The Finance Bill, 2026 proposes a clarificatory amendment to settle the long-standing controversy on jurisdiction for issuing notices under sections 148 and 148A in reassessment proceedings. Under the existing framework, reassessment follows a two-step process: a pre-assessment inquiry and satisfaction by the jurisdictional Assessing Officer under section 148A, followed by faceless assessment by the National Faceless Assessment Centre (NaFAC) under section 144B after issuance of notice under section 148. Divergent High Court rulings had created uncertainty on whether NaFAC or its assessment units could undertake pre-notice actions. To remove doubts and curb litigation, a new section 147A is proposed to clarify that, notwithstanding any court ruling, the “Assessing Officer” for sections 148 and 148A shall always mean an officer other than NaFAC or its assessment units. This clarification will apply retrospectively from 1 April 2021 under the Income-tax Act, 1961, with aligned changes in the Income-tax Act, 2025 effective from 1 April 2026.
Clarification regarding jurisdiction to issue notice u/s 148 where income has escaped assessment and for carrying out pre-assessment procedure u/s 148A.
Income-tax Act, 1961 provides a two-step procedure for carrying out reassessment under section 147. The first step provides for procedure before a notice under section 148 is issued for carrying out reassessment. This first step starts with a notice under section 148A which enables the Assessing Officer to carry out enquiries so as to determine whether the case is fit for issuance of notice under section 148. The notice under section 148 is accompanied with an reasoned order under section 148A(d)/148A(3) by the Assessing Officer.
2. With the notice under section 148, the case gets transferred to the National Faceless Assessment Centre (NaFAC) for carrying out the assessment in a faceless manner as per section 144B. The taxpayer does not know the identity of officers who are part of the assessment unit in NaFAC. All communications with the tax-payer at this stage are carried out by NaFAC. The assessment units is provided powers of the Assessing Officer by virtue of section 144B(3) which provides that “assessment unit” wherever used in said section shall refer to an Assessing Officer having powers so assigned by the Central Board of Direct Taxes (CBDT).
3. It is clear from the aforesaid scheme of the Act that the legislature has clearly demarcated the line between assessment and pre-assessment enquiry process which culminates in issuing of notice under section 148. The Assessing officer carries out pre-assessment enquiry and therefore reaches a conclusion if it is a fit case of reassessment. This satisfaction is reflected in intimation to the assessee by way of notice under section 148. Thereafter, the proceedings are carried out in a faceless manner by NaFAC.
4. Accordingly, it was never the intention of the legislature to mandate the NaFAC or the Assessment Units in NaFAC to involve pre-assessment enquiry in any manner whether for issuance of notice under section 148A or under section 148. The faceless assessment for reassessment under section 147 was only required to be carried out to the extent provided under section 144B. The intended objective of the scheme framed under section 151A that is e-Assessment of Income Escaping Assessment Scheme, 2022 was also the same.
5. However, divergent views have been expressed on this issue by various High Courts, some in favour of the revenue and some in assessee’s favour. The matter is now pending in Hon’ble Supreme Court. The present amendment seeks to achieve certainty and clarity and avoid litigation.
6. The Income-tax Act, 2025 is coming into force from the 1st of April, 2026. The objective of the new law has been to provide simplicity in language and provisions so as to avoid interpretational issues and prevent litigation. Therefore, there is an urgent need to clarify the position of law in the new Income-tax Act, 2025. The intention of the legislature also needs to be clearly laid out in the Income-tax Act, 1961 so that the intent is uniformly reflected in the two Acts.
7. Accordingly, it is proposed to clarify in the Income-tax Act, 1961 that notwithstanding anything contained in any judgment, order or decree of court, the Assessing Officer for the purposes of section 148 and section 148A shall mean and shall always be deemed to have meant Assessing Officer other than the National Faceless Assessment Centre or any of its assessment units. Suitable amendment is also carried out in the Income-tax Act, 2025 so that correct interpretation is taken and litigation is minimized and certainty is achieved.
