assessment at all, so that reopening a summarily processed year raises no question of the officer changing his mind (para 13). “Reason”, it added, means a cause or justification, not a proven fact: it is enough that there is relevant material on which a reasonable person could form the belief (para 16).

Reassessment under Section 147 Before 1 April 2021: The “Reason to Believe” Test

Until 31 March 2021, reassessment under Section 147 of the Income-tax Act, 1961, was permitted where the Assessing Officer had “reason to believe” that income had escaped assessment. Beyond four years from the end of the assessment year in a scrutinised case, reopening was permitted only where the escapement was occasioned by the assessee’s failure to disclose fully and truly all material facts. Around that short formula the courts built a doctrine that still governs a very large stock of pending litigation.

The foundational case is Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC), where a Constitution Bench held that the taxpayer’s duty is to disclose fully and truly all primary facts, and that the duty stops there: once the primary facts are before the assessing authority it is for him to draw the inferences of fact and law. The allocation of responsibility that follows is the axis on which many reopening disputes turn. Where the facts were placed before the officer and only the conclusion drawn from them is now said to be wrong, the case is one of the officer’s own assessment of the material rather than of any withholding by the taxpayer; where the facts themselves were incomplete or untrue, it is not.

The second strand concerns the quality of the material. In ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) the Court insisted on a “rational connection” or live link between the material and the belief formed, rejecting reasons that were “vague and indefinite or distant, remote and far-fetched”, and drawing the celebrated line between a reason to believe and a reason to suspect. Its counterpoise is Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), where the Court held that at the reopening stage the only question is whether there was prima facie some material, and “the sufficiency or correctness of the material is not a thing to be considered at this stage” (para 3). Read together, the two decisions yield the working rule that the existence of the reasons is justiciable but their sufficiency is not.

The third strand prohibits a change of opinion – the officer revisiting a view he has already taken on facts he has already seen. In CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) the Court accepted that the 1989 amendments had widened the power, but held that “reason to believe” must be read schematically, that reopening requires tangible material, and that the officer may reassess but not review; the change-of-opinion rule, it said, is an in-built test against abuse. ITO v. TechSpan India (P.) Ltd. [2018] 404 ITR 10 (SC) added an important qualification, although the Revenue’s appeal in that case was itself dismissed: a change of opinion presupposes an opinion formed in the first place (para 10), and where the original order is cryptic or perfunctory no opinion may be attributable to it at all (para 12).

Against these, the Revenue has its own line. Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) holds that where the officer acquires fresh information, “specific in nature and reliable in character”, which exposes the falsity of what the assessee had earlier stated – that a loan shown in the books was bogus, say – that is fundamentally different from drawing a fresh inference from the same material, and the earlier disclosure was never “true and full” at all. Sri Krishna (P.) Ltd. v. ITO [1996] 221 ITR 538 (SC) puts it bluntly: not every disclosure is, or can be treated as, a true and full disclosure.

Finally, procedure. GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC) prescribed the sequence that governed reopenings for two decades: the assessee should file a return and may seek the recorded reasons; the officer is bound to furnish them within a reasonable time; the assessee may file objections; and the officer must dispose of them by a speaking order before proceeding. A writ petition at the bare notice stage, the Court indicated, is ordinarily premature.

Section 148A of the Income-tax Act: The 2021 Shift to “Information Which Suggests”

With effect from 1 April 2021, Parliament replaced this architecture. Section 147 was reduced to a bare enabling provision, and the threshold for issuing a Section 148 notice shifted from the officer’s subjective “reason to believe” to an objective requirement that there be information which suggests that income has escaped assessment, drawn from a prescribed list. Section 148A introduced a mandatory pre-notice procedure requiring the Assessing Officer to put the relevant information to the taxpayer and consider the response before deciding whether reassessment proceedings should be initiated. As first enacted, Explanation 1 to section 148 contained only two categories: information flagged in accordance with the Board’s risk-management strategy, and a final objection of the Comptroller and Auditor-General. The Finance Act 2022 widened the list with effect from 1 April 2022 to include audit objections generally, information received under a tax treaty, information made available under the faceless information-gathering scheme in section 135A, and information requiring action in consequence of a court or Tribunal order. Explanation 2 separately deemed searches, requisitions and surveys conducted on or after 1 April 2021 to constitute such information.

