Section 147A of Income Tax Act Unconstitutional

Punjab and Haryana High Court 

Why in News? 

A Division Bench of Justice Deepak Sibal and Justice Rupinderjit Chahal, in Jyoti Sareen v. Union of India and Others (2026), in a batch of over 500 writ petitions, declared Section 147A of the Income Tax Act, 1961 unconstitutional, holding that it failed to cure the actual defect identified by nine High Courts and impermissibly attempted to overrule binding judicial decisions. 

What was the Background of Jyoti Sareen v. Union of India and Others (2026) Case? 

• The petitioner, an advocate and income tax assessee, had earlier succeeded before the same High Court in a 2024 judgment quashing a reassessment notice issued to her by her Jurisdictional Assessing Officer (JAO) under Section 148, on the ground that such notices could only be issued by a Faceless Assessing Officer under Section 151A read with the "e-Assessment of Income Escaping Assessment Scheme, 2022" notified on 29.03.2022. 
• This view was shared by a majority of High Courts (Telangana, Bombay, Rajasthan, Madras, Karnataka, Andhra Pradesh, Gauhati, and Punjab and Haryana itself), while a minority (Calcutta, Delhi, Gujarat) held that JAOs retained concurrent jurisdiction. 
• While cross-Special Leave Petitions on this divergence were pending before the Supreme Court, Parliament enacted Section 147A through the Finance Act, 2026, with retrospective effect from 01.04.2021, providing that the Assessing Officer for the purposes of Sections 148 and 148A "shall mean and shall always be deemed to have meant" an officer other than the National Faceless Assessment Centre, notwithstanding any judgment, Section 151A, or scheme framed thereunder. 
• The Supreme Court, by order dated 10.04.2026, set aside the impugned High Court judgments on this limited ground, remitted all matters to the respective jurisdictional High Courts, granted assessees liberty to challenge Section 147A, directed disposal preferably by 30.09.2026, and granted interim stay of reassessment proceedings. 
• The petitioners argued that without amending Section 151A or the 2022 scheme, Parliament could not nullify binding judicial pronouncements through a mere retrospective non-obstante clause, and that this amounted to legislative overreach in breach of the separation of powers. 
• The Revenue argued that a harmonious reading of the relevant provisions showed JAOs retained authority to issue Section 148 notices, that over 95% of assessees had already submitted to JAO-issued notices, and that the financial impact of an adverse ruling was estimated at around ₹17 lakh crore. 

What were the Court's Observations? 

• On the Doctrine of Separation of Powers: 
  The Court held that although not expressly part of the Constitution, the doctrine of separation of powers is clearly visible from its scheme, and that the Constitution demarcates the judiciary, executive, and legislature, with a breach by either organ negating the equality guaranteed under Article 14. 
• On the Legislature's Power to "Make" Law versus "Declare" Judicial Findings: 
  The Court held that under Articles 245, 246, and the Seventh Schedule, the legislature has the power to make and amend laws, but cannot "declare" what the law laid down by constitutional courts was meant to be, nor directly annul or legislatively overrule a judicial decision that has attained finality between parties. 
• On the Permissible Scope of Retrospective Validating Legislation: 
  The Court held that the legislature can, even retrospectively, validate a statute held illegal by a court, provided it removes the basis or defect identified by the court in the earlier law; the validating law must be such that the court could not have arrived at the same decision had the validating law existed at the time of its judgment. 
• On Abrogation as a Device to Bypass Judicial Decisions: 
  The Court held that abrogation cannot be used by the legislature to bypass an unfavourable judicial decision, and that validating legislation enacted solely to defy a judicial pronouncement amounts to legislative overreach and is unconstitutional. 
• On the Actual Defect Left Uncured by Section 147A: 
  The Court found that the non-obstante clause in Section 147A omitted any reference to Section 130 of the Act and its scheme dated 28.03.2022, and, more critically, left Section 151A and the "e-Assessment of Income Escaping Assessment Scheme, 2022" completely unamended and intact on the statute book, meaning the actual defect identified by the High Courts remained uncured. 
• On the Foreclosed Statutory Window for Exclusion: 
  The Court noted that under the first proviso to Section 151A(2), the Central Government could have excluded Section 148 from the faceless scheme only by notification issued before 31.03.2022, a window Parliament had already let lapse, and held that what was statutorily foreclosed could not be achieved through Section 147A. 
• On the Stated Legislative Objective of Certainty: 
  The Court rejected the argument that Section 147A was enacted to achieve certainty and avoid litigation, observing that it instead became "the breeding ground of litigation," with thousands of petitions pending across at least eight High Courts. 
• On the Alternate Challenge to the Section 148 Notices: 
  The Court held that, even assuming Section 147A survived scrutiny, the impugned notices were independently liable to be quashed as they were not issued through randomized automated allocation as mandated by Clause 3(b) of the scheme dated 29.03.2022 framed under Section 151A. 
• On the Revenue's Reliance on Section 144B and CBDT Notifications: 
  The Court rejected the Revenue's contention that the phrase "to the extent provided in Section 144B" excluded Section 148 notices from the faceless requirement, holding this would render the scheme a dead letter, and further held that internal CBDT notifications issued under Section 120 could not override the statutory scheme framed under Section 151A and approved by both Houses of Parliament. 
• On Alignment with Other High Courts: 
  The Court expressly agreed with the majority line of High Court rulings (Telangana, Bombay, Punjab and Haryana's own prior decisions, Rajasthan, Madras, Karnataka, Andhra Pradesh, and Gauhati) and respectfully disagreed with the minority view of the Delhi, Gujarat, and Calcutta High Courts. 
• In view of the above, the Court allowed the entire batch of writ petitions, declared Section 147A of the Income Tax Act, 1961 unconstitutional and struck it down, and independently set aside all impugned Section 148 notices for not being issued through randomized automated, faceless allocation. 

What is Section 147A of the Income Tax Act, 1961? 

About: 

• Section 147A was introduced to clarify the designation of the Assessing Officer (AO) for the purposes of Sections 148 and 148A, specifying that the AO does not include the National Faceless Assessment Centre or assessment units under Section 144B(3). 
• It was originally enacted to remove doubts regarding the validity of notices issued by traditional Jurisdictional Assessing Officers (JAOs) instead of the automated faceless system. 

Key Details of Section 147A: 

• Jurisdictional Role: It addresses the authority and role of Jurisdictional Assessing Officers (JAOs) in reassessment proceedings, seeking to affirm that JAOs retain the power to issue reassessment notices. 
• Recent Legal Status: The Punjab and Haryana High Court struck down Section 147A as unconstitutional, ruling that the legislature could not use it to retrospectively override court verdicts regarding non-compliance with the randomized faceless allocation scheme.