SC stays Supreme Court’s order to strike down provisions on income tax reassessment process | Today’s news
Mumbai: The Supreme Court on Friday stayed the order of the Punjab and Haryana High Court striking down provisions of the Income Tax Act, including the reassessment proceedings.
After hearing the Centre’s plea challenging the high court’s September 10 judgment, a bench of the apex court comprising Justice JB Pardiwal and Justice K. Vinod Chandran said, “The impugned order shall remain in abeyance subject to the condition that neither assessment nor reconsideration shall proceed till the final decision of the main case.” ordered by the court.
The matter will be heard for a final hearing on December 3.
On Wednesday, Additional Solicitor General N. Venkataraman told the court that the High Court’s decision had created a “huge vacuum” in the tax department’s review process.
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The dispute was over whether regular Jurisdictional Assessing Officers (JAOs) could issue reconsideration notices, or whether notices had to be issued through an anonymous review system.
The problem arose after the tax department switched to an anonymous system for several assessment and reassessment procedures.
Under the anonymous system, cases are assigned electronically and taxpayers usually deal with the tax authorities online rather than with a specific local tax officer. The government introduced the system to reduce direct interaction between taxpayers and tax officials.
The Central Board of Direct Taxes (CBDT) on 29 March 2022 notified the scheme under section 151A for anonymous assessment 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.
Section 147A of the Income Tax Act clarified that traditional local tax officers instead of an automated centralized anonymous system have the statutory power to conduct assessment proceedings under sections 148 and 148A.
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.
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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 that the trial had not followed the anonymous scheme.
The decision led to more taxpayers challenging similar notices. The High Court ended up dealing with a batch of more than 500 joined 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.
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