Reassessment Under Income-tax Act 2025 vs 1961: Section 281 Changes Explained

From 1 April 2026, India’s reassessment framework moved from sections 147–153 of the Income-tax Act, 1961 to sections 279–286 of the Income-tax Act, 2025. The basic taxpayer safeguard remains familiar: in an ordinary reopening case, the Assessing Officer must have information suggesting that income has escaped assessment, give the taxpayer an opportunity to respond, consider that response and pass a reasoned order before issuing the reopening notice. But the new Act makes a substantive procedural change in the exceptions to that pre-notice process: section 281(4) identifies additional situations in which the section 281 show-cause procedure need not be followed.

This distinction matters because the Income-tax Act, 2025 is not merely a renumbered copy of the old Act. In reassessment, much of the architecture is preserved, but the exception framework and the transition between the two Acts can determine which notice procedure, approval hierarchy and limitation rules apply in a real case.

Old law — Income-tax Act, 1961

Under the post-1 September 2024 version of the Income-tax Act, 1961, section 147 authorises assessment, reassessment or recomputation where income chargeable to tax has escaped assessment, subject to the statutory procedure in sections 148 to 153.

Section 148 requires the Assessing Officer to issue the reopening notice, subject to section 148A. Section 148A ordinarily requires a show-cause notice containing the information suggesting escapement, an opportunity for the assessee to reply, consideration of the reply and an order deciding whether it is a fit case to issue notice under section 148.

Under section 148A(4) of the 1961 Act, the pre-notice section 148A procedure does not apply where the Assessing Officer has received information under the scheme notified under section 135A. The old framework therefore contained a specific statutory exception to the normal pre-notice hearing process.

New law — Income-tax Act, 2025

For Tax Year 2026-27 and subsequent tax years, the equivalent reassessment framework is contained in sections 279–286 of the Income-tax Act, 2025. Section 279 is the reassessment provision, section 280 deals with the reopening notice, and section 281 contains the procedure to be followed before that notice is issued.

The Income Tax Department’s current reassessment guidance confirms the ordinary sequence under the new Act: the Assessing Officer must have information suggesting that income has escaped assessment; issue a show-cause notice under section 281(1) containing that information; consider the taxpayer’s response; pass a reasoned order under section 281(3) with prior approval of the Additional Commissioner or Joint Commissioner; and then issue the reopening notice under section 280.

What actually changed? The exception to the pre-notice hearing is wider

The significant change is section 281(4). The Income Tax Department states that, although the section 281 procedure is generally mandatory, it may be skipped in specified situations. These include information received under the notified faceless collection-of-information scheme under section 260; directions of the Approving Panel under section 274(6) declaring an arrangement to be an impermissible avoidance arrangement for specified tax years; and findings or directions contained in orders of an authority, Tribunal or court in proceedings under the Act, or of a court in proceedings under another law.

That is broader than the corresponding exception in section 148A(4) of the 1961 Act, which was focused on information received under the scheme notified under section 135A. Accordingly, the new Act expressly places additional categories of information or directions outside the ordinary section 281 pre-notice procedure.

This should not be misunderstood as removing all control over reopening. The Department’s FAQ states that even where section 281 is skipped under the specified exceptions, approval of the Additional Commissioner or Joint Commissioner remains mandatory before the section 280 notice is issued.

Old section vs new section — practical mapping

Income-tax Act, 1961: section 147 — income escaping assessment. Income-tax Act, 2025: section 279 — corresponding reassessment provision.

Income-tax Act, 1961: section 148 — reopening notice. Income-tax Act, 2025: section 280 — corresponding reopening notice.

Income-tax Act, 1961: section 148A — pre-notice procedure. Income-tax Act, 2025: section 281 — pre-notice procedure.

Income-tax Act, 1961: section 149 — time limits for reopening notices. Income-tax Act, 2025: the reassessment chapter and limitation provisions operate through the new tax-year framework, with section 286 prescribing the time limit for completion of reassessment.

What did NOT change?

The new Act does not abolish the pre-reopening opportunity of hearing. In the ordinary case, taxpayers continue to receive a show-cause notice before the final reopening notice, and the Assessing Officer must consider the response and pass a fit-case order.

The new Act also preserves the requirement that the Assessing Officer possess information suggesting that income chargeable to tax has escaped assessment. Reassessment is therefore not intended to become an unrestricted power merely because the legislation has been simplified and renumbered.

Further, section 280 continues to require a formal reopening notice before reassessment is made. The Income Tax Department expressly states that an assessment, reassessment or recomputation under section 279 cannot be made without issuing the section 280 notice.

The transition rule is as important as the new section numbers

A common compliance mistake after 1 April 2026 is to assume that every reassessment notice must now cite the Income-tax Act, 2025. That is incorrect.

The Department has clarified that sections 279–286 of the new Act apply to Tax Year 2026-27 and subsequent tax years. For tax periods beginning before 1 April 2026, the old Act continues to govern reassessment. This means old assessment years can still be reopened under sections 147, 148, 148A and 149 of the 1961 Act after 1 April 2026, provided the statutory conditions and limitation period under that Act are satisfied.

Section 536 of the Income-tax Act, 2025 is central to this transition. Pending proceedings under the repealed Act continue under the 1961 Act. The Department also confirms that fresh proceedings relating to earlier assessment years can still be initiated under the old Act after 1 April 2026 where the old-law conditions permit.

