Reassessment Under Section 147 of the Income Tax Act & Section 148

 If the income tax authorities are of the opinion that any income of the assessee has not been disclosed or has escaped assessment, then they can initiate income escaping assessment proceedings under Section 147 of income tax act. This is also known as a reassessment. Section 147 to 153 of the Income Tax Act, 1961 primarily governs the reassessment proceedings. However, in the past 2 years, the reassessment provisions have undergone significant changes. 

When an assessee is issued a reassessment notice, it is his right to determine whether the notice is valid or not. But when can an AO issue a reassessment notice and what are his powers? Let’s see that under Sections 147 and sec 148 of income tax act. 



Section 147 – Power of Reassessment

Section 147 of income tax act gives power to the assessing officer (AO) to assess or reassess any income that has escaped assessment in any assessment year. Further, the assessing officer can recompute loss, depreciation allowance or any other deduction or allowance. Also, the assessing officer can assess or reassess income in relation to any issue that comes to his notice during the proceedings under this section. Suppose, reassessment proceedings were in progress in relation to income arising from issue-A. However, during the proceeding, the AO discovers that income from issue B has also escaped assessment. Therefore, the AO has the right to assess or reassess such income from issue B as well.

Section 148 – Notice of Reassessment

Section 148 of income tax act governs the requirements with respect to the notice for reassessment. Before the AO can begin with the reassessment under section 147 of income tax act, he needs to serve a notice to the assessee as per the provisions of section 148. Under such notice, the AO shall require the assessee to furnish a return of income. Under this return, the assessee shall disclose the income that has escaped assessment.

However, the AO can issue such notice only if he is having information that suggests that the income chargeable to tax has escaped assessment and he has obtained prior approval of appropriate authorities. The following shall be considered as sufficient information for the issue of notice for reassessment:

1- Any information as per the risk assessment strategy that the board has formulated or,

2- Any audit objection or,

3- Any information received under an agreement under section 90 or 90A (DTAA) or,

4- Any information made available to the AO as per the scheme notified under section 135A or,

5- Any information requiring action in consequence of an order of a court or tribunal

Further, in the following cases, the AO shall be deemed to have the information to issue the reassessment notice:

• Search initiated under section 132

• Books of accounts, any assets or other documents requisitioned under section 132A

• Survey under section 133A

• Where certain assets were seized during the search proceedings of another person under section 132 or 132A and AO is satisfied that such assets belong to the assessee.

  • The AO is satisfied that assets seized during a search under section 132 or 132A or any  information therein pertain to the assessee.    

Therefore, if any of the above conditions are satisfied, then the AO can issue a notice to initiate reassessment proceedings. Further, section 149 of income tax act specifies the time limit for issue of notice. The assessees need to be aware of such situations and time limits in case they have been issued a reassessment notice. In case of any assistance, feel free to contact the ASC Group.


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