Reassessment Proceedings under Income Tax Act, 2025 & Rules, 2026

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REASSESSMENT PROCEEDINGS UNDER THE NEW TAX REGIME
Income Tax Act, 2025 & Income Tax Rules, 2026 — A Practitioner’s Guide

ABSTRACT

The Income Tax Act, 2025 (“the new Act” or “ITA 2025”) has ushered in a transformative restructuring of India’s direct tax framework, effective 1 April 2026. Among the most consequential changes for tax professionals and assessee alike are the provisions governing reassessment, the mechanism through which the Revenue revisits concluded assessments when income is believed to have escaped the tax net. This article provides a practitioner-focused, section-by-section analysis of Sections 279 to 286 of the new Act, the corresponding Income Tax Rules, 2026, and the critical transitional safeguards under Section 536(2)(c). It also examines the procedural architecture for issuing reopening notices, the legally defined triggers for “escape of income,” exceptions to pre-notice procedure, the temporal scope of the new regime, and the governing law for pending proceedings, synthesising the statutory text with judicial precedent and practical illustrations.

I. Setting the Stage: Why Reassessment Matters

Taxation, at its core, is a collaborative exercise between the State and the taxpayer. Assessees file returns; assessing officers scrutinise them; and, ideally, that is where the story ends. But the story does not always end there. Income may be suppressed, transactions concealed, or information simply unavailable at the time of original assessment. The law, therefore, must arm the Revenue with a calibrated power to reopen, but equally, it must protect the taxpayer from arbitrary, fishing-expedition style inquiries that violate the constitutionally guaranteed right to fair procedure.

The Income Tax Act, 1961 (the “old Act”) grappled with these competing imperatives through Sections 147 to 153, particularly the landmark amendment of 2021 that introduced the ‘show-cause notice’ regime under Section 148A.11 The new Act, ITA 2025, retains the essential spirit of taxpayer protection while recasting the machinery in contemporary, clearer language under Sections 279 to 286.16

This article dissects every layer of that machinery. It is written for those who cannot afford to be surprised in the middle of proceedings chartered accountants, tax counsels, company secretaries, and sophisticated assessee who must know not just what the law says, but what it means in practice.

II. The Architecture: Sections 279–286 at a Glance

The reassessment provisions of ITA 2025 are housed within Chapter [XV], Sections 279 through 286. Before drilling into each provision, a structural overview aids comprehension:

SectionSubject Matter
Section 279Power to assess/reassess income escaping assessment — foundational provision
Section 280Notice for income escaping assessment (corresponding to old Section 148)
Section 281Pre-notice procedure — show-cause notice, AO’s reasoned order, approval
Section 282Scope of reassessment — what the AO may examine
Section 283Limitation period for issue of notice
Section 284Exclusion period provisions
Section 285Sanction/approval requirements
Section 286Miscellaneous — consequential provisions

Table 1: Reassessment Framework — ITA 2025 at a Glance

III. Section 279: The Foundational Power — “Income Escaping Assessment”

Section 279 of ITA 2025 is the cornerstone upon which the entire reassessment architecture rests.1 It confers upon the Assessing Officer (“AO”) the power to assess or reassess income that has escaped assessment, or to recompute the loss or depreciation allowance or any other allowance or deduction for any tax year. Crucially, no such power may be exercised without the issuance of notice under Section 280.

Practitioner’s Note: The No-Notice, No-Power RuleSection 279 imposes a jurisdictional precondition: the AO cannot make any assessment, reassessment, or recomputation unless a valid notice under Section 280 has been issued. This mirrors the settled proposition under the old Act, that a notice under Section 148 was the sine qua non of jurisdiction. Any reassessment without a valid notice is a nullity ab initio.

IV. Section 280: The Reopening Notice — India’s “Section 148” Reborn

Section 280 of ITA 2025 is the functional successor to Section 148 of the old Act.2 It provides that where the AO has reason to believe, based on information in his possession, that any income chargeable to tax has escaped assessment for a tax year, he may, subject to the provisions of Sections 279 to 286, issue a notice to the assessee.

