CBDT FAQ Deep-Dive Series #2: Section 147-148 Reassessment Continuity Under Section 536 Saving Clause After the Income-tax Act 2025 – How Open Notices, TOLA Cases, Section 151 Sanctions, and ITAT Appeals Survive the April 1, 2026 Cutover
Quick Summary
- Section 536 of the Income-tax Act 2025 preserves Sections 147, 148, 148A, 149, 150, 151, and 153 of the 1961 Act for every reassessment notice issued on or before March 31, 2026, and for every reassessment proceeding in which the time limit had begun running before April 1, 2026.
- Outer time-limit math remains the 1961 Act calculation: three years from the end of the relevant assessment year for routine cases, ten years where escaped income is Rs 50 lakh or more, with the Section 148A show-cause notice step preserved as a precondition for issuance of Section 148.
- TOLA 2020 extension dates continue to apply to reassessment notices saved under that statute. The CBDT FAQ chapter on TOLA confirms that any Section 148 notice covered by the Supreme Court ruling in Union of India v. Ashish Agarwal (May 4, 2022) continues to be assessed under the 1961 Act regardless of the April 1, 2026 cutover.
- Specified-authority approvals under Section 151 (1961 Act) survive intact for pre-April 1, 2026 notices. No re-sanction is required when an assessment moves into the Income-tax Act 2025 era because the trigger event (the issue of the Section 148 notice) is locked under the earlier law.
- Action: every CA with an open Section 148 file, a pending Section 148A reply, or an ITAT appeal arising from reassessment must annotate the file with the 1961 Act sections, save the CBDT FAQ chapter on reassessment continuity, and avoid drafting cross-references to the new Income-tax Act 2025 sections until assessment is complete.
What the CBDT FAQ Says About Reassessment Continuity
The CBDT released a 99-page Frequently Asked Questions clarification on the transition between the Income-tax Act 1961 and the Income-tax Act 2025 in late April 2026. Post 723 walked through the FAQ structure and Section 536 saving clause at a master level. Post 732 went deep into the TDS chapter and the May 31, 2026 Q4 FY 2025-26 statement-filing window.
This post is the second instalment of the deep-dive series. It opens up Chapter 4 of the FAQ, which the Board labels Pending Assessments, Reassessments and Reopenings. The chapter answers thirty-one questions covering Section 147, Section 148, Section 148A (show-cause), Section 149 (time-limit), Section 150 (assessment after court direction), Section 151 (specified-authority sanction), Section 153 (time-limit for completion of assessment), and Section 153A (assessment in search cases). The chapter is structured as a flowchart from issuance through completion, with each stage tested against the Section 536 saving clause.
The Specific Sub-Clauses of Section 536 That Govern Reassessment
Section 536 of the Income-tax Act 2025 is the omnibus saving clause that preserves the operation of the 1961 Act for income, transactions, and proceedings anchored to events before April 1, 2026. The CBDT FAQ identifies four sub-clauses of Section 536 that govern reassessment continuity:
| Sub-clause | What It Saves | Practical Effect |
|---|---|---|
| 536(1) | Liability, refund right, or any thing acquired or accrued under the 1961 Act before April 1, 2026. | Income that escaped assessment in any pre-April 1 year remains assessable under the 1961 Act provisions. |
| 536(2) | Investigation, legal proceeding, or remedy pending on March 31, 2026, in respect of the 1961 Act. | Every Section 148 notice issued by March 31, 2026, and every Section 148A reply still under consideration, continues under the 1961 Act framework. |
| 536(3) | Period of limitation, computation, or extension under the 1961 Act. | The three-year and ten-year outer limits in Section 149 of the 1961 Act remain the operative timetable for pre-April 1 escaped income, even when the actual assessment is completed in FY 2026-27 or later. |
| 536(7) | Anything done or any action taken in exercise of any power conferred by the 1961 Act. | Specified-authority sanctions under Section 151 of the 1961 Act, draft assessment orders under Section 144B, and Section 142(1) notices issued before April 1, 2026, all remain valid. |
Reassessment Notices Issued Before April 1, 2026: How They Continue
Section 148 Notice Already Served Before March 31, 2026
For every Section 148 notice that left the office of the Assessing Officer on or before March 31, 2026, the assessment proceeds entirely under the 1961 Act. The taxpayer reply, any further inquiry under Section 142(1), the draft assessment order under Section 144B, and the final reassessment order under Section 147 read with Section 153 are all 1961 Act actions. The time limit for completion of the assessment is the Section 153 limit, which is twelve months from the end of the financial year in which the Section 148 notice was served, with extensions where the National Faceless Assessment Centre had to refer the case to the Dispute Resolution Committee or the Transfer Pricing Officer.
If the reassessment order is appealed, the appeal proceeds before the Commissioner of Income-tax (Appeals) under Section 246A of the 1961 Act and onwards to the Income Tax Appellate Tribunal under Section 253. The ITAT continues to apply 1961 Act jurisprudence to these matters. The Income-tax Act 2025 has its own successor provisions for appeals, but those apply only when the underlying assessment is itself a 2025 Act assessment.
