Mint ·
SC to decide fate of reassessment notices affecting taxpayers
The Supreme Court on Wednesday agreed to urgently hear the Centre’s challenge against a Punjab and Haryana High Court ruling that struck down a provision of the Income-Tax Act, in a case that could affect reassessment proceedings involving several taxpayers.
Additional solicitor general N. Venkataraman told the bench. led by Chief Justice of India Surya Kant, that the Punjab and Haryana High Court ruling had created a “huge vacuum” in the reassessment process. The bench agreed to list the Centre’s plea on Friday.
The dispute is about whether regular jurisdictional assessing officers (JAOs) can issue reassessment notices or whether the notices must be issued through the faceless assessment system.
The matter has reached the Supreme Court for the second time this year. In April, the apex court considered a large batch of appeals on the same issue. It did not decide the dispute on merits after Parliament introduced Section 147A through the Finance Act, 2026. The court sent the cases back to the respective high courts to consider the new provision, including its constitutional validity and retrospective effect.
The Punjab and Haryana High Court later struck down Section 147A on 10 September, declaring the provision unconstitutional.
In a reassessment, the tax department can reopen a taxpayer’s past assessment if it believes that some income may have escaped taxation.
Before reopening an assessment, the department can ask the taxpayer for an explanation. If it decides to proceed, it can issue a notice under Section 148.
The government introduced the faceless assessment system to reduce direct interaction between taxpayers and tax officers. Under the system, cases are allocated electronically and taxpayers generally communicate with the department online.
The CBDT notified a scheme under Section 151A on 29 March 2022 for faceless assessment and reassessment proceedings. The scheme provided for automated allocation of cases.
Despite this, these cases of regular JAOs continued to issue reassessment notices in several cases. Taxpayers challenged these notices in various High Courts, arguing that reassessment proceedings had to follow the faceless system.
Different high courts gave different rulings. Some allowed JAOs to issue the notices, while others said the notices had to go through the faceless system.
The debate started after Chandigarh lawyer Jyoti Sareen filed her income-tax return for assessment year 2020-21 in September 2020 and her jurisdictional tax officer issued a Section 148 notice seeking to reopen her assessment in March 2024,
Sareen challenged the notice in the Punjab and Haryana High Court, arguing that her regular tax officer could not issue the notice and that it should have gone through the faceless system.
On 19 July 2024, the High Court quashed Sareen’s reassessment notice, holding that the process had not followed the of the faceless scheme.
The ruling led to more taxpayers challenging similar notices. The High Court eventually dealt with a batch of more than 500 connected petitions.
While the dispute was pending, Parliament introduced Section 147A through the Finance Act, 2026, with retrospective effect from 1 April 2021.
The provision sought to clarify that regular assessing officers could handle reassessment proceedings and that notices issued by them could not be treated as invalid simply because of the faceless assessment system.
Taxpayers challenged the provision, arguing that the amendment did not remove the legal problem identified by the courts.
The Punjab and Haryana High Court ultimately struck down Section 147A. It held that Parliament could not retrospectively treat an earlier legal position as valid when constitutional courts had already found the procedure defective. The court held that the amendment effectively tried to bypass those earlier judicial findings.
As the government has now moved the Supreme Court, it will have to consider whether Section 147A can protect reassessment proceedings initiated by regular tax officers and whether Parliament could give the provision retrospective effect.
Krishna Yadav is a Senior Correspondent at Mint, based in New Delhi, and part of the corporate bureau. He joined the newsroom as a trainee in 2023 and quickly grew into his current role. He writes on legal and regulatory developments in corporate India, with a focus on insolvency, taxation, company law, and policy. His reporting includes tracking and breaking key legal stories from the Supreme Court, Delhi High Court, NCLT, and NCLAT.<br><br>With a background in law, Krishna is known for simplifying complex legal developments into clear, accessible stories for readers. His work focuses on trends in corporate law and policy that affect businesses. This ranges from explaining tax disputes—like whether coconut hair oil is edible—to writing on why celebrities are seeking personal rights protection. He closely tracks India’s insolvency system, covering issues such as creditor losses, gaps in the process, and challenges in how the framework works in practice.<br><br>Krishna also tracks developments within law firms—covering hiring trends, how firms help companies navigate global challenges, and how the legal industry is adapting to artificial intelligence. Beyond legal reporting, he has written long-form pieces, including on-ground coverage of the 2024 general elections, capturing the scale and logistics of polling across India.<br><br>Outside work, he enjoys travelling, exploring new places, and reading about geopolitics and history.