The more consequential innovation was section 148A, a mandatory pre-notice gateway: an optional enquiry, a show-cause notice putting the information to the taxpayer, an opportunity to reply, and a reasoned order under clause (d), with prior approval, deciding whether it was a fit case. Time limits in section 149 were simultaneously compressed and extended – three years ordinarily, but ten years where the officer possessed books, documents or evidence revealing escapement of Rs.50 lakh or more represented in the form of an asset, to which the Finance Act 2022 added expenditure in respect of a transaction or event and entries in the books of account.

How much protection section 148A actually affords is contested. The taxpayer’s case is that the gateway is a jurisdictional condition whose breach is fatal, and that a hearing which is not a real hearing is no hearing at all. The Revenue’s case is that the statute deliberately says “suggests”, so that at the threshold the officer need only be satisfied that information exists pointing towards escapement, leaving the merits to the reassessment itself. The Punjab and Haryana High Court took the latter view in Anshul Jain v. PCIT [2022] 449 ITR 256 (P&H), confining Article 226 scrutiny at the section 148A(d) stage to whether such information exists; the Supreme Court dismissed the assessee’s special leave petition on 2 September 2022. Since the dismissal of a special leave petition without granting leave is not a declaration of law under Article 141 (Kunhayammed v. State of Kerala (2000) 6 SCC 359), the authority should be cited for what it is.

The Transitional Wars: TOLA, Ashish Agarwal And Rajeev Bansal

The change of regime coincided with the pandemic. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, universally called TOLA, had extended limitation periods falling due between 20 March 2020 and 31 March 2021. Between 1 April and 30 June 2021 the Department issued some ninety thousand notices under the old section 148, relying on TOLA-based notifications, for years in which the new regime had already commenced (Rajeev Bansal, para 114(f)). High Courts across the country quashed them; the resulting litigation is narrated in Rajeev Bansal at paras 8 to 13.

In Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC), decided on 4 May 2022, the Supreme Court agreed that the new regime governed every notice issued on or after 1 April 2021 and that section 148A was a condition precedent. But instead of quashing, it used Article 142 to fashion a pan-India remedy: the impugned notices were deemed to be show-cause notices under section 148A(b), officers were to supply the underlying material within thirty days, assessees were given two weeks to reply, the clause (a) enquiry was dispensed with as a one-time measure, and all defences under section 149 and otherwise were expressly preserved.

That preservation generated the next round. The Board issued Instruction No. 1/2022 dated 11 May 2022, taking the position that the deemed notices “travel back in time” to their original date, so that limitation should be tested as at that earlier date; several High Courts, the Gujarat High Court in Keenara Industries among them, rejected that reading. The controversy was settled by a three-Judge Bench in Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC), decided on 3 October 2024. TOLA continues to apply where the action fell for completion between 20 March 2020 and 31 March 2021, the Court held, but its non-obstante clause overrides section 149 only to the extent of relaxing the time limit for issuing a notice (paras 71-72). The arithmetic then follows from the legal fiction created in Ashish Agarwal: the fiction stopped the clock, so the surviving limitation equals the number of days between the issue of the deemed notice and 30 June 2021, excluding the period consumed in supplying material and the two weeks for reply; notices issued beyond that balance are time-barred (paras 107-111, 114(g)-(h)). Ashish Agarwal applies to all the extended notices, challenged or not. Contrary High Court decisions, including Keenara Industries (P.) Ltd. v. ITO [2023] 453 ITR 51 (Guj), were set aside “to the extent of the observations made in this judgment” (para 115), and should no longer be relied on for the proposition that TOLA cannot relax the section 149 limit.

One point of precision is worth making, because commentary frequently gets it wrong. “Travel back in time” is the Board’s language in Instruction No. 1/2022, narrated by the Court; the Court’s own reasoning proceeds on the legal fiction and the surviving-time computation, and attributing the phrase to it misstates the judgment.

