A Section 148 notice rarely arrives on a day you're prepared for it. It usually lands months or years after you've filed and forgotten about a return, and it tells you the Assessing Officer (AO) believes some income from that year escaped tax. The instinct to panic is natural. The better instinct is to read it carefully, check the dates, and respond within the timeline — because how you handle the next 30 days often decides whether this stays a minor clarification or turns into a full reassessment with penalty exposure.

Which Law Applies to Your Notice — Old Act or New Act

This is the first thing to check, and it isn't optional. From 1 April 2026, the Income Tax Act, 2025 governs assessments for Tax Year 2026-27 onward. But reassessment of older years doesn't automatically shift to the new law. Under Section 536(2)(c) of the IT Act 2025, any reassessment proceeding already initiated under the old Act — even a show-cause notice issued just before 1 April 2026 — continues to be governed entirely by the 1961 Act, including the old approval hierarchy and old time limits, regardless of when the final notice or order is actually passed.

If your show-cause notice or 148A order was issued before 1 April 2026, you're under the old Act, full stop, even if the final 148 notice or assessment order comes after that date. Fresh proceedings for Tax Year 2026-27 onward fall under Sections 279–286 of the new Act.

Practical implication: Don't assume the new Act's numbering or time limits apply just because the calendar has moved past April 2026. Check which Act governed the first step in your case — the inquiry or show-cause notice — and stay consistent with that Act throughout.

The Process the AO Must Follow Before a Section 148 Notice

A Section 148 (or Section 280) notice cannot be issued out of nowhere. The department is required to follow a structured sequence:

1. The AO must have specific information — not mere suspicion — suggesting income has escaped assessment.
2. A show-cause notice is issued under Section 148A(b) (old Act) or Section 281(1) (new Act), sharing the material with you and giving you 7 to 30 days to respond.
3. The AO considers your reply and, with approval from the specified authority, passes a reasoned order — under Section 148A(3)/148A(d) in the old Act, or Section 281(3) in the new Act — deciding whether reassessment is justified.
4. Only after this order is the formal Section 148 (or Section 280) notice issued, along with a copy of that order.

There are limited exceptions where the AO can skip the show-cause step — primarily search cases, faceless information-sharing under Section 260 of the new Act, or directions from an Approving Panel on impermissible avoidance arrangements. If your notice skipped straight to Section 148/280 without a prior show-cause step and none of these exceptions apply, that's a procedural defect worth raising.

Practical implication: If you never received a show-cause notice or weren't given a real opportunity to respond before the 148 notice arrived, this is a ground to challenge the validity of the entire proceeding — don't let it pass unnoticed.

How Far Back Can They Go

The new Act's time limits run roughly a year longer than the old Act's, and section numbers and exact figures here are still being interpreted across professional sources — treat the table above as a working reference and confirm the applicable limitation period against the notice you've actually received before forming a final view.

Practical implication: The first thing to verify on any notice is whether it falls within time. A notice issued beyond the applicable limit, without the escaped income genuinely crossing ₹50 lakh, is barred and can be challenged on that ground alone.

Responding to the Notice — Step by Step

Once a valid Section 148/280 notice is in hand, here's the sequence to follow:

• Check the basics first — correct PAN, correct assessment year, and confirm it was actually served (email to your registered ID counts as valid service, so don't assume an unread notice doesn't bind you).
• Request the reasons, if not already detailed in the notice or the preceding order, before you respond on merits.
• File the return for the relevant year within the period specified — typically up to three months from the end of the month the notice was issued. Use the ITR form corresponding to the Act that governs your proceeding.
• Prepare your explanation with supporting documents — bank statements, sale deeds, source-of-funds proof — addressing the specific discrepancy flagged, not a general defence.
• Raise jurisdictional objections early if the notice is time-barred, lacks proper sanction, or skipped the show-cause step — these are best raised before submitting on merits, not as an afterthought.

One important restriction: once you've received a show-cause notice under Section 148A(1)/281(1), you can no longer file an Updated Return (ITR-U) to fix the same year voluntarily. That window closes the moment the case is flagged.

Practical implication: If you suspect an old return has a gap, file the ITR-U before any 148A notice lands. Once the show-cause notice arrives, that escape route is gone, and your only path is responding to the reassessment process itself.

If You Don't Respond

Silence doesn't make the notice disappear. If you fail to file the return or respond within time, the AO proceeds to a best judgment assessment, estimating your income and tax liability without your input — almost always to your disadvantage. If you disagree with the resulting order, your recourse is an appeal to the Commissioner of Income Tax (Appeals) or the Income Tax Appellate Tribunal, or in cases of genuine jurisdictional defect, a writ petition before the High Court even before reassessment concludes.

Compliance Checklist

• Confirm which Act (1961 or 2025) governs the proceeding based on when the first notice/order was issued
• Verify the notice is within the applicable time limit
• Confirm proper sanction was obtained from the specified authority
• Check whether a show-cause notice and opportunity to respond preceded the Section 148/280 notice
• File the return for the relevant year within the stipulated period
• Prepare documentary evidence addressing the specific flagged discrepancy
• Do not attempt an ITR-U for the same year once a show-cause notice has been received

A Section 148 notice is a process, not a verdict. Read it for what it actually says, verify the timeline and procedure before you respond on merits, and file your explanation with documents — not just denials. Most genuine cases close at the 148A/281 stage if the source of funds is properly explained; don't let a procedural deadline turn an explainable transaction into a contested reassessment.

CA Praneeth Thunuguntla | Thunuguntla & Associates | Income Tax & GST Advisory