s.147 — The power to reassess

Currently operative

One text since 1 April 2021, and a different section before that. Section 147 was substituted by the Finance Act 2021 with effect from 1 April 2021 and, unlike sections 148 to 151, was NOT touched on 1 September 2024: every edition on the Department's site from Year 2021 to Year "2024 (No. 2)" carries the same words, and the later editions were not separately opened, the "2024 (No. 2)" edition being the post-Finance (No. 2) Act 2024 edition and settling the question. A reassessment begun by a notice issued BEFORE 1 April 2021 is not governed by this text at all. It is governed by the earlier section 147, under which the officer needed a reason to believe that income had escaped assessment and, where four years had passed on a scrutiny assessment, a failure to disclose fully and truly. That earlier text is not set out here and was not verified for this page, and section 152 does not preserve it: sub-sections (3) and (4) preserve only the text as it stood immediately before the commencement of the Finance (No. 2) Act 2024, which the section 152 page reads as 1 September 2024.

Income-tax Act, 1961

s.147

Income-tax Act, 2025

s.279

In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.

In short

Section 147 of the Income-tax Act, 1961 is where the power to reassess comes from. Everything in sections 148 to 153 is machinery for exercising it. The section is now one sentence and an Explanation. The sentence provides that if any income chargeable to tax in the case of an assessee has escaped assessment for any assessment year, the Assessing Officer may, subject to sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for that year. Two things follow. The trigger is the objective fact that income has escaped assessment, and the phrase "reason to believe", which governed this section for decades and still appears in a great deal of commentary and in many grounds of appeal, was removed by the Finance Act 2021 and is nowhere in the present text. That is true of the substituted section only: on a notice issued before 1 April 2021 the earlier section governs, reason to believe and all, and a great many such appeals are still pending. The Explanation decides what a reassessment can reach. The officer may assess or reassess the income in respect of any issue which has escaped assessment and comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with. So the section 148A stage controls what may start a reassessment and not what may be taxed in it. The Explanation names section 148A and nothing else, so it does not dispense with the notice under section 148, with the time limits in section 149 or with the sanction under section 151, and it is open to argue that an issue brought in under it cannot be used to achieve what section 149 would have barred had the reassessment been founded on that issue. The counterpart in the Income-tax Act, 2025 is section 279, which carries the rule in two sub-sections, the Explanation becoming sub-section (2) and the cross-reference changing to section 281. One difference is worth noting: the 1961 power is subject to sections 148 to 153, a range which takes in the limitation for completing the assessment, while the 2025 power is subject to sections 280 to 286, and which provision of the 2025 Act limits the time for completing a reassessment was not established here.

What the provision does

Confers the power to assess escaped income, to reassess, and to recompute a loss, a depreciation allowance or any other allowance or deduction, and fixes how far a reassessment once validly begun may travel. It does not authorise the notice, which is section 148, and it supplies no time limit: section 149 bars the notice, section 150 lifts that bar where the reassessment gives effect to a finding or direction in an order in appeal, reference or revision or by a court, and section 153 bars the order. Section 150 is not set out on this page and was not verified for it.

Threshold questions

Which section 147 governs, the substituted one for a notice issued on or after 1 April 2021 and the earlier one, with its reason to believe and its four year proviso, for a notice issued before that date
Has income chargeable to tax escaped assessment for the year, which on the substituted section is an objective question and not one about the officer's reason to believe
What the reassessment is being used to tax, and whether each item is either the escapement the notice was founded on or an issue that came to notice in the course of the proceedings
Whether any issue added under the Explanation is one on which a notice could itself have been issued for that year, since the fifty lakh rupee gateway in section 149 is tested on the notice and the Explanation says nothing about it
Whether the original ground has survived, because the Explanation permits other issues to be added but the authorities differ on what happens to them when the founding ground falls away
Whether what is being reassessed is income, or only a recomputation of a loss, depreciation or another allowance, since the section covers both and the consequences differ

The recurring disputes.

