Income Tax Reassessment Notices under Section 148: Supreme Court Precedents & CBDT Instruction Analysis

The Finance Act, 2021 revamped the entire scheme of reassessment under Sections 147 to 151 of the Income-tax Act, 1961. The old concept of 'reason to believe' was substituted with 'information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment'.

Before issuing a notice under Section 148, the Assessing Officer is statutorily mandated to conduct an inquiry with prior approval under Section 148A(a), serve a show-cause notice under Section 148A(b), consider the reply under Section 148A(c), and pass a speaking order under Section 148A(d).

Under Section 149, no notice under Section 148 shall be issued for the relevant assessment year if three years have elapsed from the end of the relevant assessment year, unless:

The Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of an asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year.

Taxpayers should never ignore an automated portal communication. Timely submission of clean, paginated, and referenced digital replies on the e-filing portal is essential to ensure grounds are preserved for potential appeals before CIT(Appeals), ITAT, or High Court writ petitions.