The Oversight Committee will decide the fate of the notice of reassessment concerning taxpayers

The Supreme Court on Wednesday agreed to expeditiously hear the Centre’s challenge to the Punjab and Haryana High Court’s decision striking 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 review process. The bench agreed to list the Centre’s plea on Friday.

The dispute is over whether regular Jurisdictional Assessing Officers (JAOs) can issue reconsideration notices, or whether notices must be issued through an anonymous review system.

The matter reached the Supreme Court for the second time this year. In April, the Supreme Court considered a large batch of appeals in the same case. After Parliament introduced Section 147A through the Finance Bill 2026, it did not decide the dispute on the matter. The court remanded the cases to the respective high courts for consideration of the new provision, including its constitutionality and retroactive effect.

HC decision

The Punjab and Haryana High Court later struck down Section 147A on 10 September, declaring the provision unconstitutional.

On reassessment, the tax department can reopen the taxpayer’s past assessment if it believes that some income may have escaped taxation.

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Before reopening the assessment, the department may ask the taxpayer for an explanation. If he decides to proceed, he can issue a notice under section 148.

The government introduced an anonymous rating system to reduce direct interaction between taxpayers and tax officials. Under the system, cases are assigned electronically and taxpayers generally interact with the department online.

The CBDT notified the scheme under section 151A on 29 March 2022 for anonymous review and reassessment. The system allowed for automatic case allocation.

Despite this, these cases of regular JAOs continued to issue reconsideration notices in several cases. Taxpayers have challenged these notices in various high courts, arguing that the reassessment proceedings must be conducted under an anonymous system.

Different High Courts have given different decisions. Some allowed the JAO to issue notices, while others argued that notices must go through an anonymous system.

The debate started after Chandigarh lawyer Jyoti Sareen filed her income tax return for 2020-21 in September 2020 and her tax officer issued a Section 148 notice in March 2024 seeking to reopen her assessment,

Sareen challenged the notice in the Punjab and Haryana High Court, arguing that her regular revenue officer could not have issued the notice and that it should have gone through the anonymous system.

On 19 July 2024, the High Court quashed Sareen’s notice of reconsideration, saying the trial was not connected to the anonymous scheme.

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The decision led to more taxpayers challenging similar notices. The High Court ended up dealing with a batch of more than 500 related petitions.

While the dispute was ongoing, Parliament introduced section 147A through the Finance Bill 2026 with retrospective effect from 1 April 2021.

The provision sought to clarify that the Regular Assessing Officers can conduct reassessment proceedings and that the notices issued by them cannot be held invalid merely because of the anonymous assessment system.

Taxpayers challenged this provision, arguing that the amendment did not eliminate the legal problem identified by the courts.

The Punjab and Haryana High Court eventually struck down Section 147A. He stated that the Parliament cannot retroactively consider an earlier legal position as valid when the constitutional courts have already found this procedure to be defective. The court ruled that the amendment effectively sought to circumvent these earlier court findings.

As the government has now moved the High Court, it will have to consider whether section 147A can protect reassessment proceedings brought by regular tax officers and whether Parliament could give the provision retrospective effect.

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