The reassessment framework under the Income Tax Act 1961 was substantially rewritten by the Finance Act 2021 (effective 1 April 2021). The new Sections 148, 148A and 149 replaced the earlier proviso-based scheme with a structured inquiry process that requires the Assessing Officer to conduct a preliminary inquiry under Section 148A before issuing a reassessment notice under Section 148.
Under the post-2021 framework, the Assessing Officer must first conduct a preliminary inquiry under Section 148A: issue a notice to the assessee with information suggesting income has escaped assessment, provide an opportunity to respond, consider the response and pass a speaking order deciding whether to issue the reassessment notice under Section 148. The limitation periods under Section 149 are: three years from the end of the relevant assessment year (standard cases), and ten years (where income escaping assessment amounts to or exceeds Rs 50 lakh). The Supreme Court in Union of India v Ashish Agarwal (2022) deemed all reassessment notices issued under the old regime between 1 April 2021 and 30 June 2021 to be show-cause notices under Section 148A, providing a significant procedural reset.
AMLEGALS advises taxpayers on responding to Section 148A notices, challenging reassessment proceedings on procedural and substantive grounds, and representing taxpayers in reassessment proceedings and subsequent appeals.
Preparing and filing detailed responses to the preliminary inquiry notice under Section 148A.
Challenging reassessment notices on grounds of limitation, absence of new material, change of opinion, procedural non-compliance and jurisdictional defects.
Filing writ petitions under Article 226 challenging reassessment notices and Section 148A orders.
Representing taxpayers in the reassessment proceedings after Section 148 notice is upheld.
Filing appeals against reassessment orders before CIT(A) and ITAT.
Advising on and deploying limitation defences under Section 149.
Under Section 148A (effective 1 April 2021), before issuing a reassessment notice under Section 148, the Assessing Officer must: (i) conduct an inquiry with the prior approval of the specified authority; (ii) provide the assessee with a notice setting out the information suggesting escaped income and an opportunity to respond within a minimum of 7 to 30 days; (iii) consider the response; and (iv) pass a speaking order deciding whether it is a fit case for issue of notice under Section 148.
In Union of India v Ashish Agarwal (2022), the Supreme Court dealt with reassessment notices issued between 1 April 2021 and 30 June 2021 under the old Section 148 (which had been replaced by the Finance Act 2021). The Court deemed all such notices to be show-cause notices under Section 148A, directed the AOs to provide the information relied upon to the assessees, and required them to follow the new Section 148A procedure. This landmark decision protected taxpayer rights while allowing the Revenue to proceed under the new framework.
Under Section 149: (a) a reassessment notice under Section 148 can be issued within three years from the end of the relevant assessment year (standard cases); (b) beyond three years but within ten years only where the income escaping assessment amounts to or is likely to amount to Rs 50 lakh or more in that year; and (c) no notice can be issued beyond ten years. The Supreme Court in Ashish Agarwal also clarified the interaction between the old and new limitation periods.
Yes. Taxpayers routinely challenge reassessment notices and Section 148A orders through writ petitions under Article 226. Common grounds include: failure to follow the Section 148A procedure, change of opinion (where the AO seeks to reassess on the same material already considered), absence of new tangible material, expiry of limitation, non-application of mind, and approval by the wrong authority.
The AO must have information suggesting that income chargeable to tax has escaped assessment. The Explanation to Section 148 defines information to include information flagged by risk-management systems, information from audit objections, information received from other authorities, and information from any other source. A mere change of opinion on material already considered during the original assessment does not constitute valid information for reassessment.
No. No engagement is treated as accepted until conflicts, scope and terms are confirmed in writing.
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