Supreme Court stays P&H High Court verdict striking down Section 147A of Income Tax Act

The Supreme Court on Friday stayed a Punjab and Haryana High Court judgment that had struck down Section 147A of the Income Tax Act, 1961 as unconstitutional [Union of India and Others v. Bharat Industrial Enterprises Private Limited]

A Bench of Justices JB Pardiwala and K Vinod Chandran passed the order on a challenge filed by the Central government against the High Court ruling.

“The impugned judgment and order passed by the High Court shall remain stayed, subject to the condition that the assessment and reassessment proceedings shall not proceed further until the final disposal of the main matter,” the apex court ordered.

The dispute arose from the issue of whether notices for reopening income-tax assessments can be issued by a taxpayer’s local Jurisdictional Assessing Officer (JAO) or must be issued through the Faceless Assessing Officer or National Faceless Assessment Centre (NFAC).

The issue arose from Section 151A of the Income Tax Act and the e-Assessment of Income Escaping Assessment Scheme notified under it on March 29, 2022.

Under the scheme, notices under Section 148 for reopening assessments must be issued through automated allocation and in a faceless manner.

Taxpayers then challenged reassessment notices issued directly by their jurisdictional assessing officers.

However, the parliament introduced Section 147A through the Finance Act, 2026, with retrospective effect from April 1, 2021.

The provision contained a non-obstante clause and clarified that, notwithstanding any court judgment, Section 151A or any scheme framed under it, the assessing officer for such proceedings would mean an officer other than the NFAC or its assessment units.

On September 10, the Punjab and Haryana High Court struck down Section 147A as unconstitutional. It held that parliament could not override judicial decisions without removing the legal basis on which they were delivered.

The High Court found that Section 151A and the 2022 scheme continued to require reassessment notices to be issued through randomised automated allocation and in a faceless manner.

It held that merely introducing Section 147A with a non-obstante clause did not cure the underlying defect or resolve the conflict.

The Union government challenged this ruling before the Supreme Court which stayed the verdict.

The Court has listed the plea for final hearing on December 3.

Additional Solicitor General N Venkataraman appeared for the Central government.