Income escaping assessment under Section 147

What this section is

Section 147 (post-Finance Act 2021 framework) allows the AO to reassess income that has escaped assessment. The procedure is now strictly governed by Section 148A, which requires a preliminary inquiry and a show-cause to the assessee before any reassessment notice under Section 148 is issued.

When it is issued

After a 148A(b) show cause and a 148A(d) order. Limitation is staggered based on the quantum of escaped income.

What you should do

1. 1Examine whether the Assessing Officer had information suggesting income chargeable to tax has escaped assessment within the meaning of Explanations 1 and 2 to Section 148. The pre-Finance Act 2021 standard of 'reason to believe' no longer applies — the test is now objective and based on specified categories of information.
2. 2Verify limitation under Section 149 (as substituted by the Finance (No. 2) Act 2024): three years and three months from end of the relevant AY in ordinary cases; five years and three months only where the alleged escaped income is ₹50 lakh or more and is represented by an asset, expenditure or entries in books of account. The pre-2024 ten-year outer limit is no longer available.
3. 3Insist on strict compliance with the 148A procedure: a 148A(b) show-cause supplied along with the underlying information, an opportunity of hearing, and a reasoned order under 148A(d) before any 148 notice is issued. File detailed objections at the 148A(b) stage; once a 148 notice issues, the available procedural defences narrow considerably.
4. 4Sanction under Section 151 — verify that the prescribed authority's approval was obtained and reflects independent application of mind. Mechanical sanction, or absence of sanction, is fatal to the reassessment. Per Ashish Agarwal (SC, 2022), all pre-1 April 2021 reopening notices issued after that date were deemed 148A(b) show-causes — track whether the post-Ashish framework has been correctly followed in your case.

Documents typically needed

• The information / annexure supplied with the 148A(b) notice
• Original return, computation, and assessment order (if any)
• Evidence rebutting the alleged escapement

Common mistakes

• Confusing pre-2021 and post-2021 frameworks. The Supreme Court in Ashish Agarwal (2022) clarified that all old 148 notices issued after 1 April 2021 are to be treated as 148A(b) notices.
• Filing only a procedural objection without rebutting the merits.
• Missing the limitation argument — it is the strongest defence in many cases.