A. What Constitutes ‘Information’ :Section 280(6)

Unlike the old Act’s nebulous ‘reason to believe’ standard, Section 280(6) provides an exhaustive statutory definition of what shall constitute ‘information suggesting that income has escaped assessment.’ This is a critical taxpayer-protective innovation — the AO cannot act on a mere hunch, an informant’s tip, or an officer’s suspicion unless it falls within one of the following eight categories:6

(i) Risk Management Strategy: Information identified under the Board’s (CBDT’s) risk management strategy for the relevant year — a data-driven, algorithmic flagging mechanism.

(ii) Audit Objections: Objections from the Comptroller and Auditor General indicating that the assessment was not conducted in accordance with the Act.

(iii) International Information Exchange: Information received under any agreement with a foreign country or specified territory as referred to in Section 159 (treaties, TIEAs, MLIs).7

(iv) Faceless Collection Scheme: Information made available under any scheme notified under Section 260 for the purpose of collection of information.8

(v) Tribunal/Court Directions: Information requiring action in consequence of an order passed by the Income Tax Appellate Tribunal or a court.

(vi) Survey-Derived Information: Information emanating from surveys conducted under Section 253, except sub-section (4) thereof.9

(vii) Approving Panel Directions (GAAR): Directions from the Approving Panel under Section 274(6) declaring an arrangement as an impermissible avoidance arrangement under the GAAR provisions in Chapter XI.10

(viii) Findings in Proceedings Under Other Laws: Findings or directions contained in an order passed by any authority, Tribunal, or Court in proceedings under ITA 2025, or by a court in proceedings under any other law.

Key Takeaway: Exhaustiveness as a ShieldThe statutory catalogue in Section 280(6) is exhaustive, not illustrative. This means that an AO acting on information not falling within any of these eight categories would be acting without jurisdiction. Practitioners should always begin a reassessment challenge by asking: which category did the AO invoke, and is the information he relied upon genuinely referable to that category? If the answer is doubtful, a writ petition may lie.

V. Section 281: The Show-Cause Notice Regime — Due Process in Action

If Section 280 is the sword of reassessment, Section 281 is its scabbard, a mandatory procedural sheath that must be handled before the weapon is drawn. Section 281 is the direct descendant of Section 148A of the old Act, introduced in 2021 following a sustained campaign by the bar and the Supreme Court’s implicit endorsement of procedural fairness in tax proceedings.13

A. Step 1: Show-Cause Notice :Section 281(1)

Before issuing any notice under Section 280, the AO must provide the assessee with an opportunity of being heard by serving a show-cause notice under Section 281(1).3 This notice must:

  • Disclose the specific information suggesting that income has escaped assessment;
  • Invite the assessee to respond within the prescribed period (as specified in the Income Tax Rules, 2026);
  • Be issued before the reopening notice under Section 280.17

B. Step 2: Consider the Assessee’s Response

The AO is under a statutory obligation to consider the assessee’s reply to the show-cause notice. This is not a perfunctory requirement the AO must apply his mind to the response, consider any evidence or argument submitted, and only then determine whether the case warrants issuance of a reopening notice. A mechanical, rubber-stamp consideration of the reply would be amenable to challenge.

C. Step 3: Reasoned Order : Section 281(3) and Mandatory Approval

After considering the reply, the AO must pass a reasoned, speaking order under Section 281(3), deciding whether it is a fit case for reassessment.4 Critically, this order requires prior approval from the Additional Commissioner or Joint Commissioner of Income Tax before it can be passed. This dual safeguard a reasoned order plus supervisory approval is designed to prevent arbitrary action at the AO level.

