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Article Dated 14th March, 2023


The Finance Act of 2021 has made significant revisions to the provisions governing the reopening of assessments for previous years for taxpayers. This has resulted in the substitution of the previous Sections 147 to 151 with amended Sections 147, 148, 148A, 149, 150, and 151, which came into effect on April 1st, 2021. These changes represent a major overhaul in the way assessment/reassessment of taxpayers is carried out going ahead.

This change did not come without any legal troubles. A Plethora of writ petitions was filed across several High Courts challenging the notices under the old provision first of April, 2021. All such legal Battles were settled by the apex court by way of its judgement in the case of Union of India Vs Ashish Agarwal [2022] 192 TAXLOK.COM (IT) 001 (SC). In this article, we shall not go into past controversies and discuss the way ahead.

In the past, AO used to record reasons u/s 148(2) and based on the same issue a notice under Section 148(1) of the Income Tax Act, requiring taxpayers to file their returns for a specific assessment year without disclosing the reason for such reopening. The taxpayer was required to file the return in response to the notice, after which they could request for a copy of the reasons recorded and the copy of approval obtained. The taxpayer could file objections to the reasons recorded by the AO, and the AO was required to dispose of the objections by way of a speaking order as stipulated by the Hon’ble Supreme Court of India in the Case of GKN Driveshafts (India) Ltd vs Income Tax Officer and Ors [2002] 91 TAXLOK.COM (IT) 277 (SC). This often resulted in litigation due to non-disclosure of reasons or failure to pass speaking orders in respect of the objections filed by the taxpayer. Further, there used to be restrictions on the assessment of matters other than the matters for which the case was reopened.

To reduce litigation and to take benefit of an improved system of gathering information, the Finance Act of 2021 introduced a new regime for reopening assessment proceedings under Section 148, which made it mandatory to follow the procedures as stipulated under Section 148A before issuing a notice under Section 148. Under the new regime, the revenue provides an opportunity to the taxpayer by issuing a Show Cause Notice under Section 148A(b), which requires the taxpayer to explain their case and to have the proceedings dropped with the satisfaction of the AO. It is now mandatory for the AO to issue a notice under Section 148A(b) to the taxpayer, which contains the information along with adverse material purporting escapement of income, that can be countered by the taxpayer with available material and evidence. This is a significant change from the old provisions, under which this information was made available to the taxpayer after the issuance of notice under Section 148 of the previous regime and the filing of the income tax return by the taxpayer. This system tries to benefit from the improved system of information gathering and better analytical tools at the disposal of the department.


Under the substituted provisions of section 147 notice under section 148 can be issued to asses or reassess the income or loss of any assessee if there is any income chargeable to tax.


A notice u/s 148 can be issued after complying with the requirements of section 148A, i.e., after issuing an order u/s 148A(d.) Through such notice, the assessee shall be required to file his return of income for the period covered by the notice under section 148.

However, no notice under this section shall be issued unless there is

— Information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year, and

— The Assessing Officer has obtained prior approval of the specified authority to issue such notice.

But, no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section.

Specified authority for the purpose of this section and section 148A shall mean-

(i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year;

(ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year.

(Defined u/s 151)

For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means, -

(i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;

(ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or

(iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or

(iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or

(v) any information which requires action in consequence of the order of a Tribunal or a Court.


Section 148A provides the flow of processes which needs to be carried out in order to issue a notice u/s 147 and ultimately assess/ reassess the income escaped assessment. The flow of the process is as under-






conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment.



Provide an opportunity of being heard by way of an SCN giving not less than 7 days and a maximum of 30 days to respond by showing cause as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case.



consider the reply of the assessee furnished, if any, in response to the show-cause notice referred to in clause (b)



Decide on the basis of the response furnished under clause (b) (step 2) whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of the specified authority. Such an order should be issued within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires.


  1. The entire material and information relied upon by the Assessing Officer need to be supplied to the assessee along with the notice u/s 148A Show Cause Notice.

  2. It is very essential that each and every step inked in the said section is mandatorily complied with as even a minor lapse might have to face the rigour of courts and the entire proceeding may fall under jeopardy.

  3. No appeal can be filed against the order of clause (d) before the CIT(A). However, the assessee may file a WRIT before The hon’ble High Courts requesting quashing of the order u/s 148A(d) and the consequent notice issued u/s 148.

  4. It is very essential that an order under clause (d) be issued only for matters on which SCN has been issued. Any order containing matters other than those covered by the SCN may be void-ab-initio.


No notice under section 148 shall be issued for the relevant assessment year,—

(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

(b) if three years, but not more than ten 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—

(i) an asset;

(ii) expenditure in respect of a transaction or in relation to an event or occasion; or

(iii) an entry or entries in the books of account,

which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more.

However the above time limit may not be applicable for the issue of notices under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.

CA Pranay Jain is a young and aspiring Chartered Accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.

He is also socially active on LinkedIn at

CA Pranay Jain
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