Supreme Court stays Punjab and Haryana HC ruling declaring Section 147A of Income Tax Act unconstitutional
New Delhi: 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 and invalidated reassessment notices issued by jurisdictional Assessing Officers.
A Bench comprising Justices J.B. Pardiwala and K. Vinod Chandran issued the interim order while considering a Special Leave Petition (SLP) filed by the Union of India and tax authorities challenging the September 10 High Court ruling.
While staying the decision, the apex court paused all related reassessment proceedings pending a final outcome, scheduling the matter for a conclusive hearing on December 3.
"The impugned judgment and order passed by the High Court shall remain stayed on the condition that the assessment proceedings shall not proceed further till the final disposal of the main matter," the Justice Pardiwala-led Bench ordered.
Origin of the Legal Dispute
The dispute arises from a batch of writ petitions before the Punjab and Haryana High Court challenging Section 147A of the Income Tax Act. The provision was introduced retrospectively from April 1, 2021, via the Finance Bill, 2026.
Petitioners argued that Section 147A violated Articles 14, 19(1)(g), and 265 of the Constitution. They also contested reassessment notices issued under Section 148, arguing they bypassed the automated, randomised allocation system mandated under Section 151A and its accompanying faceless scheme.
On September 10, a High Court Division Bench of Justices Deepak Sibal and Rupinderjit Chahal ruled that Section 147A's retrospective application could not displace the statutory framework establishing faceless proceedings and automated case distribution.
The High Court noted that Section 147A aimed to clarify that an Assessing Officer under Sections 148 and 148A refers to an officer separate from the National Faceless Assessment Centre (NFAC) or assessment units under Section 144B.
Previous Supreme Court Proceedings
Earlier, on April 10, the Supreme Court had set aside prior rulings on the issue because the underlying legislative framework had been altered, sending the matters back to the respective High Courts for fresh evaluation.
At that time, the apex court left open all questions regarding the validity, scope, retrospectivity, and effect of the amended provision, while temporarily halting further assessment steps.
Upon fresh examination, the Punjab and Haryana High Court concluded that it had "no hesitation to declare Section 147A of the Act to be unconstitutional".
The High Court added that, even setting Section 147A aside, Section 148 notices issued directly by jurisdictional Assessing Officers were legally unsustainable because they failed to follow the randomized allocation process mandated by Section 151A and the scheme dated March 29, 2022. Consequently, the High Court quashed the contested notices and granted relief to the petitioners.
Following that decision, the Union government, the Central Board of Direct Taxes (CBDT), the Deputy Commissioner of Income Tax, and the NFAC appealed to the Supreme Court, securing the present interim stay order. (IANS)