Introduction: Why “Information Suggesting Escapement” Is the New Gatekeeper
Reassessment under the Income-tax Act has long been a major source of litigation. To curb arbitrary reopenings and repeated scrutiny of completed assessments, the law relating to reassessment was completely recast with effect from 1 April 2021.
Under the new regime, the power of the Assessing Officer to reopen an assessment is no longer based on a broad or subjective “reason to believe.” Instead, it is anchored to a much narrower and stricter condition — the existence of “information suggesting escapement of income.”
This phrase is now the starting point and jurisdictional foundation of every reassessment proceeding under section 148. Unless the tax department is able to demonstrate that it possesses legally valid “information” indicating that income chargeable to tax has escaped assessment, the reopening itself becomes unsustainable in law.
At the same time, the expression “information suggesting escapement” is not mechanically defined. This has led to frequent disputes on what qualifies as information and what does not. Courts, particularly the Supreme Court, have therefore stepped in to lay down clear threshold tests.
This article explains how courts interpret this requirement and why it has become the decisive filter in reassessment proceedings today.
Legislative Background: How Reassessment Changed After 1 April 2021
The reassessment provisions of the Income-tax Act underwent a fundamental shift with effect from 1 April 2021 through the Finance Act, 2021. This amendment was not merely procedural; it was intended to correct long-standing issues arising from frequent and mechanical reopening of completed assessments.
Under the earlier law, reassessment could be initiated if the Assessing Officer recorded a “reason to believe” that income had escaped assessment. Over time, this standard became diluted and was often invoked based on internal audit objections, reinterpretation of existing records, or a mere change of opinion. Courts repeatedly criticised this approach, leading to uncertainty and excessive litigation.
To address these concerns, Parliament substituted sections 147 to 151 and introduced a new statutory framework. The revised section 147 now permits reassessment only when the Assessing Officer is in possession of information suggesting escapement of income. Further, section 148A mandates a pre-notice procedure, requiring the tax department to disclose such information to the taxpayer and provide an opportunity of being heard before issuing a reassessment notice.
An Explanation has also been inserted to section 148 to clarify what constitutes “information” for this purpose, such as risk-based inputs, audit objections, or information received from investigation agencies. Importantly, the law consciously shifts the focus from subjective belief to objective information.
This legislative design makes it clear that reassessment is no longer intended to be a routine review mechanism, but an exceptional power, exercisable only when statutory conditions are strictly satisfied.
What Does “Information Suggesting Escapement” Mean in Law?
The expression “information suggesting escapement of income” is the cornerstone of the post-2021 reassessment framework. While the Income-tax Act does not provide a rigid definition, its meaning has been clarified through the statutory scheme and judicial interpretation.
In simple terms, “information” refers to objective inputs available with the Assessing Officer which indicate that income chargeable to tax may not have been assessed correctly. It is not the Assessing Officer’s opinion or suspicion, but something tangible, identifiable, and verifiable.
The Explanation to section 148 provides guidance by indicating that “information” may arise from:
- Risk management or data analytics inputs,
- Audit objections pointing out factual discrepancies,
- Information received from investigation wings or other authorities,
- Information emerging from search, survey, or enquiry proceedings.
Equally important is what the law seeks to exclude. The reassessment power cannot be exercised merely because the Assessing Officer:
- Re-examines the same return or financial statements,
- Takes a different view on the same set of facts,
- Attempts to review an issue already considered earlier.
The phrase “suggesting escapement” also carries significance. The information must have a direct nexus with possible tax escapement. Vague alerts, general risk flags, or internal doubts without supporting material do not satisfy this condition.
From a legal perspective, therefore, reassessment can begin only when information exists first, and belief is formed later. This marks a clear departure from the earlier regime and imposes a higher jurisdictional threshold on the tax department.
Supreme Court’s Threshold Test: What Courts Now Examine
With the introduction of the new reassessment regime, courts—particularly the Supreme Court—have made it clear that the expression “information suggesting escapement of income” is not a matter of administrative discretion. It is a jurisdictional condition, and courts are entitled to examine whether this condition is satisfied before reassessment can proceed.
The Supreme Court has consistently emphasised that the Assessing Officer must cross a minimum legal threshold before invoking reassessment powers. This threshold has three essential elements.
First, the information relied upon must be objective and specific. It should be capable of independent verification and must relate directly to the taxpayer concerned. General inputs, broad risk parameters, or sector-wide alerts do not, by themselves, meet this standard.
Second, there must be a live link between the information and the alleged escapement of income. Courts have repeatedly held that the information should reasonably indicate how and why income chargeable to tax may have escaped assessment. A mere possibility or suspicion is not sufficient.
Third, the information must exist prior to the initiation of reassessment proceedings. The Assessing Officer cannot justify reopening by collecting material later or by improving the reasons after issuing a notice.
Importantly, the Supreme Court has clarified that reassessment is not a power of review. It cannot be used to re-examine the same material or to take a different view on issues already considered earlier.
