The reassessment provisions have been one of the most litigated areas of Indian tax law. Finance (No. 2) Act 2024 (w.e.f. 01-09-2024) rewrote Sections 148 / 148A / 149 / 151 of the IT Act 1961, and the IT Act 2025 then renumbered them. Here is a practical guide using both numbering systems.
The Framework — Old and New Numbering
Under IT Act 1961:
- Section 147: Income escaping assessment
- Section 148: Issue of notice
- Section 148A: Mandatory procedure before issuing the notice (inserted by Finance Act 2021, rewritten by FA (No.2) 2024)
- Section 149: Time limits (rewritten by FA (No.2) 2024)
- Section 151: Sanction for notice (approval authority hierarchy)
Under IT Act 2025 (effective 01-04-2026):
- Section 279 — Income escaping assessment (old Sec. 147)
- Section 280 — Issue of notice for reassessment (old Sec. 148)
- Section 281 — Procedure before issuance of the Sec. 280 notice (old Sec. 148A)
- Section 282 — Time limit for notices under Sec. 280 / Sec. 281 (old Sec. 149)
- Section 284 — Sanction for issue of notice (old Sec. 151)
The substantive law is the FA (No.2) 2024 regime; the IT Act 2025 mostly renumbers and consolidates.
The Sec. 148A / Sec. 281 Mandatory Procedure
Before issuing a reassessment notice, the AO must follow the Sec. 148A (IT Act 1961) / Sec. 281 (IT Act 2025) procedure. Originally inserted by Finance Act 2021 and shaped by the Supreme Court in Ashish Agarwal (2022), it was rewritten by Finance (No. 2) Act 2024.
Step 1: "Information" triggers the process.
The AO must have "information" suggesting income has escaped assessment, from sources such as:
- Risk Management Strategy (departmental data analytics)
- Search or survey operations
- Information from other government agencies
- AIS / TIS mismatches flagged against the return
Step 2: Show-cause notice to the assessee [Sec. 148A(1) / Sec. 281(1)]:
The AO provides the assessee:
- The information which suggests income has escaped assessment
- An opportunity to show cause why a Sec. 148 / Sec. 280 notice should not issue
- 7 to 30 days to respond
Step 3: Assessee's reply.
The assessee (through their CA) files a detailed response. This is the most critical stage — a well-drafted response here can prevent reassessment entirely.
Step 4: AO's order [Sec. 148A(3) / Sec. 281(3)]:
The AO must pass a reasoned order. If satisfied that reassessment is warranted, the AO proceeds to issue the Sec. 148 / Sec. 280 notice; if not, the proceedings are dropped.
Step 5: Prior approval of the specified authority under Sec. 151 / Sec. 284.
Time Limits — Two Regimes Run in Parallel
Under IT Act 2025 Sec. 282 (for notices issued on or after 01-04-2026):
| Period from end of tax year | Condition | Approving Authority under Sec. 284 |
|---|---|---|
| Up to 4 years 3 months | Any amount of escaped income | Additional / Joint Commissioner / Director |
| Up to 6 years 3 months | Escaped income is ₹50 lakh or more, and the AO has books, documents, or evidence of an asset, expenditure, or entry showing the escapement | Additional / Joint Commissioner / Director |
Under IT Act 1961 Sec. 149 as amended by Finance (No. 2) Act 2024 (for notices issued between 01-09-2024 and 31-03-2026):
| Period from end of AY | Condition | Approving Authority under Sec. 151 |
|---|---|---|
| Up to 3 years 3 months | Any amount of escaped income | Additional / Joint Commissioner |
| Up to 5 years 3 months | Escaped income is ₹50 lakh or more, represented as an asset, expenditure, or entry in books | Principal CIT / Principal Director / CIT / Director |
Important: The IT Act 2025 further reduced the approval hierarchy — under Sec. 284, the specified authority is only the Additional / Joint Commissioner or Director, regardless of the bracket. The earlier Finance (No. 2) Act 2024 already abolished the pre-2024 10-year extended window; the IT Act 2025 carries forward and slightly extends that regime to 4y 3m / 6y 3m from the end of the relevant tax year.
CA's Checklist When Client Receives a Sec. 148A / Sec. 281 Notice
Immediate steps (within 48 hours):
1. Read the notice carefully. Identify the tax / assessment year, the "information" cited, and the response deadline.
2. Check the time limit. Is the notice within the applicable regime? For notices on/after 01-04-2026, IT Act 2025 Sec. 282 caps this at 4y 3m (default) or 6y 3m (where escaped income ≥ ₹50 L with AO evidence). For notices between 01-09-2024 and 31-03-2026, the FA (No.2) 2024 regime applies (3y 3m / 5y 3m). A notice issued beyond the applicable limit is void and can be challenged.
3. Verify the approval. Check whether the notice bears approval from the correct specified authority. Under IT Act 2025 Sec. 284, only the Additional / Joint Commissioner or Director is required regardless of bracket. Under pre-2026 Sec. 151, notices beyond 3y 3m required Principal CIT / Principal Director level approval — defects in approval hierarchy for old-regime notices remain a live ground for challenge.
4. Check if it is faceless. Post-01-04-2026, reassessment proceedings should be faceless under the applicable scheme. A non-faceless notice may be procedurally defective.
Research and response preparation (within 7-14 days):
5. Gather the client's records for the relevant assessment year: return filed, computation, bank statements, investment proofs.
6. Analyse the "information" cited. Is it based on AIS/TIS data? Check if the mismatch is genuine or a data error (common with AIS discrepancies from banks, mutual funds, or property registrations).
7. Prepare a point-by-point response addressing each item of information. For each item, either:
- Explain that the income was already disclosed in the return (cite the relevant schedule and line item)
- Provide evidence that the information is incorrect
- Show that the income is not taxable (with section references)
8. Draft the response with proper citations. Reference both old and new Act sections if the assessment year is pre-2026-27.
Filing the response:
9. File on the e-filing portal within the deadline. Always file before the deadline. Late responses can be treated as non-responses.
10. Keep a copy with acknowledgement. If filing physically (for non-faceless cases), send by registered post.
Common Grounds for Challenging Sec. 148A / Sec. 281 Notices
- No "information": The notice does not specify what information suggests escaped income. A vague reference to "information available" is insufficient.
- Time-barred: The notice is issued beyond the applicable limit under Sec. 282 (IT Act 2025: 4y 3m / 6y 3m) or pre-2026 Sec. 149 (3y 3m / 5y 3m).
- No prior approval: The required approval from the specified authority is missing or from a lower authority than Sec. 284 (IT Act 2025) or the pre-2026 Sec. 151 hierarchy required.
- Change of opinion: The AO is merely re-examining issues already considered during the original assessment. This is impermissible (Supreme Court in CIT v Kelvinator).
- Incorrect procedure: The Sec. 148A / Sec. 281 procedure was not followed, or the assessee was not given adequate opportunity to respond.
The Ashish Agarwal Legacy
The Supreme Court's 2022 decision in Union of India v Ashish Agarwal reshaped reassessment practice. The Court mandated that all notices under Sec. 148 must be preceded by the Sec. 148A inquiry process — protection that continues under Finance (No. 2) Act 2024 and the IT Act 2025 renumbering (Sec. 281).
CAs should be vigilant about procedural compliance by the department. A significant percentage of reassessment notices have been quashed by High Courts and Tribunals for procedural defects.
TaxMarg's database includes the full reassessment framework (Finance (No.2) Act 2024 amendments + IT Act 2025 renumbering). Search "reassessment procedure" or "Section 148A" for the complete provisions, relevant circulars, and important judicial precedents.