Understanding Section 148A: The New Reassessment Regime

The reassessment provisions have been one of the most litigated areas of Indian tax law. The IT Act 2025 has restructured these provisions under Sections 279, 279A, and 280 (corresponding to old Sections 147, 148, 148A, and 149). Here is a practical guide.

The Old vs New Framework

Under IT Act 1961:

• Section 147: Income escaping assessment
• Section 148: Issue of notice
• Section 148A: Conducting inquiry before issuing notice (inserted by Finance Act 2021)
• Section 149: Time limits
• Section 151: Sanction for notice

Under IT Act 2025:

• Section 278: Income escaping assessment (old 147)
• Section 279: Issue of notice for reassessment (old 148)
• Section 279A: Mandatory inquiry before issuing notice (old 148A)
• Section 280: Time limits for notice (old 149)
• Section 281: Sanction for issue of notice (old 151)

The substantive requirements are largely the same, but the 2025 Act consolidates and clarifies several aspects that were previously ambiguous.

The Section 279A Mandatory Inquiry Process

Before issuing a reassessment notice under Section 279, the Assessing Officer must follow the Section 279A inquiry process. This was introduced in 2021 (as old Section 148A) following the Supreme Court's decision in Ashish Agarwal (2022) and has been retained in the 2025 Act.

Step 1: Information triggers the process:

The AO must have "information" suggesting income has escaped assessment. This information can come from:

• Risk Management Strategy (automated data analytics by the department)
• Search or survey operations
• Information from other government agencies
• Discrepancies in the return (AIS/TIS mismatch)

Step 2: AO conducts inquiry:

The AO conducts an inquiry based on the information available. This is an internal step; the assessee is not involved yet.

Step 3: Show cause notice to assessee [Section 279A(1)(b)]:

The AO must provide the assessee:

• The information which suggests income has escaped assessment
• An opportunity to show cause why a reassessment notice should not be issued
• A minimum of 7 days (typically 14-30 days in practice) to respond

Step 4: Assessee's response:

The assessee (through their CA) submits a detailed response explaining why the income has not escaped assessment. This is the most critical stage. A well-drafted response at this stage can prevent the reassessment entirely.

Step 5: AO's order [Section 279A(1)(d)]:

The AO must pass a reasoned order:

• If satisfied that reassessment is warranted: Proceed to issue notice under Section 279
• If not satisfied: Drop the proceedings with a speaking order

Step 6: Prior approval:

The order and the proposed notice must be approved by the specified authority (see approval hierarchy under Section 281).

Time Limits Under Section 280

Important: The 10-year window applies only when the escaped income is "represented in the form of an asset" (investments, property, bank deposits, etc.). Mere income discrepancies without an identifiable asset do not qualify for the extended period.

CA's Checklist When Client Receives a 279A Notice

Immediate steps (within 48 hours):

1. Read the notice carefully. Identify the assessment year, the "information" cited, and the response deadline.

2. Check the time limit. Is the notice within the applicable time limit under Section 280? A notice issued beyond the time limit is void and can be challenged.

3. Verify the approval. Check whether the notice bears the approval of the correct authority. Notices beyond 3 years require higher-level approval.

4. Check if it is faceless. Post-1 April 2026, all reassessment proceedings should be faceless. 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 279A 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 time limit under Section 280.
• No prior approval: The required approval from the specified authority is missing or from a lower authority than 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 279A inquiry process 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 old Section 148 (now 279) must be preceded by the Section 148A (now 279A) inquiry process. This protection continues under the 2025 Act.

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. Search "reassessment procedure" or "Section 279A" for the complete provisions, relevant circulars, and important judicial precedents.