Centre Challenges Punjab & Haryana HC Verdict Striking Down S.147A Income Tax

The Union Government has approached the Supreme Court challenging the Punjab and Haryana High Court judgment declaring Section 147A of the Income Tax Act, 1961, unconstitutional.

The matter was mentioned before Chief Justice of India Surya Kant by Additional Solicitor General N. Venkataraman, appearing for the Union.

The ASG sought urgent listing of the Special Leave Petition, stating that the High Court ruling had created a legal vacuum concerning income tax reassessment proceedings. The Chief Justice agreed to list the matter urgently.

The controversy concerns who can issue a reassessment notice under Section 148 of the Income Tax Act. The question is whether such a notice can be issued by the taxpayer's local Jurisdictional Assessing Officer (JAO) or whether it must be issued through the faceless assessment mechanism.

The issue arose from Section 151A of the Income Tax Act and the scheme notified under it on March 29, 2022.

Several High Courts had held that Section 148 notices issued by JAOs were invalid because the prescribed mechanism required automated and random allocation of cases and faceless proceedings. Other High Courts had taken a contrary view.

Against this backdrop, Parliament introduced Section 147A through the Finance Bill, 2026, with retrospective effect from April 1, 2021.

Section 147A clarified that, for the purposes of Sections 148 and 148A, the Assessing Officer would mean an officer other than the National Faceless Assessment Centre or an assessment unit referred to in Section 144B(3). The provision also stated that it would operate notwithstanding any judgment, order or decree of a court, Section 151A or any scheme framed under it.

The Punjab and Haryana High Court held that Section 147A did not cure the defect identified by earlier constitutional court judgments because it did not amend Section 151A or the scheme framed under it, including the requirement of automated and random allocation.

The court ruled,

“Without amending Section 151A of the Act or the scheme framed thereunder, the “clarification” made by the legislature through the retrospective enactment of Section 147A that Assessing Officers for the purpose of issuance of notices under Section 148 of the Act mean and shall always deemed to have meant to be Assessing Officers other than the faceless AOs is in defiance of and in conflict with the law laid down by the constitutional courts. Through such “clarification”, the legislature visibly seeks to substitute its opinion over and above the findings returned by the constitutional courts which is legally impermissible.”

The High Court consequently declared Section 147A unconstitutional.

It also held that the Section 148 notices before it were illegal, as they had not been issued through the randomised allocation and faceless process mandated under Section 151A and the March 29, 2022, scheme.