Section 285 · Assessment
Section 285 of the Income-tax Act, 2025 — Other Provisions in Reassessment of Escaped Income (Tax Rate & Dropping of Proceedings)
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVI
📜 What the law says — Section 285, Income-tax Act 2025
285. (1) In an assessment, reassessment or recomputation made under section
279, the tax shall be chargeable at the rate or rates at which it would have
been charged had the income not escaped assessment.
(2) The proceedings initiated under section 279 shall be dropped on a claim made
by the assessee and on his showing to the effect that—
(a) the assessee had been assessed on an amount not lower than what he
would be rightly liable for, even if the income alleged to have escaped
assessment had been taken into account, or the assessment or compu-
tation had been properly made; and
(b) he has not impugned any part of the original assessment order for the
relevant tax year under section 356 or 357 or 378.
(Contd. from page 402)
(2) The provisions of sub-section (1) shall not apply in any case where any such assessment,
reassessment or recomputation as is referred to in that sub-section relates to a tax year in
respect of which an assessment, reassessment or recomputation could not have been made,
by reason of any other provisions limiting the time within which any action for assessment,
reassessment or recomputation may be taken, at the time when,—
(a) the order which was the subject-matter of the appeal, reference or revision, as the
case may be, was made; or
(b) the reference from the jurisdictional Principal Commissioner or Commissioner is
made to the Approving Panel under section 274(4).”
(3) Where a claim has been made by an assessee under sub-section (2), he shall not
be entitled to reopen matters concluded by an order under section 287 or 288 or
365(10) or 368 or 377.
Time limit for completion of assessment, reassessment and recomputation.
In plain language
What Section 285 actually deals with
Section 285 of the Income-tax Act, 2025 is the "Other provisions" section that supports the reassessment machinery. It is the direct successor to Section 152 of the old Income-tax Act, 1961. Do not confuse it with the old Section 285 of the 1961 Act (which required non-resident liaison offices to file an annual statement in Form 49C) — under the 2025 Act that liaison-office reporting has been renumbered elsewhere. In the 2025 Act, Section 285 is a short but powerful provision that answers two practical questions that arise whenever the Assessing Officer (AO) reopens a case for income escaping assessment under Section 279 (the successor to Section 147 of the 1961 Act):
- At what rate is the reassessed income taxed?
- When can the taxpayer get the reopening dropped?
Rule 1 — Tax at the rate of the original year (Section 285(1))
When an assessment, reassessment or recomputation is made under Section 279, the escaped income is charged to tax at the rate(s) that would have applied had the income never escaped assessment. In plain terms: if the AO reopens your 2023-24 case in 2027, the escaped income is taxed at the slab rates and surcharge in force for 2023-24, not at whatever rates apply in 2027. This protects both sides — the taxpayer is not hit with a later (possibly higher) rate, and the department cannot lose revenue merely because rates fell later.
Rule 2 — Dropping the reassessment (Section 285(2))
The proceedings under Section 279 must be dropped if the taxpayer shows two things together:
- (a) No actual under-assessment: that he was already assessed on an amount not lower than what he would rightly be liable for — even after including the allegedly escaped income or correcting the computation. In other words, the reopening would not actually increase his correct tax.
- (b) Original order not challenged: that he has not challenged any part of the original assessment order for that tax year in appeal or revision under Section 356 (appeal to Joint Commissioner/Commissioner (Appeals)), Section 357, or Section 378 (revision).
This is a fairness rule: if there is nothing more to tax, the AO cannot keep the reopening alive just to re-examine the whole file.
Rule 3 — Concluded matters cannot be reopened (Section 285(3))
If a taxpayer takes the benefit of the "drop the proceedings" claim under sub-section (2), there is a trade-off. He then cannot reopen matters that were already concluded by an order under the specified sections — Section 287, Section 288, Section 365(10), Section 368 or Section 377 (the appeal, revision and related final-order provisions of the 2025 Act). You cannot both ask for the reassessment to be dropped as harmless and simultaneously try to reopen settled issues in your favour. It is a "take it as it stands" condition.
Who it applies to
- Every taxpayer whose case is reopened under Section 279 — individuals, HUFs, firms, LLPs and companies — where the AO believes income has escaped assessment.
- It applies automatically; there is no separate form to file for Rule 1 (the rate is fixed by law). The drop-of-proceedings benefit under Rule 2 is claimed by the assessee during the reassessment.
How it interacts with related sections
- Section 279 is the trigger — it deals with income escaping assessment (old Section 147). Section 285 only operates once Section 279 proceedings exist.
- Sections 356 / 357 / 378 — the appeal and revision routes; using them on the original order blocks the drop-proceedings claim.
- Sections 287 / 288 / 365(10) / 368 / 377 — final appellate/revisional orders that become sealed once you invoke Section 285(2).