Finance (No. 2) Act 2024: Changes to Income Tax Reassessment and Section 148A

Acknowledging in the Explanatory Memorandum that the 2021 provisions had produced considerable litigation, Parliament introduced significant changes to the Income Tax Reassessment procedure through the Finance (No. 2) Act, 2024. With effect from 1 September 2024, sections 148, 148A, 149 and 151 were substituted, and sub-sections (3) and (4) were inserted in section 152. Section 147 itself was left untouched.

Three changes matter most. First, limitation was cut sharply: no notice under section 148 may now issue after three years and three months from the end of the relevant assessment year, extended to five years and three months only where the officer holds books, documents or evidence relating to an asset, expenditure, transaction or entry showing escapement of Rs.50 lakh or more; the corresponding limits for the section 148A show-cause notice are three and five years. The ten-year window is gone, as are the provisos and exclusions that made the earlier computation so contentious.

Second, section 148A was thinned. It now has no separate enquiry stage and no clause-lettered structure: the officer serves a show-cause notice which must be accompanied by the information, the assessee replies within the period specified, and the officer passes an order under sub-section (3), with prior approval, determining whether it is a fit case. Sub-section (4) disapplies the section altogether where the officer received the information under the scheme notified under section 135A – a carve-out to which the provision itself supplies no express limits.

Third, the sanction was lowered. Substituted section 151 makes the specified authority for both sections the Additional Commissioner, Additional Director, Joint Commissioner or Joint Director in every case, replacing the graded tiers under which approvals beyond three years had to come from a Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General. The Revenue reads this as removing an administrative bottleneck that served no purpose once the threshold had become objective; taxpayers read it as removing a real check at the moment the check mattered most.

The transitional rules deserve attention in their own right. Section 152(3) preserves the pre-September 2024 provisions for searches, requisitions and surveys initiated between 1 April 2021 and 31 August 2024; section 152(4) preserves them wherever a section 148 notice was issued, or a section 148A(d) order passed, before 1 September 2024. Two dates must therefore be fixed before anything else: the assessment year, and the date of the notice.

Who May Issue The Notice: Section 151A And The Retrospective Answer

A separate controversy concerned not the grounds for reopening but the officer. Section 151A, inserted in 2021, empowered the Government to notify a faceless scheme for the issue of notices, and the e-Assessment of Income Escaping Assessment Scheme, 2022 was notified on 29 March 2022 (Notification No. 18/2022). Was a notice issued by the taxpayer’s Jurisdictional Assessing Officer, outside that automated allocation, valid? In Hexaware Technologies Ltd. v. ACIT [2024] 464 ITR 430 (Bom) the Bombay High Court held that it was not, rejecting any notion of concurrent jurisdiction, and the High Courts of Telangana, Punjab and Haryana, Rajasthan, Andhra Pradesh and Gauhati broadly agreed. Delhi, in T.K.S. Builders (P.) Ltd. v. ITO, and Madras, in Mark Studio India (P.) Ltd. v. ITO, held the opposite.

The Finance Act, 2026 answered the question legislatively rather than judicially. It inserted section 147A, with retrospective effect from 1 April 2021, providing that notwithstanding section 151A, any scheme framed under it, or any judgment, order or decree of any court, the Assessing Officer for sections 148 and 148A means, and shall always be deemed to have meant, an officer other than the National Faceless Assessment Centre or an assessment unit under section 144B(3). By a common order dated 10 April 2026 the Supreme Court set aside the taxpayer-favourable High Court judgments on the limited ground that their statutory foundation had been removed, and remitted the matters with liberty to challenge section 147A itself, granting interim protection meanwhile. The live question is therefore no longer who may issue the notice, but whether a retrospective validation of this kind is constitutionally sustainable – the taxpayer’s argument resting on accrued rights, the Revenue’s on Parliament’s competence to clarify a jurisdictional allocation with effect from the day the scheme began.

