Chapter XVI - Procedure for Assessment
Section 281
Section 281: procedure before issuance of notice under Section 280
Section 281 builds in a hearing before reopening: before issuing a notice under Section 280, the Assessing Officer must first serve a show-cause notice explaining why a Section 280 notice should not be issued, give the assessee a chance to reply, and then pass a reasoned order (with the specified authority's approval) on whether to proceed.
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Need advice on Section 281?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Where the Assessing Officer has information which suggests that income chargeable to tax has escaped assessment in the case of an assessee for the relevant tax year, he shall, before issuing any notice under section 280 provide an opportunity of being heard to such assessee by serving upon him a notice to show cause as to why notice under section 280 should not be issued.
(2) The notice to show cause referred to in sub-section (1) shall be accompanied by the information which suggests that income chargeable to tax has escaped assessment in his case for the relevant tax year, and on receipt of such notice, the assessee may furnish his reply within such period, as specified therein.
(3) The Assessing Officer shall, on the basis of material available on record and taking into account the reply of the assessee furnished under sub-section (2), if any, pass an order with the prior approval of the specified authority determining whether or not it is a fit case to issue notice under section 280.
(4) The provisions of this section shall not apply to income chargeable to tax escaping assessment for any tax year in the case of an assessee, where the Assessing Officer has received—
(a) information under the scheme notified under section 260; or
(b) directions issued by the Approving Panel under section 274(6); or
(c) any finding or direction contained in an order passed by any authority, Tribunal or court in any proceeding under this Act by way of appeal, reference or revision, or by a Court in any proceeding under any other law.
Introduction
Before most notices for income escaping assessment are issued under section 280, section 281 gives the assessee a show-cause notice, the underlying information and a chance to reply. The Assessing Officer then makes a fit-case decision with specified approval.
Subsection (4) identifies information, directions and findings for which this preliminary process does not apply.
Key takeaways
Show-cause before reopening notice
Where this procedure applies, the Assessing Officer gives the assessee an opportunity to explain why a section 280 notice should not issue.
Decision needs approval
The officer considers the material and reply, then passes the statutory decision with prior approval of the specified authority.
Exceptions are express
The section lists information or directions for which this separate show-cause procedure is not required.
The show-cause notice
Where the Assessing Officer has information suggesting income has escaped assessment for the relevant tax year, he must, before issuing a notice under section 280, give the assessee an opportunity of being heard by serving a notice to show cause as to why the section 280 notice should not be issued.
This show-cause notice must be accompanied by the information suggesting escaped income, and the assessee may furnish a reply within the period specified in the notice.
The Assessing Officer's decision
Based on the material on record and the assessee's reply (if any), the Assessing Officer must pass an order, with the prior approval of the specified authority, deciding whether or not it is a fit case to issue a notice under section 280.
When this show-cause step does not apply
This section does not apply where the Assessing Officer has received information under the scheme notified under section 260, directions from the Approving Panel under section 274(6), or a finding/direction in an appellate, revision or other-law court order - in these cases a notice under section 280 can be issued directly.
Step-by-step flow for the show-cause procedure under Section 281
- 1
Does the Assessing Officer have information suggesting that income has escaped assessment for the relevant tax year?
Section 281(1) starts only when there is such information. Without it, the Section 281 procedure does not begin.
- No: No show-cause notice under Section 281 is issued on this basis.
- Yes: Go to the next step.
- 2
Is the information of a kind listed in Section 281(4)?
Section 281(4) excludes: information under the scheme notified under Section 260; directions of the Approving Panel under Section 274(6); and a finding or direction in an order of an authority, Tribunal or court in appeal, reference or revision, or of a Court under any other law.
- Yes: Section 281 does not apply. The Assessing Officer proceeds under Section 280, which separately requires prior approval of the specified authority in these cases (Section 280(5)).
- No: Go to the next step.
- 3
Serve a show-cause notice with the information
Under Sections 281(1) and 281(2), the notice asks why a Section 280 notice should not be issued and must be accompanied by the information suggesting escaped income. It states the period for reply.
- 4
Does the assessee reply within the period specified in the notice?
Section 281(2) allows the assessee to furnish a reply within the period specified. The Act does not fix the length of that period in this section.
- 5
Pass an order with prior approval of the specified authority
Under Section 281(3), the Assessing Officer decides, on the material on record and any reply, whether it is a fit case to issue a Section 280 notice. The specified authority is named in Section 284. The time limits for the show-cause notice are in Section 282(2) and (3).
Practical checklist
Do
- Read the information enclosed with the show-cause notice and respond within its stated period.
- Preserve the reply, supporting records and the order deciding whether a section 280 notice should issue.
Avoid
- Assume the section 281 show-cause step applies when one of subsection (4)’s statutory exclusions is present.
Illustrative example
Worked example: replying to a show-cause notice about unreported interest
Hypothetical facts (illustration only, not a real taxpayer): Mr. Rao, a salaried individual, receives a show-cause notice under Section 281 for tax year 2026-27. The enclosed information shows bank interest of ₹1,80,000 (assumed figure) that does not appear in his return. The information did not come from the Section 260 scheme, an Approving Panel direction, or an appellate or court order.
Check that Section 281 applies
None of the Section 281(4) exclusions applies, so the Assessing Officer must give him a hearing before any Section 280 notice.
Read the enclosed information
Section 281(2) requires the information to accompany the notice. Mr. Rao matches it against his bank statements and finds that ₹1,20,000 of the interest belongs to a joint account where his spouse is the first holder and has reported it (assumed facts).
Reply within the stated period
He files his reply within the period given in the notice, with the bank statements and the spouse's return extract. On his figures, the amount he has not reported is ₹1,80,000 − ₹1,20,000 = ₹60,000.
Order under Section 281(3)
The Assessing Officer considers the record and the reply and passes an order, with the specified authority's prior approval, on whether it is a fit case to issue a Section 280 notice.
Outcome
- Mr. Rao's reply is part of the record that the Section 281(3) order must take into account.
- Whether a Section 280 notice follows depends on that order. The time limits in Section 282 also apply.
Frequently asked questions
Do I get a hearing before a reassessment notice is issued against me?
Yes, in most cases. Section 281 requires the Assessing Officer to serve a show-cause notice, along with the information suggesting escaped income, and consider your reply before deciding whether to issue a formal notice under section 280.
When can the Assessing Officer skip the show-cause step?
Under Section 281(4), the show-cause step is skipped where the Assessing Officer already has information under the section 260 scheme, directions from the Approving Panel under section 274(6), or a finding/direction contained in an appellate, revision or court order.
Need help applying this provision to your situation?
Get help replying to a Section 281 show-cause noticeLast updated 9 October 2026