D. Step 4: Issue of Notice Under Section 280

Only after the Section 281(3) order is passed with requisite approval may the notice under Section 280 be issued and served upon the assessee. The Section 280 notice and the Section 281(3) order are ordinarily issued together.

The Section 281 Process: Step by StepStep 1: AO receives qualifying information (Section 280(6)) → Step 2: AO issues show-cause notice (Section 281(1)) disclosing information → Step 3: Assessee responds within prescribed time → Step 4: AO considers reply and prepares draft order → Step 5: Prior approval of Addl. Commissioner / Jt. Commissioner → Step 6: Reasoned order under Section 281(3) → Step 7: Notice under Section 280 issued along with Section 281(3) order.

VI. Section 281(4): When the Procedure is Bypassed: The Exceptions

The law recognises that in certain contexts, the pre-notice procedure under Section 281 would be redundant or already substituted by an equivalent safeguard. Section 281(4) accordingly carves out three situations where the AO may proceed directly to issue notice under Section 280, without following the show-cause-and-order procedure:5

Exception 1: Faceless Information Scheme :Section 281(4)(i)

Where the AO has received information under a scheme notified under Section 260 of ITA 2025 for the purposes of faceless collection of information.21 The rationale here is that such information has already undergone systematic, algorithmic processing, and a separate show-cause procedure would duplicate rather than add to due process.

Exception 2: GAAR  Approving Panel Directions :Section 281(4)(ii)

Where the AO has received directions from the Approving Panel under Section 274(6) declaring an arrangement as an impermissible avoidance arrangement under Chapter XI (the General Anti-Avoidance Rules).22 Since the Approving Panel has already conducted a quasi-judicial examination of the transaction with full participation from the assessee, a further show-cause procedure before reopening would be an unnecessary duplication.24

Exception 3: Court/Tribunal Findings : Section 281(4)(iii)

Where any finding or direction is contained in an order passed by any authority, Tribunal, or Court in proceedings under ITA 2025 (by way of appeal, reference, or revision), or by a Court in proceedings under any other law.23 Here, the judicial finding itself carries the weight of a determination, and requiring the AO to go through a further pre-show-cause regime would, paradoxically, allow the assessee to relitigate before the AO what has already been judicially determined.

Critical Caveat: Approval Still Mandatory in All ExceptionsEven when the AO bypasses the Section 281 show-cause procedure by virtue of Section 281(4), the prior approval of the Additional Commissioner or Joint Commissioner remains a non-negotiable condition precedent before the notice under Section 280 can be issued. There is NO exception to the approval requirement.

VII. Temporal Scope: When Does the New Regime Apply?

One of the most practically significant questions for any practitioner advising on pending or imminent reassessments is: which Act governs? The answer is governed by two rules that operate in tandem.

A. The Prospectivity Rule: Tax Year 2026–27 Onwards

The reassessment provisions of ITA 2025 (Sections 279 to 286) apply only to Tax Year 2026–27 and subsequent tax years. For any tax year beginning before 1 April 2026, the reassessment provisions of the old Act (Income Tax Act, 1961) continue to apply.16

B. The Continuity Rule: Section 536(2)(c) and Pending Proceedings

Section 536(2)(c) of ITA 2025 is the transitional lifeline for pending proceedings.15 It expressly provides that the provisions of the repealed Act (ITA 1961) shall continue to apply to any proceeding pending on the date of commencement of the new Act (i.e., 1 April 2026). Therefore, a reassessment proceeding initiated under the old Act even if the final order will be passed after 1 April 2026 remains entirely governed by ITA 1961.

VIII. The Law in Action: Worked Illustrations

Abstract statutory analysis gains meaning only when tested against concrete facts. The following illustrations drawn from the CBDT’s own guidance walk through the most important transitional scenarios that practitioners will encounter.

