[Opinion] The Taxpayer Certainty Year and the Missing Reform in the Income-tax Act 2025

Bijoy Das – [2026] 187 taxmann.com 331 (Article)

Why India Needs a Permanent Assessment Closure Guarantee After Four Years – The Endless Reassessment Window, the Constitutional Case Under Articles 14 and 19(1)(g), and a Legislative Proposal for Section 282A

1. The Problem – A Taxpayer Who Can Never Be Certain

The Income-Tax Act, 2025, which replaced the Income-Tax Act, 1961 with effect from 1 April 2026, was designed around the principles of simplicity, certainty, and digital efficiency. It succeeded admirably on simplicity – reducing 819 sections to 536, eliminating provisos within provisos, and reorganising the Act into 23 logical chapters. On certainty, however, the new Act missed a critical opportunity. Section 282 of the ITA 2025 preserves a reassessment window of up to 10 years from the end of the relevant Tax Year in cases involving alleged evasion exceeding Rs. 50 lakh. A taxpayer who filed a return for Tax Year 2026-27 may receive a valid reassessment notice as late as 2036-37 – a decade after the return was filed.

This 10-year exposure window imposes a structural certainty deficit on every Indian taxpayer. For corporate treasuries, it requires maintaining tax-return documentation for a decade – a storage, retrieval, and audit-readiness cost that falls disproportionately on small and medium enterprises. For individuals, it creates a perpetual exposure to reassessment that discourages genuine compliance and encourages conservative under-disclosure. For foreign investors, it is a material business risk factor that increases the effective cost of doing business in India. The ITA 2025’s simplification of language has not simplified the risk landscape.

This article proposes a legislative remedy – a new Section 282A of the ITA 2025, creating a ‘Taxpayer Certainty Year’ (TCY) mechanism. Under the TCY, once four years pass from the end of a Tax Year without a Section 282 notice being issued, the CBDT must issue a Certainty Certificate to the taxpayer, confirming that no reassessment will be initiated for that Tax Year. The TCY mechanism converts the current open-ended exposure into a bounded, legally-enforceable certainty guarantee. It is constitutionally valid, administratively feasible, and directly responsive to India’s long-standing complaint about its business environment – that tax disputes extend indefinitely and that resolution is never truly final.

2. The Architecture of Uncertainty – Section 282 and Its Predecessors

Section 282 of the ITA 2025 replaces Sections 147 -153 of the 1961 Act. Sub-section (1) permits notice for reassessment where income has escaped assessment. Sub-section (2) prescribes the limitation – three years from the end of the Tax Year in standard cases, five years where income escaping assessment exceeds Rs. 50 lakh, and ten years where the AO has information that income exceeding Rs. 50 lakh has escaped assessment in connection with assets, expenditure, or entry in books of account. The 10-year window was preserved from Section 149(1)(c) of the 1961 Act, itself a legislative response to the Benami and HSBC Geneva account revelation investigations of the 2010s.
The 10-year window is constitutionally justified as a Revenue protection measure for cases of deliberate concealment. But its practical operation is indiscriminate – it applies to every taxpayer against whom an information allegation is made regardless of whether the allegation is ever converted into an assessed demand. A taxpayer who receives a Section 282 notice in year 8 and successfully defends against it has spent 10 years in a state of potential reassessment exposure without any mechanism to close that exposure upon successful defence. The ITA 2025 does not introduce any such closure mechanism. This is the gap the TCY proposal addresses.

The Supreme Court’s ruling in Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC) on the interaction of TOLA and reassessment limitation, and the Bombay High Court’s ruling in G.M. Polyplast Ltd. v. Union of India (WP(L) No. 8508 of 2026, 24 April 2026) on the constitutional validity of Explanation 2 to Section 148, both confirm that reassessment limitation is a subject of active judicial contestation. The TCY mechanism would significantly reduce this contestation by introducing a clear, predictable, and enforceable certainty guarantee.

3. The Taxpayer Certainty Year – Legislative Mechanism

The proposed Section 282A would operate as follows. Sub-section (1) where no notice under Section 282(1) has been issued to a taxpayer for a Tax Year within four years from the end of that Tax Year, the CBDT shall, within 30 days of the expiry of the four-year period, issue a Taxpayer Certainty Certificate (TCC) to the taxpayer for that Tax Year. Sub-section (2) – the TCC is conclusive proof that no reassessment proceedings may be initiated for the relevant Tax Year, except in cases of fraud or wilful misrepresentation. Sub-section (3) – the four-year TCY window is tolled during any period when a Section 282 notice has been issued and is pending disposal preventing a taxpayer from obtaining TCC protection while a valid reassessment is ongoing. Sub-section (4) – the TCC is issued electronically through the income-tax portal and is accessible to the taxpayer and to any third party with whom the taxpayer shares it (e.g., lenders, investors, foreign tax authorities).

The TCC system would be implemented through a CBDT automated process on the income-tax portal – after four years from the end of each Tax Year, the system checks whether any Section 282 notice has been issued for that taxpayer and Tax Year. If not, the TCC is auto-generated and uploaded to the taxpayer’s dashboard. No manual AO involvement is required. The administrative cost is near-zero; the compliance benefit to taxpayers is substantial.