Income Tax Act 1961 Section 147: Income Escaping Assessment (2026)

Explainer · Income Tax · Reassessment

Updated for 2026 · Claw Editorial

Section 147 of the Income Tax Act, 1961 is the reopening power. It lets the Assessing Officer go back and assess, or reassess, income that was chargeable to tax but escaped assessment for a past year. The whole reassessment system was rewritten by the Finance Act, 2021 from 1 April 2021, so the old language of "reason to believe" has gone and Section 147 now works hand in hand with Sections 148, 148A and 149. This explainer sets out what Section 147 means today, the time limits, and what to check if a reassessment notice lands. Last verified October 2026.

01What Section 147 says now

Section 147 lets the Assessing Officer assess or reassess income that has escaped assessment for any assessment year, and also any other income that comes to notice during the proceeding. Crucially, the officer can only act subject to the provisions of Sections 148 to 153. Those sections now carry the real conditions, so Section 147 is the power, and Sections 148, 148A and 149 are the gatekeepers.

Income can escape assessment in several ways: income never offered to tax, income under-assessed, excessive relief or loss claimed, or a return not filed at all when it should have been.

02The new regime from 1 April 2021

The Finance Act, 2021 replaced the old reassessment scheme from 1 April 2021. The change was large:

• the old test of the officer having a "reason to believe" income escaped was removed;
• a new inquiry stage, Section 148A, was added before any notice; and
• the old search assessment provisions, Sections 153A and 153C, were folded into the Section 147 route.

The aim was to make reopening more objective and information-driven, usually based on specific information flagged in the department risk system, rather than a general suspicion.

03How 147, 148 and 148A fit together

The three sections run in a sequence, and it helps to see them as steps.

For the inquiry stage, see Section 148A inquiry before a reassessment notice. For the notice itself, see Section 148 reassessment notice and how to respond to a Section 148 notice.

04Time limits under Section 149

Section 149 sets how far back the department can go, and the Finance (No. 2) Act, 2024 shortened these windows for notices issued on or after 1 September 2024.

• Escaped income below Rs 50 lakh: a notice can generally go back up to about three years from the end of the assessment year.
• Escaped income of Rs 50 lakh or more: the window extends to about five years, where the income is represented by an asset, entry or expenditure.

These outer limits are strict. A notice issued after the window has closed is open to challenge as time barred.

05The Ashish Agarwal transition

When the new regime began, the department issued many notices under the old Section 148 between April and June 2021, even though the new law was already in force. This led to thousands of disputes.

The Supreme Court settled it in Union of India v. Ashish Agarwal (2022). It treated those old-style notices as if they were the Section 148A inquiry step under the new regime, and asked the department to complete the new procedure. If your matter dates to that window, that ruling and the orders following it decide how your notice is read.

06A practical note

If you get a reassessment notice, check three things before anything else. First, was the Section 148A inquiry step followed and an order passed. Second, is the notice within the Section 149 time limit for your year. Third, does the information relied on actually point to income escaping assessment, or is it vague.

A defect at any of these points is a real ground to challenge the reopening, often by writ in the High Court. Keep every notice and order, because the dates drive the whole dispute.

07Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

Reassessment is one of the most litigated areas of income tax, and the outcome usually turns on earlier rulings about notice, limitation and the inquiry stage. Claw lets you search more than 30 crore judgments and orders, with results in under 5 seconds, so you can find how High Courts and the Supreme Court have read Section 147, the new regime and the Ashish Agarwal line of cases. Reported authority runs from Supreme Court rulings of 1950 and High Court rulings of 1990 to recent orders. You can also track a live matter, with its orders and hearings, by party name across 9,102 courts, benches and forums. Claw does not use the documents you upload to train its AI models.

Create a FREE Claw account to track your reassessment matter and its hearings, and use case search across Indian courts to find how Section 147 has been applied. For ongoing files, teams use income tax appeals tracking.

08Sources and further reading

• India Code (Income Tax Act, 1961 bare text): indiacode.nic.in
• Income Tax Department (law and acts): incometaxindia.gov.in
• Income Tax e-filing portal: incometax.gov.in
• Claw: clawlaw.in

This explainer is general information, not legal or tax advice. Tax law changes through the annual Finance Acts and judgments, so check the current text and take advice from a professional before you act.

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