Illustration 1: Complete Pending Proceeding

FactsGoverning Law
AO issues notice under Section 148A(1) to Mr. X for AY 2023–24 in December 2025. Notice under Section 148 issued in February 2026. Assessment order passed in June 2026.Income Tax Act, 1961 governs throughout, by virtue of Section 536(2)(c) of ITA 2025. Even though the order is passed post-1.4.2026, the proceeding is governed by the old Act.

Illustration 2: Mid-Stream Section 148A(1) Issued, Section 148 Notice Pending

Consider a scenario where the AO issued a show-cause notice under Section 148A(1) of the old Act to a taxpayer for AY 2022–23 on 20 March 2026. After receiving the reply, the AO passes an order under Section 148A(3) on 15 April 2026, and issues the Section 148 notice on 30 April 2026. All these actions are valid. The initiation of proceedings under the old Act through Section 148A(1) is sufficient to clothe the entire consequential sequence with old-Act jurisdiction. However, compliance with the limitation period under Section 149 of ITA 1961 remains mandatory.14

Illustration 3: Return Filing After 1 April 2026 in Old Act Proceedings

If a reassessment notice under Section 148 of the old Act was issued for AY 2022–23 in February 2026, and the assessee has not yet furnished the return in response, the return may be filed after 1 April 2026. Since the entire proceeding is governed by the old Act (Section 536(2)(c)), the assessee must file the return in the form prescribed under ITA 1961, within the time specified in the notice, not exceeding three months from the end of the month in which the Section 148 notice was issued.

IX. The Limitation Framework: Time is (Always) of the Essence

Limitation under reassessment law is not a mere technicality — it is a fundamental right-protective device. The Supreme Court in GKN Driveshafts (India) Ltd. v. ITO recognised that the AO’s power to reopen is not unlimited in time, and that the validity of the jurisdictional notice is to be tested as on the date of issuance.

19Under ITA 2025, the limitation for issuing a notice under Section 280 is governed by Section 283, read with Section 284 (exclusion provisions). Practitioners must be alive to the following:

  • The general limitation period for most cases runs from the end of the relevant tax year.
  • Extended limitation applies where the escaped income exceeds a prescribed monetary threshold.
  • Section 284 provides for exclusion of certain periods from the computation of limitation practitioners must carefully map out the timeline in each case.
  • For pending old-Act proceedings, the limitation under Section 149 of ITA 1961 continues to apply.14

X. The Income Tax Rules, 2026: Procedural Scaffolding

The Income Tax Rules, 2026 (“ITR 2026”) are the procedural complement to ITA 2025.17 While the Act sets out the substantive rights and powers, the Rules prescribe the forms, timelines, and procedural mechanics. In the reassessment context, practitioners should note the following key aspects governed by ITR 2026:

  • The prescribed time within which an assessee must respond to the show-cause notice under Section 281(1) this is the single most important timeline from the assessee’s perspective;
  • The form in which the Section 281(3) order is to be communicated;
  • The mode of service of notices (electronic service through the e-filing portal is the default for e-registered assessee); and
  • The form of ITR to be filed in response to a Section 280 notice (for old-Act proceedings, the applicable form is as per ITA 1961).

Practitioners are strongly advised to monitor CBDT notifications for any rules or circulars issued under ITR 2026 that may modify or supplement these procedural requirements, given that the new Rules are in their early operational phase.

XI. Judicial Signposts: What the Courts Have Said

The new statutory framework does not operate in a judicial vacuum. Courts have, over decades, built up a rich body of doctrine on reassessment that remains substantially relevant under ITA 2025:

A. The Jurisdictional Notice Doctrine

In GKN Driveshafts (India) Ltd. v. ITO,19 the Supreme Court held that the notice under Section 148 is the foundation of the AO’s jurisdiction and that any challenge to its validity must be raised at the earliest stage. This principle applies with equal if not greater  force to Section 280 notices under ITA 2025.

B. The Right to Reasons Doctrine

In Rajesh Kumar v. DCIT,20 the Supreme Court confirmed that an assessee is entitled to the recorded reasons for reopening. Under ITA 2025, the right to the information is now codified in Section 281(1)  the AO must disclose the information in the show-cause notice itself. This is a legislative codification of the judicial doctrine.