Practical implications
- No penalty by rate arbitrage: a reopening cannot be used to apply harsher current-year rates on old income.
- Genuine relief from pointless reopenings: if the escaped income does not change your correct tax, you can have the reassessment dropped — saving time, cost and litigation.
- Weigh the trade-off: before claiming a drop under 285(2), check that you are not giving up a genuine refund or relief on a concluded issue, because 285(3) will bar you from reopening it.
💡 Example
Example 1 — the tax rate rule (Section 285(1)). Rohit's case for the tax year 2023-24 is reopened by the AO in 2027 because interest income of ₹4,00,000 was left out. Suppose the slab/surcharge position for 2023-24 would tax that ₹4,00,000 at an effective 20%. Even though rates in 2027 are different, Section 285(1) requires the escaped ₹4,00,000 to be taxed at the 2023-24 rate — so the additional tax is ₹80,000 (plus applicable interest), computed on the old-year basis, not the new-year basis.
Example 2 — dropping the proceedings (Section 285(2)). Meena's original assessment for 2024-25 already taxed her total income at ₹18,00,000. The AO reopens the case alleging ₹1,50,000 of escaped professional receipts. But Meena shows that she had wrongly been assessed on ₹1,60,000 of income that was never really hers, which was left uncorrected. Even after adding the ₹1,50,000, her rightful income is not higher than the ₹18,00,000 already assessed. Because there is no genuine under-assessment and she never appealed the original order under Sections 356/357/378, the AO must drop the reassessment under Section 285(2). The catch: under 285(3), Meena cannot now separately reopen that concluded ₹1,60,000 issue to claim a refund.
A relatable story. Think of Section 285 like a shopkeeper being told years later that one day's sales entry was missing. The tax office says "we'll add it back." Section 285(1) says the missing sale is billed at the price list of that old day, not today's inflated menu. And Section 285(2) is the shopkeeper replying, "Actually you had overcounted another day by the same amount, so my total is already correct — please close this." The office must close it — but per Section 285(3), the shopkeeper then can't turn around and demand a refund on that overcounted day. Fair both ways.
| Aspect | Section 285, Income-tax Act 2025 | Equivalent in Income-tax Act 1961 |
|---|
| Subject | Other provisions for reassessment of escaped income | Section 152 — Other provisions |
| Trigger section (reopening) | Section 279 (income escaping assessment) | Section 147 |
| Rate of tax on escaped income | Rate of the original year (as if income never escaped) — Sec 285(1) | Section 152(1) |
| Drop-of-proceedings claim | Allowed if no real under-assessment AND original order not appealed/revised — Sec 285(2) | Section 152(2) |
| Appeal / revision sections referenced | Sections 356, 357, 378 | Sections 246 to 248, 264 |
| Bar on reopening concluded matters | Sections 287, 288, 365(10), 368, 377 — Sec 285(3) | Proviso to Section 152(2) |
| Effective from | 1 April 2026 | In force till 31 March 2026 |
Related sections
Section 279 — Income escaping assessment (reopening) Section 280 — Time limit for issue of reassessment notice Section 356 — Appeal to Commissioner (Appeals) Section 378 — Revision of orders Section 287 — Orders of appellate authority Section 270 — Assessment procedure
Frequently asked questions
Does Section 285 of the 2025 Act deal with non-resident liaison offices?
No. That was Section 285 of the old 1961 Act (annual statement in Form 49C). In the Income-tax Act, 2025, Section 285 is the 'Other provisions' section for reassessment of escaped income — the successor to Section 152 of the 1961 Act.
At what rate is escaped income taxed when my case is reopened?
Under Section 285(1), the escaped income is taxed at the rate(s) that applied in the original year — as if the income had never escaped assessment — not at the rates in force in the year the case is reopened.
Can I get a reassessment dropped?
Yes, under Section 285(2), if you show that even after including the alleged escaped income your correct tax liability is not higher than what you were already assessed on, and you have not challenged the original order in appeal or revision under Sections 356, 357 or 378.
What is the catch if I ask for the proceedings to be dropped?
Section 285(3) bars you from reopening matters already concluded by orders under Sections 287, 288, 365(10), 368 or 377. So you cannot use the drop-claim and simultaneously reopen settled issues in your favour.
Which section triggers a reopening in the first place?
Section 279 of the 2025 Act (income escaping assessment), the successor to Section 147 of the 1961 Act. Section 285 only comes into play once Section 279 proceedings are on foot.
From when does Section 285 of the 2025 Act apply?
The Income-tax Act, 2025 (as amended by the Finance Act, 2026) is effective from 1 April 2026, replacing the 1961 Act.
Do I have to file any form to get the benefit of Section 285(1)?
No. The old-year rate under Section 285(1) applies automatically by law. The drop-of-proceedings relief under Section 285(2) is claimed by you during the reassessment, not through a separate return or form.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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