8. The clarification in Income-tax Act, 1961 shall come into force with retrospective effect from 1st day of April, 2021. The amendment in Income-tax Act, 2025 shall come into force with effect from 1st day of April, 2026.
[Clause 8, 62]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 8 of the Bill seeks to insert a new section 147A of the Income-tax Act, 1961 relating to Assessing Officer for the purposes of section 148 and 148A.
Vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, sections 144B and 151A were inserted in the said Act. Section 144B provides for statutory procedure for faceless assessments with effect from the 1st day of April, 2021.
Section 147 of the Income-tax Act, 1961 empowers the Assessing Officer to assess, reassess, or recompute income if any income chargeable to tax has escaped assessment for a particular assessment year. Section 148 of the said Act provides that the Assessing Officer is mandated to issue a notice to the assessee so as to furnish a return of income where income chargeable to tax has escaped assessment.
The Finance Act, 2021 had inserted section 148A into the said Act with effect from 1st day of April, 2021 to introduce a mandatory pre-notice inquiry process and opportunity of hearing before issuance of a notice under section 148. The said section requires the Assessing Officer to conduct an inquiry, if required, with prior approval of the specified authority, provide the assessee with a show cause notice along with information suggesting escapement of income, and grant an opportunity of being heard. After considering the assessee’s reply, the Assessing Officer is required to pass a reasoned order under sub-section (3) of section 148A, as the case may be, determining whether it is a fit case for issuance of notice under section 148. The said order under sub-section (3) of section 148A is issued with the prior approval of the specified authority.
It is proposed to insert section 147A after the said section 147 of the Income-tax Act, 1961 so as to remove doubts and to clarify that the Assessing Officer for the purposes of sections 148 and 148A shall mean and shall always be deemed to have meant to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in sub-section (3) of section 144B.
This amendment will take effect retrospectively from 1st April, 2021.
Clause 62 of the Bill seeks to amend section 279 of the Income-tax Act, 2025 relating to income escaping assessment.
Vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, section 144B and 151A have been inserted in the Income-tax Act, 1961. Further, section 144B of the Act prescribes a statutory procedure for faceless assessments with effect from 1st April, 2021.
Section 147 of the Income-tax Act, 1961 empowers the Assessing Officer to assess, reassess, or recompute income if any income chargeable to tax has escaped assessment for a particular assessment year. Further, section 148 of the Act, Assessing Officer is mandated to issue a notice to the assessee so as to furnish a return of income where income chargeable to tax has escaped assessment.
The Finance Act, 2021 had inserted section 148A in the Income-tax Act, 1961 with effect from 1st April 2021 to introduce a mandatory pre-notice inquiry process and opportunity of hearing before issuance of a notice under section 148. The provision requires the Assessing Officer to conduct an inquiry, if required, with prior approval of the specified authority, provide the assessee with a show cause notice along with information suggesting escapement of income, and grant an opportunity of being heard. After considering the assessee’s reply, the Assessing Officer is required to pass a reasoned order under sub-section (3) of section 148A, as the case maybe, determining whether it is a fit case for issuance of notice under section 148. The said order under sub-section (3) of section 148A is issued with the prior approval of the specified authority.
It is proposed to amend section 279 of the Income-tax Act, 2025 so as to align it with proposed insertion of section 147A of the Income-tax Act, 1961 to provide that the “Assessing Officer” for the purposes of sections 280 and 281 shall mean to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in section 273(3).
This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
8. Insertion of new section 147A.
After section 147 of the Income-tax Act, the following section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2021, namely:––
“147A. Assessing Officer for purposes of sections 148 and 148A.
Notwithstanding anything contained in any judgement, order or decree of any court or in section 151A or in any scheme framed thereunder, for the removal of doubts, it is hereby clarified that the Assessing Officer for the purposes of sections 148 and 148A shall mean and shall always be deemed to have meant to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in sub-section (3) of section 144B.”.
62. Amendment of section 279.
In section 279 of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted, namely: ––
‘(3) The “Assessing Officer” for the purposes of sections 280 and 281 shall mean to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in section 273(3).’.
