VoxJuris
Home › Acts › Income-tax Act, 1961 › Chapter XIV › Section 147

Income-tax Act, 1961 · Chapter XIV: Procedure for Assessment

Section 147: Income escaping assessment

The Income-tax Act, 1961 was repealed by the Income-tax Act, 2025 from 1 April 2026. The text is kept here because the judgments below apply it.

In plain words

If the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, the officer may assess or reassess that income. The officer may also recompute losses and allowances for that year.

  • The belief must rest on some material. A mere change of opinion on the same facts is not enough.
  • Where an assessment was already made under section 143(3), action after four years from the end of the assessment year is allowed only if the assessee failed to file a return or to disclose fully and truly all material facts.
  • That four year bar does not apply to income from assets located outside India.
  • Producing account books from which the facts could have been found does not by itself mean full disclosure.
  • Explanation 2 lists cases treated as escaped income, such as no return despite taxable income, understated income, or excessive relief allowed.
  • Once proceedings are validly started, other escaped income found during them can also be assessed.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Read the in-depth explanation, with key Supreme Court rulings ↓

Official text

If the [Assessing Officer][has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year):

Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued undersub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:

[Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:] [[Provided also] that the Assessing Officer may assess or reassess such income, other than theincome involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.]

Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:—

(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; [(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;]

(c) where an assessment has been made, but—

(i) income chargeable to tax has been underassessed; or

(ii) such income has been assessed at too low a rate; or

(iii) such income has been made the subject of excessive relief under this Act ; or

(iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] [(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;] [(d) where a person is found to have any asset (including financial interest in any entity) located outside India.] [Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.] [Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012 (23 of 2012), shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.]

Source: India Code (Legislative Department), the text of the Act as it stood before its repeal. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Understanding this section

Section 147 lets the Assessing Officer reopen an assessment when there is reason to believe that income chargeable to tax has escaped assessment. The text shown on this page is the version before the Finance Act, 2021 rewrote the reassessment procedure, and the 1961 Act has since been replaced by the Income-tax Act, 2025 from 1 April 2026.

Reason to believe

The officer must have some tangible material that has a live link with the belief that income escaped. A mere suspicion, or a fresh look at the same facts, is not enough. The courts call the second situation a change of opinion and treat it as a bar, even though the word opinion was dropped from the section in 1989.

The sufficiency of the material is for the officer. The courts only check whether there was relevant material on which a reasonable person could form the belief.

The four year proviso

Where an assessment under section 143(3) or section 147 has been made, reopening after four years from the end of the assessment year needs a failure by the assessee to file a return or to disclose fully and truly all material facts. The assessee's duty is to disclose primary facts. Drawing inferences from them is the officer's job.

The 2021 changes

From 1 April 2021 the procedure changed: the officer must follow section 148A before issuing a notice, and the old reason to believe test was replaced. Notices issued after that date under the old provisions were treated by the Supreme Court as show cause notices under the new procedure.

Key Supreme Court rulings

  • Calcutta Discount Company Ltd. v. Income-Tax Officer 1960 INSC 191

    Under the corresponding provision of the 1922 Act, the assessee's duty is to disclose all primary facts; once that is done, it is for the officer to draw the proper inferences, and failure to do so does not justify reopening.

  • Income Tax Officer v. Lakhmani Mewal Das 1976 INSC 89

    The reasons for reopening must have a rational connection or live link with the belief that income escaped; they cannot be vague or remote.

  • Commissioner of Income Tax v. Kelvinator of India Ltd. 2010 INSC 46

    Even after the 1989 amendment, the concept of change of opinion remains an in-built test to check abuse of power, and reopening needs tangible material showing escapement of income.

  • Union of India v. Ashish Agarwal 2022 INSC 510

    Reassessment notices issued after 1 April 2021 under the old sections 148 to 151 were to be treated as show cause notices under the new section 148A.

Common mistakes

  • Reopening on the same material that was before the officer in the original assessment.
  • Ignoring the four year proviso where a scrutiny assessment was made and all primary facts were disclosed.

Read with: Section 148 Income-tax Act, 1961, Section 143 Income-tax Act, 1961

Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.

Supreme Court judgments citing the section 147