If you’ve ever received a notice from the Income Tax Department, chances are you weren’t sure whether it was a regular check or something more serious. Many taxpayers find it hard to differentiate between a routine assessment and a reassessment, especially when both involve questions about their income, deductions, or past returns.
Knowing the difference is important. While regular assessments focus on verifying your latest tax return, reassessments deal with older returns where income might have escaped notice. Each process follows different rules, timelines, and legal protections. This article will break it all down, helping you understand how each one works, what triggers them, and what steps you should take if you’re ever on the receiving end of such notices.
Key Differences Between Regular Assessment and Reassessment
While both regular assessments and reassessments involve a review of your income tax return, they operate on different timelines, triggers, and legal provisions. Understanding how they differ can help you respond correctly to any notice you receive. The table below highlights the main distinctions:
Particulars | Regular Assessment (Section 143(3)) | Reassessment (Sections 147 and 148) |
Purpose | To verify accuracy of the current year’s return | To tax income that escaped assessment in past years |
Legal Basis | Section 143(3) | Section 147, with safeguards under Section 148A |
Triggering Event | Risk-based selection through CASS system | AO’s “reason to believe” backed by new, tangible information |
Primary Notice Issued | Section 143(2) | Section 148A(b) followed by Section 148 |
Scope of Inquiry | Full examination of the entire return | Focused on specific escaped income or omissions |
Time Limit for Notice | Within 3 months from end of the FY in which ITR was filed | Within 3 years (normal) or 10 years (high-value cases) from end of relevant AY |
Time Limit for Completion | 12 months from end of relevant AY | 9 months from end of FY in which notice is served |
Taxpayer Defence | Supporting all claims with documents | Challenging validity of notice, lack of new information, or procedural lapse |
Prior Approvals Required | Not required | Mandatory senior-level approvals under Section 151 |
Use of Preliminary Inquiry | Not applicable | Mandatory preliminary inquiry under Section 148A |
What Is a Regular Assessment?
A regular assessment, also called a scrutiny assessment, is the Income Tax Department’s way of reviewing your filed return to ensure it is complete and accurate. It is conducted under Section 143(3) and usually follows the preliminary processing of your return. This assessment focuses on the return you filed for the current financial year, not any past filing.
Purpose and Scope of Regular Assessment
A regular assessment serves multiple purposes beyond just verifying the numbers you report on your tax return.
Ensuring Accuracy of Income Reporting
The Assessing Officer reviews your return to confirm that the income disclosed matches the supporting documents and third-party data available with the department. This ensures the figures are neither underreported nor inflated.
Verification of Deductions and Exemptions
All claimed deductions, exemptions, and carried-forward losses are verified for accuracy. You must submit documentary evidence to prove eligibility for these benefits under the Income Tax Act.
Detecting Non-Compliance and Evasion
One of the core aims is to catch cases of deliberate non-compliance. If there are inconsistencies or undeclared income sources, they may be flagged during this detailed review.
Maintaining Routine Compliance
This process acts as a routine check within the tax administration framework. It encourages transparency and discipline among taxpayers, even if no major errors are found.
Initial Processing Under Section 143(1)
Before any scrutiny begins, every return first goes through automated preliminary processing. This step ensures basic accuracy and highlights any immediate issues.
- All filed returns are checked by the Centralised Processing Centre (CPC) using automated systems.
- The system verifies for arithmetic mistakes, incorrect claims, and missing information.
- It cross-checks data with third-party sources such as TDS statements and Form 26AS.
- If no discrepancies are found, an intimation confirming the return is sent to the taxpayer.
- If errors are detected, the return may be flagged for further review or adjustment.
- This stage is fully automated and does not involve any human assessment.
Selection for Scrutiny and the Role of Section 143(2)
Once your return clears initial processing, it may be selected for detailed review based on specific risk factors. Here’s how the selection happens and what follows next.
Risk-Based Selection Through CASS
The Computer-Assisted Scrutiny Selection (CASS) system identifies high-risk cases using a set of predefined parameters. This includes mismatches in reported income and TDS, high-value financial activity, large refund claims, or failure to report certain income sources. In rare cases, manual scrutiny is allowed based on approval and compelling reasons.
Issuance of Notice Under Section 143(2)
If your return is chosen for scrutiny, you will receive a formal notice under Section 143(2). This notice informs you that your return is under examination and asks you to furnish supporting documents or explanations. The law requires this notice to be issued within three months from the end of the financial year in which the return was filed.
Documentation, Hearings, and Final Order (143(3))
The scrutiny process involves a detailed review of your financial records, followed by a final decision from the Assessing Officer based on your submissions.
Submission of Supporting Documents
Once your return is selected for scrutiny, you must furnish evidence to support the details reported in your ITR. These documents help the Assessing Officer verify your income, deductions, and tax liability.
