Section 148 reassessment: The 3/5/10-year time limit framework post Finance Act 2021
A Section 148 reassessment notice can reopen an old return. Here is how the 3-year, 5-year-3-month and 10-year limits under Section 149 work after Finance Act 2021, with a worked AY 2022-23 example.
A notice under Section 148 of the Income-tax Act 1961 is one of the few letters from the tax department that can reopen a return you filed and forgot about years ago. Since the Finance Act 2021 rewrote Sections 147 to 151 with effect from 1 April 2021, the question of when the department may reopen an assessment follows a far more structured test than the old open-ended "reason to believe" standard. This Q&A walks through the 3-year, 5-year-3-month and legacy 10-year windows, the compulsory Section 148A inquiry that now precedes every notice, and a worked example for a salaried taxpayer whose assessment year under review is AY 2022-23.
The Scenario
Suppose you filed your income tax return for FY 2021-22 (AY 2022-23) on time, declaring salary income of Rs 18,00,000, and then moved on. In May 2026, an email lands from the e-filing portal at incometax.gov.in: a notice under Section 148A(b) asking you to explain why a property transaction worth Rs 62,00,000 never appeared in that return. Three questions follow almost immediately - is the notice even within the time limit, what can the Assessing Officer actually do next, and how should you respond.
The answer turns on two dates and one number: the end of the relevant assessment year, the date the notice was issued, and the rupee value of the income alleged to have escaped assessment. Get those three inputs right and the rest of the Section 149 analysis is arithmetic. Get them wrong and you may either concede a notice that is genuinely time-barred or, far worse, ignore one that is perfectly valid and lose the chance to contest it.
Statutory Answer
Section 147 of the Income-tax Act 1961 empowers the Assessing Officer to assess or reassess any income chargeable to tax that has escaped assessment for a given year. Section 148 is the operative instrument - the notice that formally requires you to file a return for the year being reopened. Neither section, however, can be invoked at will after the Finance Act 2021 amendments took effect on 1 April 2021.
The gatekeeper is Section 148A. Before any Section 148 notice is issued, the Assessing Officer must conduct a preliminary inquiry: serve a show-cause notice under clause (b) of Section 148A, allow you a defined and limited window to respond, consider your reply, and then pass a reasoned order under clause (d) recording whether it is a fit case to reopen. Only after that 148A(d) order can a Section 148 notice validly follow. A notice issued without completing this 148A sequence is open to challenge on procedural grounds alone.
Section 149 fixes the outer time limits. The framework has two civilian limbs and a separate track for search-linked cases:
| Reassessment trigger | Outer limit for the Section 148 notice | Section 151 sanctioning authority |
|---|---|---|
| Ordinary case | 3 years from the end of the relevant assessment year | Principal Commissioner / Principal Director |
| Escaped income of Rs 50,00,000 or more, represented as an asset, expenditure or books entry | 5 years 3 months from the end of the relevant assessment year | Principal Chief Commissioner / Principal Director General |
| Search-linked or survey-linked case | Block period covering 6 assessment years | Principal Chief Commissioner / Principal Director General |
Search-linked and survey-linked cases follow a separate statutory track. For a reassessment triggered by a search or survey action, the law contemplates a block period covering 6 assessment years rather than the ordinary 3-year or 5-year-3-month windows discussed here. The scenario in this article is a non-search reassessment, so the two civilian limbs are the operative ones for our taxpayer.
When the Finance Act 2021 first introduced this regime, the outer window for serious escaped-income cases stretched to 10 years from the end of the relevant assessment year. A subsequent Finance Act amendment recalibrated that outer limit down from 10 years to 5 years and 3 months. That history is why practitioners still describe the system as a "3/5/10-year" framework: 3 years for ordinary cases, 5 years 3 months for the high-value cases live today, and the 10-year window that governed notices issued under the earlier version of Section 149.
Sanction matters as much as timing. Under Section 151, a reassessment proposed within 3 years of the end of the relevant assessment year must be approved by the Principal Commissioner or Principal Director of Income Tax. Once the proposal crosses the 3-year mark, the approving authority steps up to the Principal Chief Commissioner or Principal Director General. A notice carrying the wrong tier of sanction is procedurally defective, and the full text of Sections 147 to 151 is published on indiacode.nic.in.
