Section 148A Show-Cause Notice: What Reassessment Means in 2026, the Three- and Five-Year Limits, and How to Reply

Most income-tax communications ask you to explain something. A show-cause under Section 148A asks you to explain why a year that was closed should be opened again. It is the gateway to reassessment — the department’s power to go back to a return it has already accepted, or never examined, and assess income it now believes escaped tax. Everything that follows a 148A — the 148 notice, the fresh return, the reassessment order, the penalty — turns on what is said in reply to it.

The scheme was rewritten by the Finance (No. 2) Act 2024 with effect from 1 September 2024. The procedure is simpler than the one it replaced, the time limits are shorter, and the department’s use of it is heavily automated: most 148A notices now originate from an AIS mismatch that went unanswered on the compliance portal. This guide sets out the current position and how to respond.

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The sequence

Stage	What happens	Your window
Information	The department holds information suggesting income escaped assessment — typically an AIS entry, a flagged transaction, an audit objection, or material from a search or survey	—
Show-cause under 148A(1)	You receive the information relied on and are asked why a notice under 148 should not issue	The period stated in the notice — in practice seven to thirty days
Your reply under 148A(2)	Reconciliation, documents, and any jurisdictional objection	Within the window; an adjournment can be sought
Order under 148A(3)	The assessing officer decides, with the approval of the specified authority, whether it is a fit case to issue notice — and must engage with your reply	—
Notice under 148	If it is a fit case: a notice requiring you to file a return for the year	The period stated in the notice, typically 30 days
Reassessment	A 143(2) or 142(1) follows the return; the assessment runs under 147 read with 144B, faceless	As specified
Order and demand	Income reassessed; penalty proceedings under 270A initiated separately	30 days to appeal under 246A

The 148A stage is not a formality. The officer must issue a reasoned order on your reply before a 148 notice can issue, and a reply that reconciles the information to the return frequently ends the matter with a “not a fit case” order. A reply that does not engage — or no reply — produces a 148 notice on the department’s own view of the figures.

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The time limits

Section 149 now permits a 148 notice only within these periods, measured from the end of the relevant assessment year:

Escaped income	148A show-cause must issue within	148 notice must issue within
Any amount	3 years and 3 months	3 years
₹50 lakh or more, represented as an asset, expenditure, or entry in the books	5 years and 3 months	5 years

The extra three months at the 148A stage exist to accommodate the show-cause procedure. For FY 2022-23 — assessment year 2023-24, ending 31 March 2024 — the ordinary window for a 148 notice therefore closes on 31 March 2027, and the extended window on 31 March 2029.

The previous scheme reached back ten years. It no longer does. A show-cause for a year outside these limits is void, and saying so is the first line of the reply.

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What “information” means

The department cannot reopen a year on suspicion. Section 148 requires information which suggests that income chargeable to tax has escaped assessment, and the Explanation defines it as:

• Information flagged under the risk management strategy — the Insight portal and CASS rules that match your return against AIS, SFT, and TDS data;
• An audit objection on your case;
• Information received under a tax treaty, or from another authority under any law;
• Information requiring action under a court order; and
• Information under any scheme notified for this purpose.

In practice the first category accounts for nearly all individual reassessments, and the information will be an AIS entry: a property sale reported by the sub-registrar, securities sold reported by a depository, a cash deposit reported by a bank, a foreign remittance reported by an authorised dealer, or professional receipts under 194J against a return that shows none. The show-cause will state the transaction and the amount. That is what the reply has to answer.

Search and requisition cases are dealt with under a separate block-assessment procedure and do not go through 148A.

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The four defences

A 148A reply can take four positions, and it is common to take more than one, in the alternative.

1. The transaction was reported. The AIS entry is in the return — under a different head, in a co-owner’s return, net rather than gross, or in a different year because the transfer and the registration fell either side of 31 March. This is the most common answer to a property or securities show-cause, and it wins on a reconciliation: the AIS line, the return line, and the document that connects them. Our guides to property-sale mismatches and stock-market mismatches set out the reconciliations in detail.

2. The transaction was reported but is not taxable, or the tax was nil. Rural agricultural land. A gain fully covered by Section 54 or 54EC with the evidence attached. Gross securities sales of ₹1.2 crore against a net gain of ₹40,000 already declared. The information is correct; the inference of escaped income is not.

3. The notice is bad in law. Issued outside the three- or five-year limit. Issued without the approval of the specified authority. Issued on information that does not “suggest” escapement — a gross AIS figure with no allegation of what income escaped. Issued on a year already assessed under 143(3) on the same material, which is a change of opinion rather than new information. These objections should be taken at the 148A stage and repeated in the return under 148; they are not waived by also replying on the merits.

4. The income did escape. Then the question is how to bring it to tax at the lowest cost. Offer the correct income in the reply with a full computation, pay the tax and interest by challan before filing, and make the penalty submissions under Section 270A(6)(a) — a bona fide explanation with all material facts disclosed — and 270A(9), whose six categories of misreporting a genuine omission of a reported transaction does not fall within. An updated return under 139(8A) is not available once a 148 notice has issued, and its availability at the 148A stage is uncertain; the offer should be made in the proceeding itself.

