Income Tax Reassessment Notice: What Taxpayers Should Know
- Asharam Swain
- Dec 17, 2025
- 9 min read
Introduction
Section 148 of the Income Tax Act is especially important in the complex realm of income tax. This clause gives the Income Tax Department the power to review and reevaluate a taxpayer's previously submitted returns in the event that there is a suspicion that any income has not been assessed. In essence, it's a way for the tax authorities to examine and correct any inconsistencies from a previous assessment that were missed. The Assessing Officer may choose your income tax return for reassessment in accordance with certain standards under Section 147 of the Income Tax Act, 1961. They issue a notification under Section 148, indicating that some income may have escaped assessment, to start this procedure.
Table of Contents
Income Tax Reassessment Notice under Section 148
The Assessing Officer may notify a taxpayer of income escaping assessment under Section 148 of the Income Tax Act of 1961. This suggests that officials may initiate proceedings under this provision if they believe a taxpayer has not declared all of their income or has given an incorrect representation of it. It is possible to issue notice under this section regardless of whether the assessee has submitted returns in the past or whether an assessment has already taken place. The assessee is essentially required by this notice to submit an income return in accordance with this section.
Other Key Sections Governing Income Tax Reassessment
Section 147: This is the main part that gives the Assessing Officer the authority to review or assess income if they have cause to think that any taxable income has escaped assessment. Escaped assessment" refers to the following:
Income omitted as a result of not filing a return
Inaccurate deductions or claims
Income is evaluated at a reduced rate
New proof of unreported income
Section 148A: This section requires AO to carry out an investigation with prior authorisation. The assessee will have the chance to explain why a reassessment is not necessary. Choosing to give notice only after taking the assessee's response into consideration.
Section 149: If the escaping income is less than Rs. 50 lakh, within three years following the conclusion of the applicable assessment year. If the escaping income is Rs. 50 lakh or more and is represented as an asset, expense, or entry, it can last up to ten years.
Section 151: The approval needed before starting a reassessment is described in this section. For instance, consent from a senior officer (Principal Chief Commissioner or Principal Director General) is required if more than three years have gone by.
How is an Income Tax Reassessment Notice Issued
The assessing officer cannot immediately issue a notice under section 148. The assessing officer must perform an inquiry under section 148A prior to providing notice under section 148. It should be mentioned that an inquiry can only be carried out with the designated authority's prior consent. The main purpose of this investigation is to provide the assessee an opportunity to explain themselves before sending out a notification. Under Section 148A(b), the taxpayer receives a show cause notice from the assessing officer along with possible proof that income has escaped assessment. The taxpayer may reply with supporting documentation. Together with the notification under Section 148A or the Show Cause notice, the assessing officer is required to furnish the taxpayer with all relevant material and information.
Conditions for Issuing an Income Tax Reassessment Notice
Reason to Believe: The AO needs concrete proof or documentation that shows income has eluded assessment. This cannot be predicated only on suspicion or speculation. For instance, fresh data must be accessible, such as unreported wages or inaccurate deduction claims.
Written Justifications: Prior to issuing the notice, the Assessing Officer must document written justifications for their belief that income has avoided assessment. This guarantees openness and gives the assessee a foundation to contest if needed.
New Information Requirement: Information that the taxpayer already disclosed during the initial assessment cannot be the exclusive basis for issuing a notice. Even if the assessment has already been finished, it must be prompted by fresh information.
Reasons for Receiving an Income Tax Reassessment Notice
You might get a reassessment notice in the following cases:
Your ITR did not include large bank transactions.
Investments in stocks or real estate appear to be at odds with your claimed income.
During demonetisation, high-value currency deposits were discovered.
Inconsistency between stated income and TDS data
Unreported foreign income and assets.
To put it briefly, the tax department will report any tax calculation that hasn't been reevaluated or seems questionable.
Time Limit to Issue an Income Tax Reassessment Notice
For the applicable assessment year, no notification under Section 148 will be given following:
Three years and three months from the end of the applicable assessment year is the typical time limit.
Time limit: Five years and three months after the end of the applicable assessment year if the Assessing Officer has proof of untaxed income of at least Rs 50 lakhs.
The deadlines listed above apply to notices sent out starting on January 9, 2024. Notices sent before August 31, 2024, have different deadlines.
Who Can Issue an Income Tax Reassessment Notice
The Income Tax Act of 1961's Section 151(1) specifies who is permitted to issue a notification under Section 148.
Regarding Notices Sent Out After Three Years: A notice under Section 148 may only be issued if the Principal Chief Commissioner, Principal Commissioner, Chief Commissioner, or Commissioner is persuaded that more than three years have elapsed since the conclusion of the relevant assessment year (AY). They must decide whether to issue such a notice after reviewing the justifications provided by the Assessing Officer (AO).
For Other Cases: Only a Joint Commissioner's consent is required to issue a notice under Section 148 if the Assessing Officer is rated lower than a Joint Commissioner. In order to confirm that the notice is warranted, the Joint Commissioner must examine and concur with the justifications noted by the AO.
The higher authority (Principal Chief Commissioner, Principal Commissioner, Chief Commissioner, or Joint Commissioner) does not have to personally deliver the notification in either case. However, it must be convinced by the AO's justifications that the matter warrants a Section 148 notice.
Steps to Respond to an Income Tax Reassessment Notice
First, review the notice for any grounds for suspicion that the assessing officer documented in order to issue the notice in accordance with section 148. You could ask the assessing officer to submit a copy of the documented reasons if they are not included in the notice.
Within the allotted time, which is typically thirty days, you must reply to the notice. You have two options for responding to the notice: either file a return or send the Assessing Officer a written response with all the information and supporting documentation.