Worked Resolution
Return to Anjali, the salaried taxpayer from the scenario, whose AY 2022-23 return declared Rs 18,00,000 of salary income. The relevant assessment year - AY 2022-23 - ends on 31 March 2023. Every limit in Section 149 is measured from that single date, so pinning it down is the first step in any reassessment defence.
The ordinary 3-year limit therefore expires on 31 March 2026. The extended limit for escaped income of Rs 50,00,000 or more runs 5 years and 3 months from 31 March 2023, which lands on 30 June 2028. The table below sets out the full computation:
| Computation step | Figure or date |
|---|---|
| Assessment year under review | AY 2022-23 (FY 2021-22) |
| End of the relevant assessment year | 31 March 2023 |
| Salary income originally declared | Rs 18,00,000 |
| Alleged escaped income (immovable property) | Rs 62,00,000 |
| Ordinary 3-year limit expires | 31 March 2026 |
| Extended 5-year-3-month limit expires | 30 June 2028 |
| Section 148A(b) notice received | May 2026 |
| Notice within time? | Yes, under the extended limb only |
Today is 22 May 2026. The ordinary 3-year window shut on 31 March 2026, so a routine reassessment is no longer possible for AY 2022-23. The notice survives only if the extended limb applies - and here it does. The alleged escaped income of Rs 62,00,000 exceeds the Rs 50,00,000 threshold and is represented as an asset, namely immovable property. The Section 148A(b) notice received in May 2026 is therefore within time, valid until 30 June 2028, and because it crosses the 3-year mark it must carry sanction from the Principal Chief Commissioner.
Change one number and the outcome flips. If the income alleged to have escaped assessment were Rs 35,00,000 rather than Rs 62,00,000, it would fall below the Rs 50,00,000 threshold, the extended limb would never open, and the only available window would be the 3-year limit that closed on 31 March 2026. A notice issued in May 2026 on those facts would be time-barred, and that limitation point should be raised squarely in the 148A(b) reply itself rather than saved for appeal.
Practically, before drafting that reply, reconcile the department's claim against your own records. Open your Annual Information Statement and Form 26AS on the e-filing portal, because high-value property registrations and securities transactions are reported to the department and surface there. If the transaction was genuine and the capital gain was in fact offered to tax, the capital gains calculator helps you reconstruct the figure, and the income tax calculator shows the additional liability if any gain was missed. For how a reassessment notice differs from the routine intimation and scrutiny notices, our explainer on Section 143(1) intimation versus 143(2) scrutiny is a useful companion.
FAQ
Can I ignore a Section 148A(b) notice if I believe the assessment is time-barred?
No. Even if you are confident the 3-year limit under Section 149 has expired - for AY 2022-23 that date was 31 March 2026 - the correct course is to raise the limitation objection inside your written reply to the 148A(b) notice. Staying silent lets the Assessing Officer pass the 148A(d) order unopposed, after which a Section 148 notice can follow and you will have surrendered your strongest argument.
What is the difference between Section 148A and Section 148?
Section 148A is the inquiry stage introduced by the Finance Act 2021: a show-cause notice under clause (b), your reply, and a reasoned order under clause (d). Section 148 is the actual reassessment notice, and it can only be issued after a favourable 148A(d) order. In short, Section 148A decides whether to reopen the year, while Section 148 actually does the reopening.
Does the 5-year-3-month limit apply to any escaped income above Rs 50 lakh?
Not automatically. The extended limit in Section 149 applies only where escaped income of Rs 50,00,000 or more is represented as an asset, as expenditure on a particular transaction or event, or as an entry in the books of account. Escaped income of, say, Rs 70,00,000 that does not take one of those three forms remains governed by the ordinary 3-year limit.
Can the department reopen a return for genuinely small unreported income?
Only within 3 years of the end of the relevant assessment year. If a taxpayer under-reported, for example, Rs 90,000 of interest income for AY 2023-24 - which ended on 31 March 2024 - the reopening window closes on 31 March 2027. Beyond that point small-value omissions cannot be reassessed at all, because they never reach the Rs 50,00,000 threshold that unlocks the extended limb.