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How to reply

The reply is a document with annexures, filed on the e-proceedings portal within the window, and it should contain — in this order:

1. Preliminary objections, if any: limitation, approval, the sufficiency of the information. Stated first, and expressly without prejudice to the merits.
2. The reconciliation: each item of information in the show-cause matched to the return, with the document that connects them, and every difference explained.
3. The computation, where any income is being offered: head, section, working, and the challan for tax paid.
4. Submissions on penalty, where relevant: 270A(6)(a) and 270A(9).
5. The prayer: that the case be held not fit for a 148 notice; in the alternative, that the income be assessed as offered; and that a hearing be granted before any adverse order.

Ask for the information relied on if the show-cause does not attach it — you are entitled to it. Seek an adjournment if the window is genuinely too short to assemble the documents; a short, reasoned request is usually granted, and a well-documented reply filed on the extended date is worth more than a thin one filed on time.

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What is at stake

Reassessment is not a 143(1) adjustment. The reassessed income carries interest under 234A, 234B, and 234C from the original due dates — for a year three years old, that alone is a substantial addition — and penalty under 270A at 50% of the tax, or 200% if the omission is characterised as misreporting. The framing of the 148A reply is what decides between those two figures, because it is the first document in which the taxpayer’s explanation goes on record.

And once a 148 notice issues, the assessing officer may also bring to tax any other income that comes to notice during the proceeding, not only the item in the show-cause. A reassessment opened on a property sale can end on the F&O trades in the same AIS. The reply at the 148A stage is the last point at which the scope of the inquiry is confined to what the department has actually alleged.

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A worked example

Facts: Flat sold in FY 2022-23 for ₹90 lakh; not reported in the return for AY 2023-24. Show-cause under 148A(1) issued in August 2026 citing the sub-registrar’s SFT report and the buyer’s 194-IA TDS.

Limitation: AY 2023-24 ended 31 March 2024. The 148A window runs to 30 June 2027; the 148 window to 31 March 2027. The notice is in time on the ordinary limit, and in any event the escaped income exceeds ₹50 lakh. No jurisdictional objection.

Reply, alternative 1: The flat was purchased in 2014 for ₹40 lakh and a new residential house was purchased in January 2023 for ₹75 lakh. Long-term gain computed with indexation: ₹90 lakh less indexed cost of about ₹54 lakh, roughly ₹36 lakh; fully exempt under Section 54 on reinvestment of the gain. Sale deed, purchase deeds, and payment trail attached. Prayer: not a fit case.

Reply, alternative 2 — if there was no reinvestment: Gain of about ₹36 lakh offered; tax at 20% with indexation, roughly ₹7.2 lakh plus cess, paid by challan and quoted; interest acknowledged. Submissions that the sale was reported by third parties, no receipt was concealed, the omission was a bona fide failure to include the schedule, and the case falls under 270A(6)(a) and outside every clause of 270A(9). Prayer: assess as offered; no penalty; in the alternative, 50% not 200%.

Either reply is a document with six annexures. Neither is a paragraph.

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Frequently asked questions

What is the time limit for a 148A notice in 2026?

Three years and three months from the end of the assessment year for any amount; five years and three months where the income escaping assessment is ₹50 lakh or more and represented as an asset, expenditure, or entry. The corresponding limits for the 148 notice itself are three and five years. The earlier ten-year reach no longer applies.

Can I file an updated return instead of replying to the 148A?

Not once a 148 notice has issued — Section 139(8A) is barred where a reassessment is pending. At the 148A stage the position is uncertain and the safer course is to offer the income within the proceeding itself, with tax paid by challan and the penalty submissions made in the reply.

What if I do not reply to the 148A show-cause?

The assessing officer passes an order under 148A(3) on the department’s own view, a 148 notice issues, and you must file a return for the year. The reassessment then proceeds on the AIS figures — for securities, often the gross sale value — and every later stage is slower and more expensive than the reply would have been.

The show-cause cites the gross value of shares I sold. Is that my escaped income?

No. The AIS reports sale consideration, not gain. The reply reconciles the gross figure to your broker’s profit-and-loss statement, scrip by scrip, and shows the actual gain — which may already have been declared. This is one of the commonest 148A patterns and one of the most readily closed.

Can the department reassess a year that was already scrutinised under 143(3)?

Only on genuinely new information. Reopening a scrutinised year on material the officer already had is a change of opinion, not reassessment, and is a ground to object at the 148A stage.

Will I be penalised if I offer the income in my 148A reply?

Penalty under 270A is decided separately, and the reply is where your explanation goes on record. A bona fide explanation with all material facts disclosed falls under 270A(6)(a); an omission of a transaction that third parties had already reported is not within the six misreporting categories of 270A(9). Making both submissions in the reply, with tax paid, is what keeps exposure at the lower end.

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Related reading

• Income Tax Notice Reply & Representation — our service
• Income Tax Notice for Capital Gains on Property Sale
• Stock Market or F&O Income Not Reported? The AIS Mismatch Notice
• Received a 143(1) Intimation or Proposed Adjustment?
• Claimed 44AD Instead of 44ADA? What the Notice Means