Section 281 of the Income-tax Act, 2025 requires the Assessing Officer to serve a show cause notice with the information relied on, consider the assessee's reply, and pass an order with prior approval deciding whether it is a fit case to issue a notice under section 280.
What section 281 does
Section 281 is the pre-notice safeguard — the successor to section 148A of the Income-tax Act, 1961, the provision introduced in 2021 that transformed reassessment litigation. It is the gateway a reassessment must pass through before a notice can issue.
The sequence has three steps: a show cause notice asking why a section 280 notice should not be issued; the notice must be accompanied by the information suggesting escaped income; and after considering any reply, an order with prior approval of the specified authority deciding whether it is a fit case.
Sub-section (4) carves out three situations where this procedure does not apply at all — and in those cases the section 280 notice can issue directly, subject to the approval requirement in section 280(5).
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 148A(b) | Show cause notice with an opportunity of being heard | 281(1) |
| 148A(b) | Information to accompany the notice, reply within specified period | 281(2) |
| 148A(d) | Order deciding fit case, with prior approval | 281(3) |
| 148A, proviso | Situations where the procedure does not apply | 281(4) |
| 148 | Notice | 280 |
| 149 | Time limits | 282 |
Section 281 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the opportunity of being heard
Where the Assessing Officer has information suggesting escaped income for the relevant tax year, he shall, before issuing any notice under section 280, provide an opportunity of being heard by serving a notice to show cause as to why a notice under section 280 should not be issued. The word used is shall — it is mandatory where the section applies.
Sub-section (2) — the information must be supplied
The show cause notice shall be accompanied by the information which suggests that income has escaped assessment for the relevant tax year, and on receipt the assessee may furnish a reply within the period specified. Supplying the information is a statutory requirement, not a matter of discretion — an assessee cannot meaningfully show cause against material they have not seen.
Sub-section (3) — the fit case order
The Assessing Officer shall, on the basis of the material available on record and taking into account the assessee's reply, pass an order with the prior approval of the specified authority determining whether or not it is a fit case to issue a notice under section 280. This order is what section 280(1)(a) requires to be served with the notice.
Sub-section (4) — when the procedure does not apply
Section 281 does not apply where the Assessing Officer has received: (a) information under the scheme notified under section 260 — faceless collection of information; (b) directions issued by the Approving Panel under section 274(6); or (c) any finding or direction contained in an order of any authority, Tribunal or court in an appeal, reference or revision, or of a Court in a proceeding under any other law.
The interaction with section 279(2)
Section 281 governs the opening of a reassessment. Once proceedings are validly on foot, section 279(2) allows other escaped issues that surface during the proceedings to be assessed even though section 281 has not been complied with for them.
Worked example
Two reassessments for tax year 2026-27, both begun in 2029.
| Case | Source of information | Is section 281 required? | What must precede the notice |
|---|---|---|---|
| A | A third-party report received by the Assessing Officer | Yes | Show cause notice with the report enclosed, opportunity to reply, and a fit case order under sub-section (3) with prior approval |
| B | Information under the scheme notified under section 260 | No — sub-section (4)(a) | Notice may issue directly, but section 280(5) requires prior approval of the specified authority |
| C | A direction in a Tribunal order in the assessee's own appeal | No — sub-section (4)(c) | Notice may issue directly, with section 280(5) approval |
In case A, if the show cause notice were served without enclosing the third-party report, sub-section (2) would not be satisfied. And if the fit case order were passed without prior approval of the specified authority, sub-section (3) would not be satisfied — and section 280(1)(a) requires that very order to accompany the notice.
Compliance checklist and due dates
- Confirm the show cause notice enclosed the information relied on, as sub-section (2) requires.
- File a reply within the period specified; sub-section (3) requires the officer to take it into account.
- Ask to see the fit case order and check it records consideration of the reply and carries prior approval.
- Check whether sub-section (4) applied — if it did, the absence of a section 281 process is not a defect.
- Verify the section 281 notice was issued within the limits in section 282(2), which are shorter than those for a section 280 notice.
- Remember that further issues found later do not need a fresh section 281 process, under section 279(2).
Common mistakes
- Assuming section 281 always applies. Sub-section (4) lists three situations where it does not.
- Not replying to the show cause notice, which leaves the officer to decide on the material alone.
- Overlooking that the fit case order must carry prior approval of the specified authority.
- Confusing the section 281 time limits with those for section 280 — section 282 sets different periods for each.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.