A practical guide to replying inside a faceless reassessment: the return, the 142(1) questions, the show cause notice, video hearings and the evidence that keeps additions small.
Say you deposited ₹18 lakh in cash into your savings account in FY 2022-23. Some came from selling old family jewellery, some was rent paid in cash, and some was money you'd withdrawn months earlier and never spent. Then a reassessment notice turns up on the income tax portal, with nobody across a desk to explain it to.
That's faceless reassessment. No officer to meet. Every question, reply and order moves through the e-filing portal, and what you upload is the whole story the department will ever read.
Our earlier post on whether you can stop reassessment dealt with validity. This one starts after that, when the case is running and the fight is over the size of the addition. Income tax reassessment litigation is mostly won or lost here, long before any appeal.
As a CA firm in Gurgaon that handles these files every month, here's the practical version we give our own clients.
The Income-tax Act, 2025 came into force on 1 April 2026, and many people assume their notice now falls under it. Usually it doesn't. What matters is the year being reopened, not the date on the notice. Reassessment of AY 2026-27 or earlier stays under the 1961 Act, through the savings clause in Section 536 of the new Act.
So your notice will still say Section 148, questions will come under Section 142(1), the faceless procedure is Section 144B and unexplained money is taxed under Section 115BBE. The new numbers (Sections 279 to 286, 268(1), 273, and 102 to 106) apply only once tax year 2026-27 onwards is reopened.
Log in and go to Pending Actions, then e-Proceedings. Each notice sits there with its DIN, assessment year, section and response date. Download the PDF and every annexure. The information the department relied on is usually attached there, not written into the notice.
A few portal habits save a lot of grief. A response can't be edited or withdrawn once submitted. Each file can be up to 5 MB, with ten attachments and 50 MB per response, so split long bank statements and name files clearly. And add your CA as authorised representative so one person files everything.
The Section 148 notice asks you to file a return for the reopened year, within the time printed on it. That can't exceed three months from the end of the month of issue, and since the Finance Act, 2026 it can't be less than 30 days.
File it, even if you plan to object. Filing isn't acceptance of the reopening. Skipping it lets the case run as a best judgment assessment, and those rarely end well.
Declare only income that's genuinely taxable. If the cash has explainable sources, your income stays the same and the explanation goes into your replies. If part of it really was missed, offering it now with tax and interest is usually cheaper than having it added later as unexplained money. From 2026, you can also file an updated return in response to the notice, at the usual additional tax plus a further 10% of tax and interest, if the year is still inside the updated return window. It's an admission you can't take back, so use it only for income you know was missed.
If the information, the Section 148A order or the approval isn't in your file, ask for it in writing through e-Proceedings. You can't answer an allegation you haven't seen.
Read More: Section 148A Notice: How to Reply and Stop Reassessment
Since 2022, reassessments have gone through the faceless scheme. Behind the portal sit the National Faceless Assessment Centre and its units: an assessment unit that asks questions and drafts the order, plus verification, technical and review units. You never learn who's on your case. That's deliberate.
Once your return is in, the questions arrive as Section 142(1) notices, and they're pointed. Give the source of cash deposits in a named account. Explain how the flat was funded. Reconcile your return with your AIS.
Answer each question in order, with a short note and documents numbered to match. Vague answers read as having nothing to show. We'd rather upload 40 pages of marked bank entries than one page of assurances. Need more time? Seek an adjournment on the portal before the due date.
Before adding anything, the assessment unit must issue a show cause notice setting out the proposed variation, usually with a draft computation. This is your last real chance before the order, and the window is often short.
Reply to every proposed addition separately, because anything left unanswered is treated as accepted. Upload any missing document now, with one line on why it matters.
Ask for a personal hearing by video conference here. Under Section 144B, once you ask, it must be given. There's a portal button, but a request inside the written reply also counts. In August 2026 the Madras High Court set aside an order where such a request was ignored. Honestly, a 15-minute video hearing with a clear chart of deposits often does more than ten pages of submissions.
Also Read: Faceless Assessments & Appeals Under Income Tax Act: A Guide
Section 68 covers credits in your books you can't explain, like a loan or capital introduced. You must show who the lender is, that they could afford it and that the deal was genuine. From AY 2023-24, the lender must also explain where their own money came from.
Sections 69, 69A and 69C catch investments, money and spending with no explained source. For the years now being reopened, AIS flags drive most of these: cash deposits of ₹10 lakh or more in savings accounts, a property worth ₹30 lakh or more, large mutual fund purchases. Plain AIS or Form 26AS mismatches (forgotten FD interest, a share sale) are taxed at normal rates, but they add up.
Why does the first group hurt? Section 115BBE taxes it at a flat 60%, plus 25% surcharge and 4% cess, roughly 78% in all, with no expense or loss set off. The Finance Act, 2026 cut the rate to 30%, but only from tax year 2026-27. Any year reopened today is still at 60%.
Then penalty. Additions under Sections 68 to 69D attract 10% of that tax under Section 271AAC, in place of Section 270A. Other additions fall under Section 270A: 50% of the tax for under-reporting, 200% if the department calls it misreporting. Our note on penalty proceedings covers how those are fought.
This is roughly what we ask clients for, adjusted to the notice:
Then use the arguments that actually cut the number.
You don't need to explain all ₹18 lakh. If ₹11 lakh traces to the jewellery sale and earlier withdrawals, prove that, and the dispute shrinks to ₹7 lakh. All-or-nothing replies are how full additions happen.
When money goes in and out of one account repeatedly, adding every deposit counts the same rupee several times. Peak credit asks that only the highest unexplained balance be added.
Income already added or declared can explain a later investment made from that same money, so it isn't taxed twice.
Round cash figures get tested hard. Land records, mandi receipts and a believable yield per acre carry the claim. A bare statement won't.
If additions survive, the order comes with a demand and usually a penalty notice. You have 30 days to appeal to the Commissioner (Appeals), and you can seek a stay of demand meanwhile. Check the date too: the reassessment must be completed within 12 months from the end of the financial year in which the Section 148 notice was served.
No. Replies go through e-Proceedings, and hearings happen only by video conference. An email outside the portal isn't treated as your response.
Often, if the gap is short and the trail is clear. A withdrawal two years before the deposit is a harder story, so explain why the cash stayed at home.
It can examine other escaped income that surfaces during the proceedings, though High Courts have read the limits differently. Answer fully, and don't volunteer unrelated issues.
No. It applies only from tax year 2026-27. A reopened AY 2023-24 is still taxed at 60% plus surcharge and cess.
DSRV India has handled tax disputes since 1987. We're an ICAI-registered, peer-reviewed CA firm in Gurgaon, and our team builds reassessment files, drafts replies and appears in faceless video hearings. Send us your notice and we'll tell you plainly where the addition can be cut.
Income tax reassessment litigation starts with your first reply. How to answer a faceless reassessment notice and keep large additions small.
Income tax reassessment litigation: legal grounds to challenge an invalid Section 148 reopening, key Supreme Court rulings and the right forum.
Income tax dispute resolution for businesses: rectification, stay of demand, CIT(A) and ITAT appeals, with 2026 time limits, fees and strategy.