You may be required to submit:
- Bank statements for the relevant financial year
- Salary slips and Form 16 from your employer
- Rental income proofs and property ownership documents
- Investment proofs for deductions under Sections 80C to 80U
- Capital gains statements for shares, mutual funds, or real estate
- Business income records, including profit and loss statements and invoices
- Form 26AS, AIS (Annual Information Statement), and TIS
- Loan repayment statements, especially for home and education loans
- Foreign income disclosures, if applicable
- Cryptocurrency reports, including buy/sell transactions, exchange statements, wallet addresses, and capital gains summary (especially if Schedule VDA is applicable)
- Tax computation or audit reports (if your income is audited under Section 44AB)
Providing these documents in full and in the correct format is essential to avoid discrepancies and further notices.
Communication in the Faceless Regime
All interactions with the Income Tax Department now happen electronically through the e-filing portal. Under the faceless regime, notices, queries, and responses are exchanged online, eliminating the need for in-person visits and reducing subjective discretion.
Issuance of Final Assessment Order
After reviewing all the submitted documents and explanations, the Assessing Officer passes a final order under Section 143(3). This order determines your final tax liability, including any interest, refund, or penalties due. The outcome depends entirely on the quality and completeness of the information you provide during the process.
Risk of Best Judgement Assessment (Section 144)
If you fail to respond to the scrutiny notice or do not provide the required documents, the Assessing Officer can complete your assessment based on available information. This is referred to as a best judgment assessment under Section 144 and can result in a higher tax liability. Non-compliance also reduces your chances of appealing the decision later.
Completion Deadline for Regular Assessments
For Assessment Year 2022–23 and onwards, the Income Tax Act mandates that the final order under Section 143(3) must be passed within 12 months from the end of the relevant assessment year. This ensures the timely closure of assessment proceedings and gives taxpayers a clear timeline to work with.
What Is a Reassessment?
Reassessment is a powerful corrective tool used by the Income Tax Department when it believes that some portion of your income was either not reported or has been incorrectly assessed in a past return.
Unlike regular assessments, which verify your current filing, reassessments focus on reopening older assessments to tax income that may have escaped assessment. It is primarily governed by Section 147 of the Income Tax Act and follows a more stringent set of checks and approvals.
What Constitutes Escaped Income?
Escaped income refers to any portion of your taxable earnings that was either omitted, misreported, or not taxed in a previous year’s return. The Income Tax Department can only reopen such cases if there is a legitimate reason to believe that this has occurred.
Examples of Escaped Income Include:
- Not reporting interest income from fixed deposits or savings accounts.
- Omission of capital gains from the sale of property, shares, or crypto assets.
- Claiming deductions or exemptions that were not legally allowed.
- Concealing high-value transactions, such as large cash deposits or asset purchases.
- Undisclosed income is traced through third-party data, such as GST or property records.
The reassessment does not involve a full review of your entire return. It focuses only on the specific income that was missed or underreported.
Role of New and Tangible Information
A reassessment can only be initiated when the Assessing Officer has new and credible material that was not available during the original assessment. This prevents arbitrary reopening of cases and safeguards taxpayer rights.
Acceptable Triggers for Reassessment Include:
- Information from other government departments, like GST or customs.
- Audit objections that point to missed income or misapplication of the law.
- Details shared by banks, property registries, or investment platforms.
- Reports from investigation wings or intelligence agencies.
- Mismatch between your ITR and Form 26AS or AIS data.
Mere suspicion is not enough. The reason to believe must be backed by fresh, verifiable data that establishes a link to potential tax evasion.
Issuance of Notice Under Section 148
Only after completing the preliminary inquiry under Section 148A can the Assessing Officer issue a notice under Section 148. This notice requires you to file a new income tax return for the relevant assessment year.
Important Points to Note:
- The notice will be served only if the officer is satisfied that income has indeed escaped assessment.
- A copy of the 148A(d) order must accompany the notice.
- You are required to file your return within the time mentioned in the notice, typically 30 days.
- This notice formally reopens your earlier assessment or processed return.
Preliminary Inquiry: Section 148A Procedure
The Finance Act, 2021, introduced Section 148A to make the reassessment process more transparent and fair. It mandates a formal inquiry before the issuance of a reassessment notice.
Key Steps Under Section 148A:
- Show-Cause Notice (148A(b)): The Assessing Officer must first issue a show-cause notice explaining why they believe income has escaped assessment. This notice must include the underlying material, reports, or evidence.
- Opportunity to Respond: You are given 7 to 30 days to reply with supporting documents or a legal explanation. This reply is considered before the AO makes a final decision.
- Order Under Section 148A(d): After reviewing your response, the officer must issue a reasoned order stating whether reassessment proceedings will be initiated or dropped. This written order is mandatory.
This pre-notice inquiry adds a formal hearing stage, which gives you a chance to stop the reassessment before it even begins.
Time Limits Under Section 149
Section 149 of the Income Tax Act outlines the extent to which the department can reopen a return, taking into account the nature and size of the escaped income.
