Supreme Court Stays P&H High Court Ruling Striking Down Section 147A
Supreme Court stays P&H High Court judgment that declared Section 147A of the Income Tax Act unconstitutional, barring further assessment proceedings until final disposal.
The Supreme Court on Friday stayed a judgment of the Punjab and Haryana High Court that had struck down Section 147A of the Income Tax Act, 1961, as unconstitutional. A bench of Justices JB Pardiwala and K Vinod Chandran issued the interim order while hearing a plea moved by the Union government.
The court directed that the assessment proceedings would not move forward until the main matter is finally decided. The case has been listed for a final hearing on 3 December 2026.
What the provision does
Parliament introduced Section 147A through the Finance Act, 2026, giving it retrospective effect from 1 April 2021. The provision specifies that for the purposes of Sections 148 and 148A, the term "Assessing Officer" refers to an officer other than the National Faceless Assessment Centre (NFAC) or its assessment units. In effect, it affirms that local Jurisdictional Assessing Officers (JAOs) hold the authority to issue reassessment notices.
The amendment carries a non-obstante clause, meaning it is intended to operate regardless of any court judgment, Section 151A, or any scheme framed under that section.
The dispute over faceless assessments
The legal conflict behind Section 147A concerns the division of authority between local tax officers and the NFAC. After the government moved to a faceless tax regime, a question arose: could local officers still independently issue reassessment notices under Section 148 and pass orders under Section 148A, or was all such action required to go through the automated faceless system?
High Courts across the country reached differing conclusions. Several, including the Punjab and Haryana High Court in Income Tax Officer, Ward 2(1), Chandigarh v. Tej Partap Singh, cancelled reassessment notices issued by local officers, holding that action taken outside the faceless procedure was legally invalid. Other High Courts took the contrary view, upholding the power of local officers to issue such notices.
Grounds for the High Court's ruling
The Punjab and Haryana High Court held that the legislature cannot retrospectively declare a legal position to have always been valid when constitutional courts had already found the relevant procedure defective. It ruled that the amendment impermissibly sought to bypass the findings of constitutional courts.
The bench observed that Parliament had not amended the primary provision of Section 151A or the 2022 scheme, which continues to require randomised and faceless allocation of cases. Introducing Section 147A with retrospective effect, it held, did not by itself resolve the legal conflict.