Reassessment FAQs — Section 147, 148, 148A Procedure

These questions are drawn from real GST compliance scenarios, litigation, and common queries from practitioners. Answers reflect the law as amended up to Finance Act 2024.

• 1 What is the procedure for reassessment under the new Section 148A regime?

  Under the Finance Act 2021 framework, the AO must: (1) conduct a pre-notice inquiry under Section 148A(a); (2) provide the assessee with the material/information relied upon under Section 148A(b) and issue a show cause notice; (3) give the assessee at least 7 days (or 30 days on request from assessee) to respond; (4) after considering the reply, pass a speaking order under Section 148A(d) on whether there is 'sufficient reason' to issue a reassessment notice; (5) only if the 148A(d) order is adverse, issue the formal notice under Section 148.

• 2 What are the time limits for issuing a reassessment notice under Section 149?

  The revised time limits (post Finance Act 2021) are: (1) Normal cases — 3 years from the end of the relevant assessment year; (2) High-value cases — 10 years from the end of the relevant AY only if the AO has evidence in the form of asset, document, or book that the escaped income (including surcharge, etc.) exceeds ₹50 lakh. The 10-year window requires sanction from the Specified Authority under Section 151.

• 3 Can old reassessment notices (pre-April 2021) be reopened under the new Section 148A framework?

  The Supreme Court in Union of India v. Ashish Agarwal (2022) held that old notices issued under the unamended Section 148 between 1 April 2021 and 30 June 2021 (when the Finance Act 2021 was to take effect) would be treated as show cause notices under Section 148A(b). The AOs were directed to provide relevant material and pass 148A(d) orders. Notices issued before 1 April 2021 continue under the old regime.

• 4 What is 'reason to believe' and how does it differ from 'reason to suspect'?

  Section 147 requires 'reason to believe' that income has escaped assessment — a higher standard than mere 'reason to suspect'. The belief must be based on tangible material and not mere suspicion. The Supreme Court in ITO v. Lakhmani Mewal Das (1976) held that there must be a direct nexus between the material and the belief of escapement. Post Finance Act 2021, the 148A procedure largely replaces the old 'reasons' regime, but the underlying requirement of 'reason to believe' under Section 147 is retained.

• 5 Can a taxpayer challenge the Section 148A(d) order directly before the High Court?

  Yes. Since a writ petition under Article 226 is maintainable against a Section 148A(d) order, taxpayers can approach the High Court directly. Multiple High Courts have held that the remedy of filing a return and pursuing the reassessment is not an adequate alternative where the 148A order is passed without following statutory safeguards (e.g., not supplying material, no opportunity to respond, or notice issued beyond limitation). However, courts generally do not interfere at the notice stage unless there is a clear jurisdictional defect.

• 6 Is a search assessment under Section 153A different from reassessment under Section 147/148?

  Yes. Section 153A provides for assessment in search cases (after a search under Section 132). For AYs where assessment is pending or completed, the AO must issue notice and complete assessment for up to 6 AYs preceding the search (and, in certain cases, up to 10 AYs). Undisclosed income found during search is taxed under Section 153A read with Section 132. This is an independent regime separate from Section 147/148, though both can co-exist in some factual scenarios.

• 7 What information can the AO rely on for issuing a 148A notice?

  The AO can rely on information received from: (a) an audit report or annual information statement (AIS/Form 26AS); (b) intelligence inputs from investigation wing; (c) SFT (Statement of Financial Transactions) data flagged by the system; (d) material obtained during survey or search of a third party; (e) information received from foreign tax authorities. The information must be credible and there must be a live link between the information and the belief of income escaping assessment.

• 8 What are the grounds to challenge a reassessment order before the ITAT?

  Common grounds include: (1) Notice issued beyond the limitation period under Section 149; (2) Absence of 'reason to believe' — escapement based on mere change of opinion; (3) Non-compliance with Section 148A procedure — material not supplied, no opportunity given; (4) Sanction under Section 151 obtained from a non-competent authority; (5) Addition on reassessment not related to the reason for reopening; (6) Assessment barred under Section 153 (completed after the time limit). The ITAT can quash the reassessment on any of these grounds.