Nature of Case | Time Limit |
Escaped income less than INR 50 lakh | Within 3 years from the end of the relevant assessment year |
Escaped income INR 50 lakh or more | Within 10 years from the end of the relevant assessment year |
This means even your return from 8 or 9 years ago could be reopened if there is credible evidence of large-scale tax evasion.
Mandatory Senior-Level Approvals (Section 151)
To prevent misuse of reassessment powers, the law requires prior approval from senior tax officials before a notice can be issued.
Approval Requirements:
- Cases within 3 years: If the Assessing Officer is below the rank of Joint Commissioner, approval must be taken from the Joint Commissioner.
- Cases beyond 3 years: The officer must get prior approval from the Principal Commissioner, Principal Chief Commissioner, or other specified authority.
- These approvals ensure that reassessment is not triggered by personal bias or routine suspicion.
No notice under Section 148 can be issued unless these pre-conditions are fulfilled.
How Can KoinX Help With Crypto Assessment in India?
When your tax assessment involves crypto transactions, the risk of receiving scrutiny or reassessment notices increases sharply. With multiple wallets, exchanges, and asset classes involved, even minor reporting gaps can trigger red flags. KoinX helps you handle crypto-related assessment notices with confidence by providing a streamlined, error-free way to organise and report your crypto income.
Automatically Tracks All Your Crypto Transactions
KoinX integrates with 800+ platforms, including major Indian and global exchanges, wallets, and blockchains. It auto-syncs all your buys, sells, transfers, airdrops, and staking rewards in one place. This ensures that you never miss a transaction while preparing your response to an assessment notice, whether under Section 143(3) or Section 148.
Identifies Unreported Gains and Income
Most assessment issues arise due to underreported capital gains or missed crypto income, like staking rewards or DeFi earnings. KoinX runs a deep scan of your crypto portfolio and highlights any transactions that may have been left out of your original return. This helps you fix issues before they escalate.
Generates Accurate Tax Reports With Schedule VDA
KoinX generates fully compliant tax reports that include income details, capital gains, and Schedule VDA-ready summaries. These reports can be submitted directly to your Chartered Accountant or uploaded as part of your response on the Income Tax portal. It saves time and reduces the chances of assessment delays.
Supports Reassessment and Scrutiny Response Documentation
Whether you are replying to a regular scrutiny notice or a reassessment under Section 148, KoinX compiles all necessary documentation in downloadable formats. You can attach these reports to your portal submissions or share them with the Assessing Officer for faster resolution.
If you’re facing a crypto tax notice, don’t risk manual errors or missed details. Use KoinX to ensure every transaction is accounted for, every report is accurate, and every deadline is met. Sort your crypto tax notices with KoinX today and make crypto compliance stress-free.
Conclusion
Regular assessments and reassessments serve different roles in the tax system, but both can significantly impact your finances if not handled properly. While regular assessments are routine checks on your current filing, reassessments reopen older returns based on new evidence or omissions. Knowing the distinction helps you prepare better and respond appropriately to any notices.
If your return includes crypto transactions, tools like KoinX simplify the process by generating accurate reports, detecting errors, and preparing Schedule VDA in minutes. Stay compliant, stay confident, use KoinX today to secure your crypto tax records.
Frequently Asked Questions
Can Reassessment Happen Even After A Regular Assessment?
Yes, reassessment can still take place even if your return was previously scrutinised. However, the Assessing Officer must have new, tangible information that was not considered during the original assessment. The “change of opinion” doctrine prevents reassessment on the same grounds as the earlier scrutiny unless fresh material evidence is discovered.
What Is The Role Of The CASS System In Tax Assessments?
The CASS (Computer-Assisted Scrutiny Selection) system automatically flags high-risk returns using predefined parameters. It helps the Income Tax Department identify cases for regular assessment based on discrepancies, high-value transactions, or refund claims. This data-driven approach limits arbitrary scrutiny and ensures objective, risk-based selection for further examination.
What Are The Time Limits For Reassessment Notices?
Reassessment notices must be issued within 3 years from the end of the relevant assessment year in normal cases. If the Assessing Officer has credible evidence that income above INR 50 lakh has escaped assessment, the notice period can extend up to 10 years. These timelines are defined under Section 149.
Can The Income Tax Department Review Returns From 8 Years Ago?
Yes, if the Assessing Officer has evidence of unreported income exceeding INR 50 lakh, reassessment can go back as far as 10 years. However, the department must follow the procedures outlined in Section 148A and obtain approval from higher authorities before issuing such a notice.
Can Digital Evidence Be Used In Faceless Assessments?
Yes, in the faceless regime, all evidence is submitted electronically through the e-filing portal. The system maintains time-stamped records of every notice, response, and document. This digital trail improves transparency but also requires taxpayers to stay alert and maintain well-organised financial records online.