Section 148A Show-Cause Pending on April 1, 2026
The Section 148A show-cause procedure was introduced by the Finance Act 2021 and requires the Assessing Officer to issue a show-cause notice explaining why a reassessment is being considered, share the information or material relied on, and grant the taxpayer at least seven days to respond, before issuing the Section 148 notice. Many show-cause notices issued in the last quarter of FY 2025-26 will have replies due in April or May 2026.
The CBDT FAQ confirms that the show-cause stage continues under Section 148A of the 1961 Act. The Assessing Officer must dispose of the show-cause by passing an order under Section 148A(d), and either drop the matter or issue a Section 148 notice, with the time limit in Section 149 of the 1961 Act still running. The CBDT FAQ specifies that an order under Section 148A(d) passed after April 1, 2026, in a case where the show-cause was issued before March 31, 2026, is a 1961 Act order. The successor provision in the Income-tax Act 2025 does not apply retrospectively.
TOLA 2020 Notices and Ashish Agarwal Cases
The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act 2020, commonly cited as TOLA, extended limitation deadlines for reassessment notices that were time-barred during the COVID-19 period. The Supreme Court in Union of India v. Ashish Agarwal (judgement dated May 4, 2022) directed that all reassessment notices issued under the old Section 148 between April 1, 2021, and June 30, 2021 (in cases where the Finance Act 2021 amendments had already taken effect) be treated as Section 148A show-cause notices under the new regime, with the limitation clock paused.
The CBDT FAQ chapter on TOLA explicitly states that any TOLA-saved reassessment notice continues under the 1961 Act framework regardless of the April 1, 2026 cutover. Section 536 sub-clause 3 captures the TOLA extension within the saved period of limitation. CAs handling Ashish Agarwal cases (a large cohort that flooded the system from May 2022 onwards) should keep working under the 1961 Act on every step until the assessment is completed.
Section 151 Specified-Authority Sanction
Section 151 of the 1961 Act requires the Assessing Officer to obtain prior sanction from a specified authority before issuing a Section 148 notice or a Section 148A(d) order. The specified authority is the Principal Commissioner or the Principal Director if the notice is issued within three years from the end of the relevant assessment year, and the Principal Chief Commissioner or the Principal Director General if the notice is issued beyond three years (in the ten-year band for escaped income of Rs 50 lakh or more).
The CBDT FAQ confirms that every Section 151 sanction granted before April 1, 2026, remains valid for the reassessment proceeding it relates to. Where a Section 148A(d) order is yet to be passed after April 1, 2026, but the Section 151 sanction was obtained before March 31, 2026, the Assessing Officer can proceed without re-sanction. The successor sanction provision in the Income-tax Act 2025 does not require a fresh sanction in such a case.
This is operationally important for cases where the Section 151 sanction was obtained in March 2026 but the Section 148 notice was actually dispatched on April 2 or April 3, 2026, because of routine processing time. The CBDT FAQ addresses this dispatch-vs-sanction lag explicitly: the Section 148 notice is valid if dispatch was within a reasonable window after sanction (the FAQ suggests up to seven working days as the safe corridor without further re-sanction).
Section 149 Outer Time-Limit Math (Preserved)
Section 149 of the 1961 Act has two outer time-limit bands for reassessment, both preserved by Section 536 sub-clause 3:
| Band | Trigger | Outer Limit From End of Relevant AY |
|---|---|---|
| Routine band | Any case where the Assessing Officer has reason to believe income has escaped assessment. | 3 years |
| Extended band | Escaped income represented in the form of an asset, expenditure, or entry in books of accounts of Rs 50 lakh or more. | 10 years |
For assessment year 2022-23, the routine band ends on March 31, 2026, and the extended band ends on March 31, 2033. Any Section 148 notice issued for AY 2022-23 on March 30, 2026, falls comfortably within the routine band. The same notice issued on April 5, 2026, is outside the routine band by the operation of Section 149 of the 1961 Act, which Section 536 sub-clause 3 preserves. The CBDT FAQ specifies that the Income-tax Act 2025 successor section does not extend or contract these dates for any income relating to FY 2025-26 or earlier.
ITAT Appeals Arising from Reassessment Orders
Appeals from a Section 147 reassessment order to the Commissioner (Appeals) and onwards to the ITAT continue under Sections 246A, 250, and 253 of the 1961 Act. The 1961 Act jurisprudence on reopening, jurisdictional facts, change of opinion, and the Ashish Agarwal compliance framework remains the operative body of law. The ITAT applies 1961 Act case law from the Supreme Court, High Courts, and earlier ITAT benches to the pending reassessment appeal.
The CBDT FAQ also clarifies that an appeal pending before the ITAT on March 31, 2026, against a reassessment order remains a 1961 Act appeal regardless of how long it takes to dispose of. The successor appeal provisions in the Income-tax Act 2025 apply only to assessments that are themselves 2025 Act assessments (those relating to FY 2026-27 and later income).
Practitioner Sprint: Eight-Step Reassessment File Review
- Inventory: List every open Section 148 notice in your practice as of May 15, 2026. Capture the AY involved, the date of the Section 151 sanction, the date of the Section 148A show-cause, the date of the Section 148 notice, and the current stage (show-cause reply, assessment in progress, draft assessment order received, final order received, appeal pending).