Income Tax Reassessment under the Income-tax Act, 2025: New Sections and Time Limits

The Income-tax Act, 2025 received the President’s assent on 21 August 2025 and came into force on 1 April 2026. The Income Tax Reassessment provisions under the Income-tax Act, 2025 are now contained in sections 279 to 286. Section 279 corresponds to section 147 of the 1961 Act, section 280 to section 148, section 281 to section 148A, section 282 to section 149, section 283 to section 150, section 284 to section 151, section 285 to section 152 and section 286 to section 153. Section 280(6) sets out eight categories of qualifying information. Section 282 expresses the time limits from the end of the tax year rather than the assessment year, so the familiar three-years-three-months and five-years-three-months become four years and three months and six years and three months, with the Rs.50 lakh threshold unchanged; section 282(3) bars any notice within one year from the end of a tax year.

For most practitioners, however, the important provision is the savings clause. Section 536(2)(c) preserves the repealed 1961 Act for any proceeding pending at commencement and for any proceeding initiated on or after 1 April 2026 in respect of a tax year beginning before that date, expressly including notices, reassessment and recomputation. Sections 279 to 286 therefore first bite for tax year 2026-27; a notice issued today for an older year is still governed by sections 147 to 151 of the 1961 Act. The case law summarised above has a long life ahead of it.

The Reassessment Regime By Period

The table summarises the applicable Income Tax Reassessment time limits under the different legislative regimes and omits special cases – notably reassessment consequent on an appellate or revisional order, and the search-assessment provisions in sections 153A and 153C for the years to which they applied. The applicable limitation period must always be determined by examining the relevant assessment year, the date of the notice and the transitional provisions governing the case.

Two Ways Of Reading The Same Reform

It is tempting to score the last five years as a contest one side has been winning. The fairer reading is that the reforms pursue two objects that do not always point the same way. Moving from a subjective belief to enumerated information, and compressing the outer limit from ten years to five years and three months, are gains in certainty, and answer a long-standing taxpayer complaint about the breadth of the reopening power. Removing the graded sanction, thinning the pre-notice hearing, and disapplying section 148A where the information arrives through the section 135A channel move the other way, and the retrospective insertion of section 147A raises a distinct question about the stability of a rule litigants have already relied on.

What has not changed is the underlying discipline. Whether the statute speaks of a belief or of information, the officer must be able to show material, a rational connection between that material and the conclusion that income escaped, and a record that a mind was applied to the taxpayer’s answer. That is what Lakhmani Mewal Das required in 1976 and what a section 148A(3) order must demonstrate today. The vocabulary has moved; the requirement of reasons that can bear examination has not.

Frequently Asked Questions

Can a reassessment notice be challenged before the assessment is completed? It can, but the threshold is high. GKN Driveshafts contemplates that the taxpayer file a return, seek reasons, object and receive a speaking order, and treats a writ at the bare notice stage as ordinarily premature; Anshul Jain confines review at the section 148A stage to whether qualifying information exists. Writ jurisdiction is nonetheless exercised where the objection is jurisdictional rather than factual – limitation under section 149, absence of the mandatory sanction, or complete failure to follow section 148A – because such defects go to the officer’s authority: sanction by the appropriate authority is “a precondition for the assessing officer to assume jurisdiction under section 148” (Rajeev Bansal, para 76), and a notice issued beyond the surviving limitation is liable to be set aside (para 114(h)).

Does the change-of-opinion rule survive the shift to “information which suggests”? The doctrine was built around “reason to believe”, which the 2021 substitution removed, and the Revenue argues that a rule tied to a deleted expression cannot outlive it. The contrary argument is that the rule was never merely textual: Kelvinator grounded it in the distinction between reassessment and review, and material already examined and decided upon can hardly be information that “suggests” escapement. The point is genuinely open, and TechSpan is a reminder that it arises only where an opinion was actually formed – which, for a year processed under section 143(1), it was not.

