When you file an ITR, the department first processes it under Section 143(1) — a routine intimation. If selected for scrutiny, a Section 143(2) notice follows, leading to a full assessment. Once an assessment is complete — or the return is processed without scrutiny — it is generally considered settled.

Reassessment is the power to reopen that settled position. Under Section 147 (or Section 280 of ITA 2025), the Assessing Officer can reopen a past year’s assessment if they have “information suggesting that income chargeable to tax has escaped assessment.”

The key word is information — not suspicion, not hunch, not mere guesswork. The Supreme Court in Rajeev Bansal v. Union of India (2024) confirmed that the 2021 procedural safeguards are mandatory and that reopening without proper compliance is void from the start.

For Notices Issued On or After September 1, 2024

The ₹50 Lakh Threshold — No Aggregation Across Years

The Delhi High Court confirmed in L-1 Identity Solutions Operating Co. Pvt. Ltd. v. ACIT (2024) that the AO cannot aggregate escaped income across multiple assessment years to cross the ₹50 lakh threshold. Each year is assessed independently. If escaped income for AY 2021-22 is ₹35 lakh and for AY 2022-23 is ₹25 lakh, they cannot be combined to reach ₹50 lakh — each year’s limit is determined by that year’s figure alone.

The Finance Act 2021 introduced Section 148A as a mandatory safeguard before any reassessment notice can be issued. The Supreme Court in Rajeev Bansal (2024) confirmed that skipping this procedure renders the notice void. Under ITA 2025, this procedure is now in Section 281.

The mandatory sequence is:

1. Step 1 — Information Review (148A(a) / ITA 2025: Section 281(a)):
   The AO receives information (from AIS, SFT reports, banks, property registrar, or third parties) suggesting income has escaped assessment. The AO reviews the information and seeks prior approval from the specified authority.
2. Step 2 — Show Cause Notice (148A(b) / Section 281(b)):
   The AO issues a Show Cause Notice sharing the information with the taxpayer and asking for an explanation. The taxpayer is given a minimum of 7 days (extendable to 30 days) to respond.
3. Step 3 — Taxpayer’s Reply (148A(c) / Section 281(c)):
   This is the most important window. Submit a detailed written response with supporting documents — bank statements, sale deeds, ITRs, gift deeds — explaining the source or nature of the flagged transaction. Many cases close here if the explanation is satisfactory.
4. Step 4 — AO’s Order (148A(d) / Section 281(d)):
   After considering the reply, the AO passes a reasoned order. If satisfied with the explanation — case closed. If not — a formal Section 148 notice (or Section 280 under ITA 2025) follows.
5. Step 5 — Section 148 Notice (Section 280 under ITA 2025):
   The formal reassessment notice — issued only after the 148A process. The taxpayer is required to file a return for the relevant year or respond to the assessment.

The AIS (Annual Information Statement) is particularly powerful — it pulls data from all the above sources into one consolidated view. Anything visible in your AIS that was not declared in your ITR is a potential reassessment trigger.

Example 1: Property Sale — Is It Still in Time?

Suresh (Delhi) sold a property in FY 2019-20 for ₹80 lakh and did not declare the capital gain in his ITR. The registrar reported the transaction via SFT.

• AY: 2020-21 → ends March 31, 2021
• Escaped income: ₹80 lakh (above ₹50 lakh) → 5-year limit applies
• Deadline: March 31, 2026
• Notice issued: February 2026 → Valid — within time

Suresh had no explanation. The reassessment proceeded and resulted in a tax demand of ₹12 lakh plus interest and penalty. Had he declared the sale and claimed Section 54 exemption on reinvestment, the liability would have been zero.

Example 2: FD Interest — Time-Barred Notice

Mrs. Gupta (Noida) failed to declare ₹40,000 FD interest in FY 2020-21.

• AY: 2021-22 → ends March 31, 2022
• Escaped income: ₹40,000 (below ₹50 lakh) → 3-year limit applies
• Deadline: March 31, 2025
• Notice received: June 2025 → Time-barred — invalid

Her CA raised the time limitation ground in the reply. The AO passed a Section 148A(d) order acknowledging the notice was time-barred. Case closed.

Example 3: Section 148A — Case Closed at Pre-Notice Stage

Rahul received a 148A(b) notice for FY 2022-23 — the AIS showed ₹22 lakh credited to his account which appeared to be undisclosed income.

In his reply, Rahul submitted:

• His mother’s property sale deed showing she sold a property for ₹22 lakh
• His mother’s ITR showing capital gain declared
• Bank statement showing transfer from his mother’s account to his
• A brief explanation that this was a family fund transfer, not his income

The AO passed a Section 148A(d) order finding no case for reassessment. No Section 148 notice was issued. The documentation made all the difference.

Not every notice is valid. Common grounds to challenge:

• Time limitation: Notice issued after the applicable deadline
• No “information” from specified source: The AO relied on mere suspicion rather than specific, verifiable information
• Change of opinion: AO is reconsidering the same facts already examined in the original assessment — not a valid ground for reopening
• 148A procedure not followed: Section 148 notice issued without the mandatory 148A(b) Show Cause Notice
• Wrong authority: Notice issued by Jurisdictional AO instead of NFAC where faceless assessment applies (Hexaware ground — note: Budget 2026 proposed Section 147A to neutralise this ground retrospectively)
• ₹50 lakh aggregation: AO aggregated income across years to reach the ₹50 lakh threshold — not permitted per L-1 Identity Solutions ruling

How to challenge:

• File detailed objections at the 148A(b) stage — this is the first and most important step
• After a 148A(d) order: challenge by writ petition in the High Court (fast track remedy)
• After a Section 148 notice: file return under protest, raise GKN Driveshafts objections, then appeal to CIT(A) if assessment proceeds

Mistake 1 — Ignoring the 148A(b) Show Cause Notice:
This is the single most damaging mistake. Ignoring the SCN results in an ex-parte 148A(d) order against you, followed immediately by a Section 148 notice. You lose your best opportunity to close the case before it becomes a full reassessment.

Mistake 2 — Filing a Section 148 return without first raising objections:
Filing a return directly in response to a Section 148 notice is treated as acceptance of the AO’s jurisdiction. Raise GKN Driveshafts objections first — request the recorded reasons, file a formal objection, and get a speaking order on the objection before complying with the return filing.

Mistake 3 — Not checking whether the notice is time-barred:
Many taxpayers assume every notice is valid. Check the AY, the escaped income amount, and the applicable time limit before doing anything else. A time-barred notice should be challenged immediately — at the 148A stage or by writ.

Mistake 4 — Disposing of financial records before 6 years:
Keep records for at least 6 years (and 10 years for large transactions). For property sales, investment records, and foreign income — retain documents for the full potential reassessment window. Digital copies in cloud storage are fully acceptable.
Books of Accounts — How Long to Keep Records