What happens after I respond to the 148A(b) notice?
The Assessing Officer must consider your reply and pass an order under Section 148A(d), either dropping the matter or holding it a fit case to reopen. If that order favours reopening, a Section 148 notice follows and you must file a return for the reopened year within the period specified in that notice. The 148A(d) order is itself a speaking order and can be examined for legal infirmities before you respond to the Section 148 notice.
How do I know if my Section 148 notice was validly sanctioned?
Check the sanctioning authority named in the notice against Section 151. A reassessment within 3 years of the end of the relevant assessment year needs approval from the Principal Commissioner; once it crosses 3 years it needs the Principal Chief Commissioner. A notice for AY 2022-23 issued in May 2026 - well past the 3-year mark that ended on 31 March 2026 - must therefore show Principal Chief Commissioner sanction to stand.
Where can I see the information that triggered my reassessment?
The data usually sits in your Annual Information Statement and Form 26AS on incometax.gov.in. High-value entries such as property registrations, large cash deposits and securities transactions are captured there. The Section 148A(b) notice must itself disclose the information relied upon, so cross-check that notice against your AIS before drafting any reply.
Sources & Citations
- Income Tax e-filing portal - reassessment notices and Annual Information Statement — Income Tax Department
- Income-tax Act 1961 - Sections 147 to 151 (official text) — India Code, Government of India
- Section 148 and 148A reassessment case law — Indian Kanoon
Frequently Asked Questions
Can I ignore a Section 148A(b) notice if I believe the assessment is time-barred?
No. Even if you are confident the 3-year limit under Section 149 has expired - for AY 2022-23 that date was 31 March 2026 - raise the limitation objection inside your written reply to the 148A(b) notice. Staying silent lets the Assessing Officer pass the 148A(d) order unopposed, after which a Section 148 notice can follow and you will have surrendered your strongest argument.
What is the difference between Section 148A and Section 148?
Section 148A is the inquiry stage introduced by the Finance Act 2021: a show-cause notice under clause (b), your reply, and a reasoned order under clause (d). Section 148 is the actual reassessment notice, and it can only be issued after a favourable 148A(d) order. Section 148A decides whether to reopen the year, while Section 148 actually does the reopening.
Does the 5-year-3-month limit apply to any escaped income above Rs 50 lakh?
Not automatically. The extended limit in Section 149 applies only where escaped income of Rs 50,00,000 or more is represented as an asset, as expenditure on a particular transaction or event, or as an entry in the books of account. Escaped income of Rs 70,00,000 that does not take one of those three forms remains governed by the ordinary 3-year limit.
Can the department reopen a return for genuinely small unreported income?
Only within 3 years of the end of the relevant assessment year. If a taxpayer under-reported Rs 90,000 of interest income for AY 2023-24, which ended on 31 March 2024, the reopening window closes on 31 March 2027. Beyond that point small-value omissions cannot be reassessed, because they never reach the Rs 50,00,000 threshold that unlocks the extended limb.
What happens after I respond to the 148A(b) notice?
The Assessing Officer must consider your reply and pass an order under Section 148A(d), either dropping the matter or holding it a fit case to reopen. If that order favours reopening, a Section 148 notice follows and you must file a return for the reopened year within the period specified in that notice. The 148A(d) order is a speaking order and can be examined for legal infirmities.
How do I know if my Section 148 notice was validly sanctioned?
Check the sanctioning authority named in the notice against Section 151. A reassessment within 3 years of the end of the relevant assessment year needs approval from the Principal Commissioner; once it crosses 3 years it needs the Principal Chief Commissioner. A notice for AY 2022-23 issued in May 2026, past the 3-year mark that ended on 31 March 2026, must show Principal Chief Commissioner sanction.
Where can I see the information that triggered my reassessment?
The data usually sits in your Annual Information Statement and Form 26AS on incometax.gov.in. High-value entries such as property registrations, large cash deposits and securities transactions are captured there. The Section 148A(b) notice must itself disclose the information relied upon, so cross-check it against your AIS before drafting any reply.