Which law applies to a notice issued today for an old assessment year? Three filters, in order. If a section 148 notice was issued, or a section 148A(d) order passed, before 1 September 2024 – or the case arises from a search, requisition or survey between 1 April 2021 and 31 August 2024 – section 152(3) and (4) apply the pre-September 2024 provisions. Otherwise, for any tax year beginning before 1 April 2026, section 536(2)(c) of the Income-tax Act, 2025 keeps the 1961 Act in play in its post-September 2024 form. Sections 279 to 286 of the 2025 Act apply from tax year 2026-27.

What is the time limit for issuing a Section 148 reassessment notice? Under the provisions substituted by the Finance (No. 2) Act, 2024, a reassessment notice under Section 148 of the Income-tax Act, 1961 may ordinarily be issued within three years and three months from the end of the relevant assessment year. This period may extend to five years and three months where the Assessing Officer possesses books, documents or evidence relating to an asset, expenditure, transaction or entry indicating that income of Rs.50 lakh or more has escaped assessment. The applicable limitation period must also be examined in light of the transitional provisions under Section 152 and the savings clause of the Income-tax Act, 2025.

Sources & Citations

• Income-tax Act, 1961, s.147 (as substituted by the Finance Act 2021, w.e.f. 1-4-2021); ss.148, 148A, 149 and 151 (as inserted or substituted by the Finance Act 2021 w.e.f. 1-4-2021, amended by the Finance Act 2022 w.e.f. 1-4-2022, and substituted by the Finance (No. 2) Act 2024, Act No. 15 of 2024, w.e.f. 1-9-2024); s.152(3)-(4) (inserted w.e.f. 1-9-2024); s.151A; and s.147A (inserted by the Finance Act 2026, w.r.e.f. 1-4-2021 – particulars to be confirmed).
• Income-tax Act, 2025 (assent 21 August 2025; in force 1 April 2026), ss.279-286 and s.536(2)(c).
• Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), s.3(1).
• CBDT Notification No. 18/2022 dated 29 March 2022 (e-Assessment of Income Escaping Assessment Scheme, 2022); CBDT Instruction No. 1/2022 dated 11 May 2022.
• Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC).
• ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC).
• Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC).
• Sri Krishna (P.) Ltd. v. ITO [1996] 221 ITR 538 (SC).
• Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC), decided 17 December 1997.
• GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC).
• ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC).
• CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC).
• ITO v. TechSpan India (P.) Ltd. [2018] 404 ITR 10 (SC).
• Union of India v. Ashish Agarwal [2022] 444 ITR 1 (SC), decided 4 May 2022.
• Anshul Jain v. PCIT [2022] 449 ITR 256 (P&H); SLP dismissed by the Supreme Court on 2 September 2022.
• Kunhayammed v. State of Kerala (2000) 6 SCC 359 (SC, three-Judge Bench).
• Keenara Industries (P.) Ltd. v. ITO [2023] 453 ITR 51 (Guj) – set aside in Rajeev Bansal, para 115, to the extent of the observations in that judgment.
• Hexaware Technologies Ltd. v. ACIT [2024] 464 ITR 430 (Bom), decided 3 May 2024; contra T.K.S. Builders (P.) Ltd. v. ITO (Del) and Mark Studio India (P.) Ltd. v. ITO (Mad, 20 December 2024) – report citations for both to be confirmed at proof stage.
• Union of India v. Rajeev Bansal [2024] 469 ITR 46 (SC), three-Judge Bench, decided 3 October 2024.
• Memorandum Explaining the Provisions in the Finance (No. 2) Bill, 2024; CBDT Press Release dated 1 April 2026 (commencement of the Income-tax Act, 2025).

Related Reading

• Unexplained Cash Credits under Section 68: Identity, Genuineness and Creditworthiness
• Search Assessments under Sections 153A and 153C: The “Incriminating Material” Requirement
• Validity of Notice: Section 143(2), Section 292BB and Curable Defects
• Section 151A and Faceless Reassessment: Who May Issue the Notice, the Jurisdictional or the Faceless Officer?
• Depreciation on Goodwill in Amalgamations: From Smifs Securities to the Finance Act, 2021

© Bhatt & Joshi Associates. This article is general commentary on the law and is not legal advice; no reader should act on it without taking advice on the facts of the particular case.