What happens to the added issues when the founding ground fails

The Explanation lets the officer tax an issue that comes to notice in the course of the proceedings. The question it leaves open is whether those added issues survive where the escapement the notice was founded on is deleted or abandoned. The assessee's point is that the jurisdiction is founded on the escapement identified in the information, and that once it goes there is nothing for the added issues to attach to. The Revenue's answer is that the Explanation is expressed in the widest terms, that it operates "irrespective of the fact that the provisions of section 148A have not been complied with", and that it cannot have been intended to stand or fall with the founding item. Both readings have support and the question is argued on the words rather than settled; the authorities are not set out on this page.

What is left of "reason to believe"

Grounds of appeal still plead that the officer had no reason to believe that income had escaped assessment. On the substituted text those words are not in the section, and the Revenue's answer begins and often ends there. The assessee's answer is that the requirement has changed form rather than disappeared: section 148 permits a notice only where there is information which suggests escapement, section 148A(3) requires an order passed on the material and on the reply, and section 151 requires a sanction, so the officer must still reach a conclusion on material, and the older learning on relevance, nexus and borrowed satisfaction is not obviously irrelevant to whether information suggests anything. The Revenue replies that Parliament substituted an objective gateway precisely to remove that enquiry, and that the clauses of section 148(3) either cover the material or do not. Which is right is not settled here. On a notice issued before 1 April 2021 the earlier section governs and the plea in its old form remains the correct one.

Recomputation as against reassessment

The section covers recomputing a loss, a depreciation allowance or any other allowance or deduction, not only assessing escaped income. The Revenue uses the limb to reopen a return showing a loss where no tax was payable at all. The assessee's point is that the limb is still governed by the opening words, so there must be income chargeable to tax which has escaped assessment before any recomputation can be undertaken, and that a difference of opinion about the quantum of a loss is not escapement. The Revenue answers that the limb would be redundant on that reading, and that recomputing an inflated loss is itself the correction of an escapement. The assessee replies that the pre-2021 section carried an express deeming for an excessive loss or depreciation allowance and the substituted section does not, so what was once put beyond argument now has to be established; that deeming is not set out on this page and was not verified for it. The point matters most where the only consequence of the reopening is a reduced carry forward, and it is open.

Frequently asked.

Does the Assessing Officer still need a reason to believe that income has escaped assessment?

Not under the section as substituted. The Finance Act 2021 replaced section 147 with effect from 1 April 2021 and the words "reason to believe" do not appear in it. The trigger is that income chargeable to tax has escaped assessment. What replaced the old requirement is the definition of "information" in section 148, the show-cause and order procedure in section 148A, and the sanction in section 151. On a notice issued on or after 1 April 2021 a ground pleading the absence of a reason to believe attacks a requirement that is no longer in the section and should be recast against those three. On a notice issued before that date the earlier section governs and the plea is the correct one; keep it.

Can the Assessing Officer tax something the notice never mentioned?

Yes, within limits. The Explanation permits him to assess or reassess income in respect of any issue which has escaped assessment and comes to his notice subsequently in the course of the proceedings, and it says so irrespective of the fact that the provisions of section 148A have not been complied with. The Explanation does not say in terms that the non-compliance it forgives is non-compliance for the added issue only, though that is how it is ordinarily read. It names section 148A and nothing else, so it does not dispense with the notice, the time limits in section 149 or the sanction under section 151. What remains contested is whether the added issues survive if the escapement the notice was founded on is itself deleted.

Where does section 147 sit in relation to the other reassessment provisions?

It is the power; the rest is machinery. Section 148 is the notice, section 148A the procedure before it, section 149 the time limit for both, section 150 the lifting of that limit for a reassessment made to give effect to a finding or direction, section 151 the sanctioning authority, section 151A the power to notify a faceless scheme, and section 152 the rate, the dropping right and the rule deciding which text of sections 147 to 151 applies. The time for completing the assessment is not in this group at all; it is in section 153.