Worked example 1 — ordinary reopening for Tax Year 2026-27

Assume a company files its return for Tax Year 2026-27. The Assessing Officer later receives risk-management information indicating that a taxable receipt may not have been offered to tax. In an ordinary case, the officer cannot jump directly to reassessment. The section 281 procedure generally requires the information to be put to the taxpayer through a show-cause notice, the response to be considered, and a reasoned fit-case order to be passed with the prescribed approval before the section 280 reopening notice is issued.

The taxpayer’s practical response should therefore focus first on the information supplied with the show-cause notice: whether the transaction is correctly identified, whether it is already reflected in the return or computation, whether there is a timing or classification mismatch, and whether documentary evidence resolves the apparent escapement.

Worked example 2 — earlier year reopened after the new Act commenced

Assume the Department proposes in FY 2027-28 to reopen AY 2023-24. Even though the calendar date is after 1 April 2026, that earlier assessment year remains within the old-law framework. The Department’s own FAQ confirms that such reassessment can be initiated under the Income-tax Act, 1961 if the requirements of that Act — including section 149 limitation — are met.

Therefore, the relevant question is not simply ‘Which Act is currently in force?’ It is ‘Which Act governs the tax period and proceeding in question?’ For several years, professionals may need to work with both statutes in parallel.

Worked example 3 — a section 281(4) exception

Consider a Tax Year 2026-27 case in which a court order contains a finding or direction that falls within the statutory exception described in section 281(4). The ordinary pre-notice section 281 process may not be required before the section 280 notice. However, according to the Income Tax Department’s FAQ, the prescribed approval of the Additional Commissioner or Joint Commissioner remains mandatory before issuing that notice.

For taxpayers and advisers, that changes the first procedural question. Instead of assuming that absence of a section 281 show-cause notice automatically invalidates reopening, one must first test whether the case falls within one of the statutory exceptions.

Practical checklist when a reassessment communication is received

1. Identify the tax period. Determine whether it is an old assessment year governed by the 1961 Act or Tax Year 2026-27/subsequent year governed by the 2025 Act.

2. Check the cited provision. Old-law notices ordinarily refer to sections 148/148A; new-law notices refer to sections 280/281.

3. Read the information supplied. Test whether the material actually relates to the assessee and tax period, and reconcile it with the return, books, AIS/TIS, withholding records and supporting documents.

4. Determine whether the pre-notice procedure applies. For a new-law case, check whether section 281(4) is being invoked and whether the stated facts fall within a recognised exception.

5. Verify approval and limitation requirements. Different years can involve different statutory approval and limitation provisions.

6. Preserve a complete response record. Reassessment disputes often turn on what information was provided, what the taxpayer explained, and whether the authority considered the response.

Why this change matters for businesses and professionals

The most important operational consequence is that tax teams cannot use one reopening checklist for every notice received after April 2026. A notice may still be governed entirely by the 1961 Act, or it may fall under the 2025 Act. Even within the new Act, the section 281 pre-notice safeguard can operate differently depending on the source of information or direction.

ERP records, tax litigation trackers and internal notice-management systems should therefore store both the tax period and the governing Act. Merely recording ‘reassessment notice received’ is no longer sufficient for a reliable procedural review.

Related PGT & Associates analysis

For the broader transition from the old assessment-year terminology to the new tax-year framework, see: https://www.pgtandassociates.com/post/tax-year-vs-assessment-year-income-tax-act-2025

For the separate change concerning digital search powers and virtual digital space, see: https://www.pgtandassociates.com/post/virtual-digital-space-income-tax-search-2025-act-vs-section-132-1961

Primary sources

Income Tax Department — Reassessment Proceedings FAQs under the Income-tax Act, 2025: https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/reassessment%20proceedings-faq

Income Tax Department — section 148A, Income-tax Act, 1961: https://www.incometaxindia.gov.in/w/section-148a-5

Income Tax Department — section 148, Income-tax Act, 1961: https://www.incometaxindia.gov.in/w/section-148-63

Income Tax Department — Objective and scope of the Income-tax Act, 2025, including parallel operation of old and new Acts: https://www.incometax.gov.in/iec/foportal/help/all-topics/e-filing-services/objective-and-scope-new-act

Conclusion

The reassessment provisions of the Income-tax Act, 2025 preserve the core pre-notice hearing architecture familiar from sections 148 and 148A of the 1961 Act, but they are not a pure renumbering exercise. Section 281(4) expressly broadens the statutory circumstances in which the ordinary pre-notice procedure may be bypassed. At the same time, the transition rules mean that old assessment years continue to live under the 1961 Act even after the new Act has commenced.

For businesses and professionals, the correct approach is therefore procedural: first identify the governing Act, then map the notice to the correct section, test whether the pre-notice safeguard or an exception applies, and finally review approval, limitation and evidence.

PGT & Associates assists businesses and professionals with income-tax notice analysis, reassessment documentation and tax litigation support. Professional advice should be taken on the facts of each case.

Disclaimer: This article is for general informational purposes and reflects the law and official guidance reviewed as of 21 August 2026. It is not legal or tax advice. Statutory provisions, rules, notifications and judicial interpretations should be checked for the specific tax period and facts before acting.