File the return as soon as possible if you are satisfied with the "reasons to believe" that the assessing officer documented. Send the copy to the assessing officer if the case has already been filed.
If you're filing an income tax return in response to a section 148 notice, make sure you do so after thoroughly declaring all of your income and expenses. If you fail to accurately declare any of your income, you may be subject to needless penalties.
You may contest the legitimacy of the notification before the evaluating officer or higher authorities if you think it is invalid or that the assessing officer's justifications for commencing an assessment under section 147 are invalid.
The Court would stop your evaluation process if you were successful in your case. However, the assessing officer may move forward with the reassessment if the decision is not in your favour.
Penalties for Non-Compliance with Income Tax Reassessment Notice
Penalties may follow noncompliance with a reassessment notice under Section 148:
Interest Fees: Interest under Section 234A is assessed for late or non-filing returns if the income is calculated under Sections 143(1), 144, or 147. Interest under Section 234B may be used in lieu of Section 234A if no return was filed and no assessment was made under Section 144.
Other Penalties: Additional penalties under other provisions of the Income Tax Act, such as for hiding income or providing false information, may be applied, depending on the type of evasion.
The Assessing Officer may use the available data to conduct the assessment if you fail to reply to a notice under Section 148. In essence, they are able to estimate your revenue and assess it as best they can. Section 144 refers to this as a "best judgement assessment." You can file an appeal with the Income Tax Appellate Tribunal or the Commissioner of Income Tax (Appeals) if you don't agree with their assessment.
Rights and Duties of Assessees Facing Income Tax Reassessment Notice
Rights:
In order to comprehend the foundation of the AO's belief, the assessee can request a copy of the grounds for the notice.
If the grounds are inadequate, object to the notification and provide justification and supporting documentation.
To ensure openness, request explanations if the AO rejects objections.
Use a writ petition to contest the legality of the notice in the High Court, either before or following assessment procedures or during an appeal.
To support future legal processes, keep records of all steps taken, including opposing, asking for reasons, and obtaining explanations for dismissal.
Duties:
Within the allotted period, submit income escaping assessment returns for the applicable assessment year.
To avoid penalties, reply to the notice with correct and comprehensive information.
Conclusion
To sum up, Section 148 of the Income Tax Act of 1961 is a crucial instrument for verifying that taxpayers' incomes are accurately and completely assessed. It is important to treat receiving a notice under this section seriously. It's critical that you reply with accurate and comprehensive information regarding your earnings and outlays. If you disregard the notice or fail to respond by the time, the assessment may be based only on the Assessing Officer's opinion, which may not be favourable to you. You may steer clear of potential traps and ensure a seamless tax assessment procedure by paying close attention to each phase. In addition to aiding in the management of the present notice, keeping the aforementioned considerations in mind provides a strong basis for upholding tax compliance and averting future problems.
Frequently Asked Questions
What is reassessment in income tax?
Reassessment entails reopening the previously finished assessment upon meeting specific requirements and recalculating the assessee's total income by accounting for revenue that was not included in the previous assessment. On the other hand, it can be the first assessment in which the assessee has not provided the return at all.
What happens if the AO conducts a best judgement assessment?
The AO uses the available information to estimate your income and expenses in this case. You may file an appeal with the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal if you disagree with the assessment. To prevent needless hassles, it is generally advisable to reply to a notice under Section 148 with all the pertinent information about your income and expenses.
What is the time limit to issue a notice u/s 148?
With effect from January 9, 2024, a taxpayer may get a notice under Section 148 within three years and three months of the conclusion of the applicable assessment year if the concealed income is less than Rs. 50,00,000 or is anticipated to be less than that amount. However, the notification may be given within five years and three months of the end of the applicable assessment year if the hidden income exceeds Rs. 50,00,000.
Can a notice under Section 148 be issued for an assessment year after five years?
No. A notification under Section 148 may only be issued within five years and three months of the end of the applicable assessment year, depending on the amount of escaped income, as of January 9, 2024.
What are the reasons for receiving a notice u/s 148?
A notification under Section 148 is primarily given when the Assessing Officer has hard proof and a reasonable suspicion that any taxable income has eluded assessment. The officer's suspicion that the taxpayer has concealed or underestimated income for the particular year under consideration must be clearly connected to the information at hand.
What happens if a taxpayer ignores a Section 148 notice?
The Assessing Officer will make a "best judgement assessment" and use the information at hand to estimate the taxpayer's income if the taxpayer does not reply to a notification under Section 148. By filing an appeal with the Income Tax Appellate Tribunal or the Commissioner of Income Tax (Appeals), the taxpayer may contest this estimate.
Can a reassessment notice be issued if the taxpayer has already submitted a return?
Yes, even if the taxpayer has already filed an ITR, a notification under Section 148 may still be given.
Can a taxpayer request the reasons for a reassessment notice under Section 148?
Yes, the taxpayer has the right to ask the Assessing Officer for a copy of the documented reasons for issuing a notice under Section 148 if they are not stated in the notice itself.
What are the key considerations when responding to a notice under Section 148?
When responding to a notice under Section 148, taxpayers should be aware of the legal requirements and laws pertaining to Section 148 of the Income Tax Act, comprehend the basis of the notification, evaluate the justification, and ensure their tax returns are accurate.
Can I challenge an income tax reassessment notice?
You are able to contest the notice on legal grounds and file objections.
What is the difference between Section 148 and Section 148A?
Before issuing the primary reassessment notice under Section 148, Section 148A mandates a preliminary inquiry and taxpayer response.
Comments