The new tax legislation reorganizes and clarifies several assessment and return-processing provisions that previously existed under the Income-tax Act, 1961 while largely retaining their core mechanisms. Section 143(1) continues to provide for summary processing of returns where the department identifies arithmetic errors or incorrect claims and issues an intimation, although the drafting has been simplified and aligned with the tax-year framework. Scrutiny assessments, earlier governed by Sections 143(2) and 143(3), remain a detailed examination process, but the new law formally recognizes electronic and faceless assessments through statutory authority under Section 532, strengthening the legal basis for digital procedures. Best judgment assessments, earlier under Section 144, are retained with clearer drafting while preserving safeguards that require an opportunity for taxpayers to respond before ex-parte orders are passed. For reassessment of income escaping assessment, the new Act consolidates provisions derived from Sections 147–149 and the Section 148A inquiry framework. It also ensures that pending reassessment proceedings under the earlier law will continue under the existing legal provisions.
Also Read: How India’s new Income Tax Act (2025) rewrites rules of assessment PART II
1. Processing of Returns: Section 143(1) Then and Now
Section 143(1) was the cornerstone of initial return processing under the 1961 Act. This was the stage before any detailed examination. The department’s role was to identify arithmetic mistakes and any erroneous claims. They would then send out an intimation – not quite a formal notice – within nine months of the close of the financial year in which the return was submitted.
Taxpayers had 30 days to respond to discrepancies noted.
The new Act retains this summary processing mechanism, but it now sits within a more clearly organized procedural chapter. The timeline references have been harmonized with the Tax Year concept, and the language has been simplified. What previously required a careful reading of multiple provisos can now be understood from the text itself without reaching for a commentary.
Practically speaking, the process you experience as a taxpayer, filing a return, waiting for an intimation, responding to adjustments remains unchanged. What changes is the legislative plumbing underneath it.
2. Scrutiny Assessment:
Coming under the Section 143(2) and (3) of the old Act, a scrutiny assessment (meaning a detailed examination of your return by an Assessing Officer) was triggered by a notice under Section 143(2), which had to be issued within six months from the end of the financial year in which the return was filed. The actual assessment order came under Section 143(3) and had to be completed within a prescribed time limit.
The 1961 Act had a problem with how it checked things. For a time taxpayers had to meet in person with the Assessing Officer to get things sorted. The Faceless Assessment Scheme changed this in 2020. It randomly assigned cases. Stopped face-, to-face meetings. This scheme was introduced under Section 143(3A). The scheme had a spot. It wasn’t how it worked that was the problem. The issue was that its authority wasn’t clearly defined in the law. It was based on decisions rather than being written into the law. This meant that the scheme could be questioned and possibly taken apart because of how it was set up. The 1961 Acts scrutiny framework had this problem. The Faceless Assessment Scheme tried to fix it.
Its authority came from a delegated rather than statutory source.
The 2025 Act closes that gap. Under Section 532, Parliament has directly handed the Central Government the power to roll out electronic and faceless mechanisms across assessment, appeals, and verification which meant no more relying on scheme notifications to do the heavy lifting. What was once an administrative workaround layered awkwardly over decades-old legislation is now the baseline expectation, backed by the force of the statute itself.
The judicial groundwork was already there, the Delhi High Court had upheld the faceless scheme’s validity in the Lakshya Budhiraja case back in 2021. What the new Act does is take that judicial green light and convert it into something far more durable: a legislative guarantee that no future government can simply rescind with a notification.
3. Best Judgment Assessment: Section 144 Then and Now
Section 144 of the old Act empowered an Assessing Officer to make a ‘Best Judgment Assessment’ when a taxpayer failed to file a return, comply with notices, or maintain proper books.
The AO could estimate income on a reasonable basis and pass an ex-parte order.
This provision is retained in the new Act, and rightly so the department needs a mechanism to deal with non-compliant taxpayers. However, the drafting has been cleaned up significantly. The multiple provisos that governed when and how a best judgment assessment could be made have been reorganized into clearly separated sub-sections. Taxpayer protections, specifically the requirement that the AO must give adequate opportunity for the taxpayer to explain before passing an ex-parte order are preserved and, in some respects, more explicitly stated than before.
4. Income Escaping Assessment: Sections 147-149 Then; New Simplified Reassessment
If any set of provisions generated more litigation under the old Act than reassessment, it is hard to think of what that would be. Section 147 when we consider it along with Sections 148 and 149 gives the Assessing Officer the power to reopen a completed assessment if some income has not been assessed. The idea of having a ‘reason to believe’ has always been a point of argument. The Finance Act, 2021 made some changes in this area. It introduced Section 148A, which says there has to be a pre-notice inquiry. It also reduced the time limit for taking action. Changed the standard from ‘reason to believe’ to a threshold based on information from risk management systems. The 2025 Act takes this framework forward and explains it in a clearer way by combining all the relevant provisions.
One important thing to note is that Section 536 of the new Act makes sure that all the pending proceedings will continue without any breaks. The new Act ensures that the Assessing Officer and the assessments and the income that has escaped assessment will all be handled in a manner following the same rules, as before. Any reassessment initiated under the 1961 Act even after April 2026 will continue to be governed by the old law to its conclusion.
Limitation periods under the old Act are not revived or extended. The Supreme Court’s ruling in Union of India v. Ashish Agarwal reinforces this: procedural amendments cannot be applied to resurrect time-barred actions. Taxpayers who have crossed the old limitation windows can exhale.
5. Search Assessments: Sections 153A-153C Then; Merged Framework Now
Previously, the old Act’s search assessments were handled through a separate and complex process. The law had some rules about searching people. Section 153A was about the people being searched. Section 153B was about how the search could take place. Section 153C was about other people whose papers were found during the search. These rules were like a part of the law. They had their deadlines and procedures. For a long time, people argued about what it really meant to find something during a search.
The Finance Act of 2021 changed things with Sections 153A and 153C being changed the most. Now search cases are covered under Section 147. The 2025 Act made this change final. It combined the rules about searching into one set of rules. The law is now easier to understand. The rules about what the department can do, during a search or survey are clearer. The department has a set of rules to follow when it does a search.
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very informative article