XII. The Practitioner’s Survival Checklist

When a reassessment notice lands on your desk, work through the following questions in order:

1. Which Act governs? Is this a Tax Year 2026–27+ case (ITA 2025) or a pre-2026 year (ITA 1961)? Check whether any proceeding under the old Act was pending as at 1.4.2026 (Section 536(2)(c)).

2. Is the reopening notice under ITA 2025? If yes, was it preceded by a valid show-cause notice under Section 281(1)? Was the information disclosed? Was adequate time given for response?

3. Does the underlying ‘information’ fall within any of the eight categories in Section 280(6)? If not, the notice is without jurisdiction.

4. Was prior approval of the Additional Commissioner / Joint Commissioner obtained before the Section 281(3) order and the Section 280 notice? Absence of approval is fatal.

5. Is the notice within limitation? Map the timeline under Section 283, factoring in any exclusion under Section 284.

6. If this is an old-Act proceeding, is the Section 148 notice within the limitation under Section 149 of ITA 1961?

7. Did the AO bypass Section 281 procedure? If yes, does it fall within one of the three exceptions under Section 281(4)? Even if yes, was supervisory approval obtained?

XIII. Conclusion: A Framework Built for Fairness

The reassessment framework under the Income Tax Act, 2025 is, on balance, a taxpayer-protective architecture. By codifying the categories of actionable information, mandating a pre-notice show-cause procedure, requiring reasoned orders, and insisting on supervisory approval at multiple stages, Parliament has struck a considered balance between the Revenue’s legitimate need to recover escaped income and the assessee’s constitutionally protected right to fair treatment.

The transitional provisions under Section 536(2)(c) ensure continuity and prevent the disruption of ongoing proceedings. Practitioners navigating the dual-regime period where old-Act and new-Act proceedings run in parallel must be meticulous in identifying which statute governs each step of each proceeding.

The Income Tax Rules, 2026 will continue to flesh out the procedural details, and CBDT circulars will provide administrative guidance. But the statutory bedrock is now clear. Know your Sections 279 to 286. Know your Section 536(2)(c). And always, always check your information, your procedure, your approval, and your limitation.

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FOOTNOTES

1. Income Tax Act, 2025, No. 5, Acts of Parliament, 2025 (India), Section 279.

2. Income Tax Act, 2025, Section 280.

3. Income Tax Act, 2025, Section 281(1).

4. Income Tax Act, 2025, Section 281(3).

5. Income Tax Act, 2025, Section 281(4).

6. Income Tax Act, 2025, Section 280(6).

7. Income Tax Act, 2025, Section 159.

8. Income Tax Act, 2025, Section 260.

9. Income Tax Act, 2025, Section 253.

10. Income Tax Act, 2025, Section 274(6).

11. Income Tax Act, 1961, No. 43, Acts of Parliament, 1961 (India), Section 147.

12. Income Tax Act, 1961, Section 148.

13. Income Tax Act, 1961, Section 148A.

14. Income Tax Act, 1961, Section 149.

15. Income Tax Act, 2025, Section 536(2)(c).

16. Income Tax Act, 2025, SectionSection 279–286.

17. Income Tax Rules, 2026.

18. Union Budget 2025–26, Finance Bill, 2025.

19. GKN Driveshafts (India) Ltd. v. ITO, (2003) 1 SCC 72 (India).

20. Rajesh Kumar v. DCIT, (2007) 2 SCC 181 (India).

21. Income Tax Act, 2025, Section 281(4)(i).

22. Income Tax Act, 2025, Section 281(4)(ii).

23. Income Tax Act, 2025, Section 281(4)(iii).

24. Income Tax Act, 2025, Chapter XI.

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Author: PRACHITARA PATRA BBA.LLB(Business Law Hons)

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