In practical terms, courts now ask a simple but decisive question:
Does the material placed on record qualify as legally valid “information” capable of triggering reassessment?
If the answer is no, the entire proceeding fails at the threshold.
What Qualifies as Information — and What Does Not
One of the most common reasons reassessment proceedings fail is that the material relied upon by the tax department does not legally qualify as “information”. Courts have therefore drawn a clear line between what is acceptable and what is not.
What generally qualifies as valid “information”
Information is likely to meet the statutory threshold when it is:
- External or newly derived, such as inputs from the investigation wing, enforcement agencies, or foreign tax authorities
- Risk-based data or analytics outputs, provided they are specific to the assessee and supported by underlying material
- Audit objections, but only where they point to a factual inconsistency and the Assessing Officer applies independent mind
- Information arising from search, survey, or enquiry, even if conducted in another case, so long as it has a clear nexus with the assessee
In all such cases, the information must indicate how income chargeable to tax may have escaped assessment.
What does NOT qualify as “information”
Courts have consistently rejected reassessment based on:
- Change of opinion, where the Assessing Officer reconsiders an issue already examined earlier
- Reappraisal of existing records, such as the same return, balance sheet, or audit report
- Mechanical reliance on audit objections, without independent verification
- Vague or generic inputs, lacking assessee-specific details
From an auditor’s and practitioner’s perspective, this distinction is crucial. Audit comments or system alerts are triggers, not conclusions. They may prompt further enquiry, but they cannot automatically justify reopening.
In essence, reassessment can proceed only where the information relied upon is fresh, specific, and legally relevant, not merely convenient or speculative.
Section 148A in Practice: How the Information Test Is Applied
Section 148A is the procedural backbone of the new reassessment regime. It ensures that the requirement of “information suggesting escapement of income” is not applied mechanically, but is tested before a reassessment notice is issued.
Before issuing a notice under section 148, the Assessing Officer is required to:
- Conduct an enquiry, if considered necessary,
- Issue a show-cause notice under section 148A(b),
- Disclose the information relied upon, and
- Consider the taxpayer’s reply before passing a reasoned order under section 148A(d).
In practice, this stage has become the most critical checkpoint. Courts have repeatedly held that if the information relied upon is not clearly disclosed, or if the assessee is denied a meaningful opportunity to respond, the reassessment proceedings are vitiated at inception.
From a practical perspective, taxpayers should carefully examine:
- Whether the show-cause notice clearly identifies the information,
- Whether the alleged escapement is linked to that information,
- Whether the reply filed has been objectively considered in the final order.
Many reassessment notices fail because section 148A orders are cryptic, non-speaking, or mechanical, merely reproducing the Assessing Officer’s initial view without addressing the assessee’s explanation.
In my professional experience, a well-drafted and fact-based reply at the section 148A stage often determines the outcome. This provision is not a formality; it is a statutory safeguard designed to prevent reassessment from being used as a fishing or roving enquiry.
Professional View & Practical Takeaways for Taxpayers and SMEs
From a professional standpoint, the post-2021 reassessment framework represents a decisive shift from discretion to discipline. The requirement of “information suggesting escapement of income” is not a procedural formality—it is the legal foundation on which reassessment jurisdiction rests.
In my experience of dealing with assessments, audits, and due diligence processes, most reassessment disputes today do not fail on computation of income, but on jurisdictional weakness at the initiation stage. Where the information relied upon is vague, recycled from old records, or not disclosed properly at the section 148A stage, courts have shown little hesitation in intervening.
For taxpayers and SMEs, the practical lessons are clear:
- Reassessment is no longer automatic; it must be information-driven.
- Every notice must be tested against the quality and relevance of information disclosed.
- The section 148A reply is a critical opportunity, not a routine compliance step.
- Silence, delayed responses, or generic replies often weaken an otherwise strong case.
For professionals and auditors, the focus must shift towards:
- Understanding the source and nature of information, and
- Ensuring that reassessment proceedings do not drift into impermissible review exercises.
In essence, the law now demands that the tax department prove the foundation first, before proceeding further. Taxpayers who understand this threshold—and respond thoughtfully—are far better positioned to protect their rights under the reassessment regime.
You May Also Like
- Intimation Notice U/s 143(1): Meaning & Best Process Guide 2025
- Income-tax Reassessment After 1 April 2021: SC Final Word
Sources
- Section 147, Income-tax Act, 1961 — statutory text and context
- Section 148, Income-tax Act, 1961 — statutory provisions on notices
- Section 148A — procedural enquiry before reassessment
- Memorandum Explaining Finance Bill 2021 — reassessment framework amendments
- Judicial precedents of the Supreme Court and High Courts interpreting reassessment jurisdiction and the requirement of “information suggesting escapement of income”
Disclaimer
This article is published for general informational and educational purposes only. It does not constitute legal, tax, or professional advice. Tax laws and judicial interpretations may change, and their application depends on specific facts and circumstances. Readers are advised to consult a qualified tax professional before taking any action based on this content.
