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Supreme Court to Hear Challenge Over Tax Reassessment Notices
The tax department can reopen an old tax assessment if it thinks some income was missed.
Before doing that, it sends the taxpayer a notice.
The main question is which tax officer is allowed to send that notice.
Taxpayers say the notice should come through an online, faceless system.
The Centre says regular tax officers can issue the notices.
Parliament passed a new rule called Section 147A to support the Centre’s position.
The Punjab and Haryana High Court struck down that rule.
The Supreme Court has agreed to quickly examine the dispute.
Its decision could affect many reassessment cases involving taxpayers.
The Supreme Court agreed to urgently hear the Centre’s challenge to a Punjab and Haryana High Court ruling on reassessment notices.
The dispute is whether regular jurisdictional assessing officers can issue notices or whether notices must use the faceless assessment system.
The High Court struck down Section 147A of the Income-Tax Act, calling it unconstitutional.
Section 147A, introduced through the Finance Act, 2026, sought to validate reassessment action by regular assessing officers retrospectively from 1 April 2021.
The Supreme Court will list the Centre’s plea on Friday after differing High Court rulings affected hundreds of taxpayer cases.
- Who
- The Centre, taxpayers, regular jurisdictional assessing officers, the Punjab and Haryana High Court, and the Supreme Court of India are involved.
- What
- The Supreme Court will hear the Centre’s challenge to the High Court’s decision striking down Section 147A and addressing who may issue reassessment notices.
- Where
- The dispute concerns reassessment proceedings across India, with the key ruling issued by the Punjab and Haryana High Court.
- When
- The Supreme Court agreed to hear the matter on Wednesday and will list it on Friday; Section 147A was introduced through the Finance Act, 2026, with retrospective effect from 1 April 2021.
- Why
- The parties disagree over whether reassessment notices must be issued through the faceless assessment system or may be issued by regular jurisdictional assessing officers.
Taxpayers’ position
Centre’s position
Who can issue notices
Taxpayers’ position
Taxpayers argue that reassessment notices must be issued through the faceless assessment system, not by regular jurisdictional assessing officers.
Centre’s position
The Centre argues that regular jurisdictional assessing officers can issue reassessment notices.
Validity of Section 147A
Taxpayers’ position
Taxpayers argue that Section 147A does not cure the legal defect identified by the courts and cannot retrospectively validate the earlier procedure.
Centre’s position
The Centre relies on Section 147A, which sought to clarify that regular assessing officers could handle reassessment proceedings and that their notices were not invalid solely because of the faceless system.
Effect of the High Court ruling
Taxpayers’ position
The Punjab and Haryana High Court held that Parliament could not retrospectively validate a procedure that constitutional courts had found defective.
Centre’s position
Additional Solicitor General N. Venkataraman told the Supreme Court that the ruling had created a “huge vacuum” in the reassessment process.
Key facts
- Supreme Court action
- The court agreed to urgently hear the Centre’s challenge and list it on Friday.
- High Court ruling
- The Punjab and Haryana High Court struck down Section 147A on 10 September as unconstitutional.
- Section 147A
- The provision was introduced through the Finance Act, 2026, with retrospective effect from 1 April 2021.
- Core legal issue
- Whether regular jurisdictional assessing officers can issue reassessment notices or must use the faceless assessment system.
- Affected litigation
- The Punjab and Haryana High Court dealt with more than 500 connected petitions.
- Faceless scheme
- The Central Board of Direct Taxes notified a Section 151A scheme on 29 March 2022 providing for automated case allocation.
- Initial case
- The dispute began after Jyoti Sareen challenged a Section 148 notice issued by her jurisdictional tax officer in March 2024.
Sources
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