Supreme Court Stays Punjab and Haryana HC Order Declaring Section 147A Income Tax Act Unconstitutional

The Supreme Court on Friday stayed the Punjab and Haryana High Court judgment declaring Section 147A of the Income Tax Act, 1961, unconstitutional.

A bench comprising Justice JB Pardiwala and Justice K. Vinod Chandran stayed the High Court judgment until the final disposal of the Special Leave Petition filed by the Union Government challenging the ruling.

“The impugned order shall remain stayed on the condition that assessment as well as reassessment proceedings shall not proceed further till final disposal of the main matter. Notify this appeal for the final hearing on 3rd December.”, the court ordered.

The Union Government had approached the Supreme Court after the High Court held that the retrospective insertion of Section 147A did not cure the legal defect concerning the authority to issue reassessment notices under Section 148 of the Act.

The matter was earlier 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 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 dispute concerns whether reassessment notices under Section 148 can be issued by a taxpayer's local Jurisdictional Assessing Officer or whether such notices must be issued through the faceless assessment mechanism.

The issue arose in the context of Section 151A of the Income Tax Act and the scheme notified under the provision on March 29, 2022. The scheme provides for automated allocation of cases and faceless proceedings in specified proceedings under the Act.

Several High Courts had held that reassessment notices issued by Jurisdictional Assessing Officers were invalid where 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 provided 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 further stated that it would operate notwithstanding any judgment, order or decree of a court, Section 151A or any scheme framed under that provision.

The Punjab and Haryana High Court, however, held that Section 147A did not cure the defect identified by earlier constitutional court judgments. It found that Parliament had not amended Section 151A or the scheme framed under it, including the requirement concerning automated and random allocation of cases.

The High Court consequently declared Section 147A unconstitutional.

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