How assessment, reassessment and recomputation are structured under the Act that replaced the Income-tax Act, 1961 with effect from 1 April 2026

Introduction

The Income-tax Act, 2025 (Act No. 30 of 2025) received Presidential assent on 21 August 2025 and came into force on 1 April 2026, repealing the Income-tax Act, 1961 and applying from Tax Year 2026-27 onward. It is a substantially re-drafted statute — 536 sections across 23 chapters and 16 schedules — built with the stated objectives of simplification, reduced litigation, and modernised, technology-enabled administration.

One of the most consequential changes for day-to-day practice is the consolidation and renumbering of the entire assessment machinery. Provisions that were spread across Sections 143, 144, 144B, 144C, 147 to 153B, and the 158B search-assessment cluster of the 1961 Act have been reorganised into a more linear, sequential block running broadly from Section 270 to Section 294 of the 2025 Act. Under Section 2(13) of the new Act, 'assessment' is now expressly defined to include reassessment and recomputation, removing earlier ambiguity about whether procedural safeguards developed for assessment proceedings automatically extend to reassessment and recomputation as well.

The Building Blocks of the New Assessment Chapter

Read together, the provisions create six broad categories of proceedings that every taxpayer and practitioner should be able to identify at a glance, each discussed in detail in the articles that follow this one:

•      Processing of return / summary intimation — Section 270(1), corresponding to erstwhile Section 143(1)

•      Regular or scrutiny assessment — Section 270(10), corresponding to erstwhile Section 143(3)

•      Best judgment assessment — Section 271, corresponding to erstwhile Section 144

•      Faceless assessment — Section 273, corresponding to erstwhile Section 144B

•      Reference to the Dispute Resolution Panel — Section 275, corresponding to erstwhile Section 144C

•      Income escaping assessment (reassessment) — Sections 279 to 286, corresponding to erstwhile Sections 147 to 153

•      Search, seizure and block assessment — Sections 247, 248 and 292 to 294, corresponding to erstwhile Sections 132, 132A and the 158B series

•      Rectification of mistakes — Section 287, corresponding to erstwhile Section 154

Why the Restructuring Matters in Practice

The renumbering is not cosmetic. Alongside it, the 2025 Act carries forward — and in places sharpens — the procedural safeguards that were introduced into the 1961 Act by the Finance Act, 2021, particularly the mandatory show-cause procedure before reopening an assessment. It also tightens completion timelines, clarifies the sanctioning hierarchy for reassessment notices, and expressly confines the power to issue reassessment notices to the jurisdictional Assessing Officer, even though the underlying process continues to run on the faceless platform for most cases.

For any taxpayer served with a notice after 1 April 2026, the very first analytical task is to correctly identify which section of the new Act the notice is issued under and to map it against the corresponding provision of the 1961 Act, so that the applicable body of case law, CBDT circulars and departmental instructions can be correctly identified and relied upon.

How the New Act Interacts With the Old

Two transitional principles run through the entire assessment chapter and are worth internalising before working through any individual provision. First, Section 536(2)(c) preserves the 1961 Act for any proceeding that was already pending when the new Act commenced — meaning a taxpayer's case may, depending entirely on the date a notice was first issued, be governed either wholly by the old Act or wholly by the new one, with very little scope for a hybrid application. Second, Section 536(2)(j) preserves the continued validity of circulars, notifications, approvals and instructions issued under the 1961 Act insofar as they do not conflict with the 2025 Act — which in turn means that decades of judicial interpretation of the 1961 Act's assessment provisions remains directly relevant to interpreting their 2025 Act successors.

Practical Roadmap: Reading Any Notice Under the New Act

In practice, the safest way to open any communication received after 1 April 2026 is to work through four questions in sequence. First, under which specific section and sub-section has the notice been issued, and does that section belong to the summary-processing, scrutiny, best-judgment, faceless, reassessment, or search family described above? Second, does the notice relate to Tax Year 2026-27 or a later year (governed squarely by the 2025 Act), or to an earlier assessment year (which may still be governed by the 1961 Act under the transitional saving clause discussed in the final article of this series)? Third, has the notice been issued by the jurisdictional Assessing Officer, or through the faceless infrastructure, and does that match the category of case it purports to be? Fourth, what is the applicable limitation period and sanction requirement for that specific type of notice, and has the department demonstrably complied with both?

Working through these four questions before drafting any substantive reply avoids the single most common error practitioners report in the early period of the new Act's operation — responding fully and cooperatively on the merits of a notice while overlooking a threshold defect (wrong section, wrong Act, missing sanction, or expired limitation) that could have disposed of the matter far more efficiently and at far lower cost.

Relevant Case Laws

Shenoy & Co. v. Commercial Tax Officer (1985) 155 ITR 178 (SC) — held that under Article 141 of the Constitution, the law declared by the Supreme Court binds all courts and tribunals in India. This is the constitutional foundation for why judgments interpreting the assessment provisions of the 1961 Act continue to guide interpretation of the parallel, renumbered provisions of the 2025 Act, provided the statutory language and conditions have not materially changed.

U.P. Pollution Control Board v. Kanoria Industrial Ltd. (2003) 259 ITR 321 (SC) — reaffirmed the same binding-precedent principle in the context of a re-enacted statute, holding that judicial interpretation of a predecessor provision continues to apply to its successor provision where the substance of the provision is retained, even if the section number or precise wording changes.

CIT v. Sun Engineering Works (P) Ltd. (1992) 198 ITR 297 (SC) — cautioned that a judgment must always be read in the context of the specific facts and question of law it decided, and that isolated sentences should not be lifted out of context and applied mechanically to materially different facts. This is a critical discipline when transplanting 1961 Act case law onto 2025 Act provisions — the principle established by a judgment carries over, but only to the extent the underlying statutory text and conditions are genuinely comparable.

Precautions to Be Taken

1.      Always identify the exact section and sub-section under which any notice is issued before responding — the 2025 Act renumbers virtually every assessment-related provision, and replying under the wrong statutory reference can itself create confusion in the record.

2.      Do not assume that case law developed under the corresponding 1961 Act provision applies automatically and without qualification; verify whether the wording, conditions and thresholds have changed in the 2025 Act before relying on an old precedent.

3.      Check the Document Identification Number (DIN) on every communication — while minor DIN defects will not by themselves invalidate an order, an unauthenticated communication should never be acted upon or ignored without independent verification on the e-filing portal.

4.      Maintain a working file that maps the old-to-new section numbers relevant to your case (270, 271, 273, 275, 279-286, 287, 294) so that timelines, rights and remedies are not lost in translation between the two Acts.

5.      Engage a qualified chartered accountant or tax counsel early in any matter — the restructured provisions carry new limitation and sanction rules that differ from the erstwhile regime in materially important respects.

6.      Track the 'tax year' and 'financial year' terminology carefully; the 2025 Act's use of 'tax year' does not always align one-to-one with the erstwhile 'assessment year' framework used throughout the 1961 Act and its case law.

7.      Before citing any 1961 Act judgment in a submission or appeal, confirm that Section 536(2)(j) genuinely preserves its relevance to your specific provision, and be ready to explain, as Sun Engineering Works requires, why the facts and legal question are comparable.

8.      Build a simple internal checklist — section identified, applicable Act confirmed, issuing authority verified, limitation and sanction checked — and run every incoming notice through it before drafting a substantive reply.

9.      Where a notice appears to blend features of two different proceedings (for example, language resembling both scrutiny and reassessment), seek clarification in writing before responding, since the procedural rights and time limits differ materially between categories.

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.