- Section reference annotation: Add a one-line cover note to each file: “Governed by Sections 147 to 153 of the Income-tax Act 1961 read with Section 536 of the Income-tax Act 2025.” This is your audit trail.
- Section 151 sanction validity: Confirm the specified-authority sanction was obtained before March 31, 2026 (for sanctions to be relied on without re-sanction). If the sanction date is after April 1, 2026, the successor provision in the 2025 Act may apply, with a different competent authority.
- Time-limit confirmation: Check the Section 149 outer limit. If the AY in question is 2022-23, the routine band closed on March 31, 2026. The extended ten-year band remains open for high-value escaped income (Rs 50 lakh and above).
- Section 148A show-cause status: If a show-cause notice is pending reply, calculate the remaining reply window under the 1961 Act (minimum seven days, extended as the Assessing Officer permits). Draft the reply citing 1961 Act sections only.
- Save the CBDT FAQ chapter: Download the CBDT FAQ PDF and bookmark Chapter 4 (pending assessments / reassessments). The Chapter 4 page references in the FAQ run from page 27 to page 41 in the April 2026 edition. Keep a copy in every reassessment file.
- Client communication: Draft a client-facing one-pager explaining that the reassessment for FY 2025-26 or earlier income continues under the 1961 Act, that no fresh action is required by the taxpayer simply because the Income-tax Act 2025 has taken effect, and that the original timeline for the reply or appeal is unchanged.
- Cross-link to TOLA cases: If you have Ashish Agarwal cohort cases (Section 148 notices that were converted to Section 148A show-cause notices under the Supreme Court directive of May 4, 2022), tag those files separately. The TOLA extension and the Ashish Agarwal directive both continue under the 1961 Act.
FAQs Practitioners Are Asking
Q1. My client received a Section 148A show-cause notice on March 28, 2026. The reply is due May 5, 2026 (after the cutover). Which Act governs my reply?
The 1961 Act governs the show-cause stage in full. Draft the reply citing Sections 147, 148, 148A, 149, and 151 of the 1961 Act. The Assessing Officer will pass the Section 148A(d) order under the 1961 Act regardless of when the order is dated. Section 536 sub-clause 2 of the Income-tax Act 2025 saves this proceeding entirely under the earlier Act. Do not introduce successor section numbers in your reply.
Q2. The Section 151 sanction was obtained on March 25, 2026, but the Assessing Officer dispatched the Section 148 notice on April 7, 2026. Is the notice valid?
Yes, provided the dispatch was within a reasonable processing window. The CBDT FAQ characterises seven working days from sanction as the safe corridor. A dispatch on April 7 from a March 25 sanction is within ten calendar days, which the FAQ accepts as a routine dispatch lag. No re-sanction is needed.
Q3. The Income-tax Act 2025 has reorganised the reassessment provisions into a new chapter. If I appeal the reassessment order, which sections do I cite?
Cite the 1961 Act sections (Sections 147, 148, 148A, 149, 151, 246A, 250, 253). The appeal arises from a 1961 Act order and the appellate authority (Commissioner Appeals or ITAT) applies 1961 Act jurisprudence. Introducing successor section numbers from the 2025 Act in the appeal memo would be a citation error. Section 536 of the 2025 Act locks the appeal under the 1961 Act.
Q4. My client has a TOLA-saved Section 148 notice from June 2021 that the Supreme Court converted to a Section 148A show-cause under Ashish Agarwal. The Assessing Officer has just now (April 2026) issued the Section 148A(d) order. What is the governing Act?
The 1961 Act governs the entire chain. TOLA 2020 itself is a 1961 Act adjacent statute, and the Supreme Court directive in Ashish Agarwal operates within the 1961 Act framework. Section 536 sub-clauses 2 and 3 preserve both the proceeding and the limitation period. The Section 148A(d) order, the consequent Section 148 notice (if issued), and any reassessment that follows are all 1961 Act actions.
Q5. I have an ITAT appeal pending against a Section 147 reassessment order for AY 2018-19. The hearing is scheduled for August 2026. Does the Income-tax Act 2025 affect the appeal in any way?
No. The appeal continues to be heard under Sections 253 to 260A of the 1961 Act with 1961 Act jurisprudence applied to the reassessment ground. Section 536 sub-clause 2 of the 2025 Act locks the appeal under the 1961 Act. The ITAT bench will continue to rely on the body of case law decided under Sections 147, 148, and 151 of the 1961 Act.
Disclaimer
This advisory summarises the reassessment-continuity chapter of the CBDT FAQ on the Income-tax Act 2025 transition (April 2026) as the editorial team interprets it. The FAQ is a clarification document and does not have the force of law. Facts of individual cases vary widely. Practitioners must read the original CBDT FAQ alongside the bare provisions of Sections 147 to 153 of the Income-tax Act 1961, Section 536 of the Income-tax Act 2025, the TOLA 2020 statute, and relevant case law (notably Union of India v. Ashish Agarwal, May 4, 2022). This article is for informational purposes only and does not constitute legal or tax advice.
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