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Informist, Friday, Sept. 18, 2026

 

--SC stays HC order striking down Section 147A of Income Tax Act 

--CONTEXT:Section 147A allows retrospective reassessment by assessing officer 

--SC: HC order stay subject to tax dept not proceeding on re-assessment

 

NEW DELHI – The Supreme Court Friday stayed a Punjab and Haryana High Court's Sept. 10 order that struck down Section 147A of the Income Tax Act, 1961 which stated that from Apr. 1, 2021, jurisdictional assessing officers, and not the faceless system, were the right authority to issue reassessment notices. However, the stay on the high court order was subject to the tax department not proceeding with assessment and reassessment proceedings till final disposal of the matter. The court will hear the case next on Dec. 3. 

 

Section 147A of the Income Tax Act, 1961 was inserted through the Finance Bill 2026, with the government's stated aim of avoiding confusion as the new Income Tax Act, 2025, which was about to come into force in April this year. It clarifies that for Sections 148 and 148A, which allows the tax department to reopen past assessments if they believe income escaped taxation, an assessing officer means a physical, jurisdictional officer.

 

The high court had quashed a bunch of reassessment tax notices given to assessees. The high court had said that these notices have not been issued through the process of randomised allocation of assessing officers and in a faceless manner as is mandated under Section 151A of the Income Tax Act read with the faceless assessment scheme framed on Mar. 29, 2022. 

 

Section 147A only seeks to remove doubt and clarify that an assessing officer for the purpose of issuance of reassessment notices shall mean an assessing officer other than the National Faceless Assessment Centre or any assessment unit, noted the high court. However, Section 147A is noticeably silent with regard to the categoric findings returned by the constitutional courts that as per the faceless assessment scheme, framed under Section 151A, allocation of assessing officers is required to be done randomly and through automated allocation, it said.

 

Even after the retrospective enactment of Section 147A, Section 151A of the Act, and the faceless assessment scheme framed thereunder continue to exist on the statute book and without any amendment, said the high court. Thus, the primary basis on which the constitutional courts had held that notices issued under Section 148 could not have been issued by the jurisdictional assessing officer has not been removed through the retrospective enactment of Section 147A, it said. 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, said the court, Section 147A is also clearly found to be in direct conflict with Section 151A, read with the faceless assessment scheme framed thereunder, all of which provisions simultaneously exist in the same statute, it said.

 

The case has its genesis from an advocate Jyoti Sareen filing her income tax return for assessment year 2020-21 (Apr-Mar). Thereafter, Sareen was informed that some proceedings had been initiated against her by the Income Tax authorities and in this regard she was advised to go to the Income Tax Business Application Portal. On doing so, the petitioner in March 2024 found that a notice under Section 148 of the Act, relating to reassessment of her income, had been issued to her by the jurisdiction assessing officer.

 

Challenging the notice for reassessment of her income, the petitioner moved the high court. The petitioner said that the faceless assessment scheme should have been followed by the tax authorities. While the case was pending, various high courts held that the reassessment notices could only be issued by a faceless assessment officer. The high courts had held that Section 151A of the Act read with the faceless assessment scheme, which still exists in the Income Act, clearly provides that reassessment notices are required to be issued randomly through automated allocation and in a faceless manner and in the light of such clear mandate of law the "clarification" sought to be made through the introduction of Section 147A is in direct conflict with such substantive provisions within the same Income Tax Act, they said.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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