Section 147A Unconstitutional: P&H HC Quashes JAO-Issued Section 148 Notices

Summary: The Punjab and Haryana High Court in Jyoti Sareen v. Union of India & Ors. struck down Section 147A of the Income-tax Act, 1961, introduced retrospectively through the Finance Act, 2026, holding that the provision impermissibly sought to override judicial decisions without removing the statutory foundation on which those decisions rested. The Court held that Section 151A, read with the e-Assessment of Income Escaping Assessment Scheme, 2022, mandated automated allocation and faceless issuance of reassessment notices under Section 148. Since Section 147A did not amend the underlying statutory scheme, it could not retrospectively validate notices issued by Jurisdictional Assessing Officers contrary to that mechanism. Relying on the constitutional principles governing validating legislation, including the Supreme Court decisions in NHPC Ltd. and Shri Prithvi Cotton Mills, the High Court declared Section 147A unconstitutional and quashed the impugned notices issued by JAOs. The ruling reinforces the doctrine of separation of powers, the binding nature of statutory reassessment procedures and the principle that executive instructions cannot override legislation or notified schemes.

P&H High Court stucked down Section 147A of the Income-tax Act, 1961 as unconstitutional for violating the doctrine of separation of powers

Section 147A Unconstitutional: Punjab & Haryana HC Quashes JAO Reassessment Notices

1. Quick Summary

A one-paragraph overview of what the case is about and the final outcome.

Bottom Line: The Punjab & Haryana High Court struck down Section 147A of the Income-tax Act, 1961 as unconstitutional for violating the doctrine of separation of powers. The Court held that the legislature cannot retrospectively validate reassessment notices issued by Jurisdictional Assessing Officers (JAOs) without amending Section 151A or its underlying Scheme, which mandates faceless assessment. Consequently, all impugned Section 148 notices issued by JAOs were quashed.

2. Key Facts

Brief background necessary to understand the dispute.

• Context: The petitioner, an advocate, received a notice under Section 148 of the Income-tax Act, 1961 from her Jurisdictional Assessing Officer (JAO) for AY 2020-21. She challenged the notice on the ground that it was not issued through randomized automated allocation in a faceless manner as mandated by Section 151A read with the e-Assessment Scheme, 2022.
• The Issue: While similar challenges were pending before various High Courts and the Supreme Court, the Legislature introduced Section 147A via the Finance Bill, 2026 with retrospective effect from 01.04.2021. This provision sought to “clarify” that for Sections 148 and 148A, the term “Assessing Officer” always meant an officer other than the National Faceless Assessment Centre (NFAC) or its units, effectively validating JAO-issued notices despite contrary judicial findings.
• Procedural History: The Supreme Court had earlier set aside favorable High Court judgments and remitted matters back to respective High Courts to decide the constitutional validity of Section 147A, while granting interim stay on reassessment proceedings.

3. Questions Presented

The specific legal questions the Court had to answer.

• Whether Section 147A of the Income-tax Act, 1961 is ultra vires Articles 14, 19(1)(g), and the basic structure of the Constitution (specifically Separation of Powers)?
• Whether the retrospective introduction of Section 147A successfully removes the legal basis on which multiple High Courts had previously invalidated notices issued by Jurisdictional Assessing Officers?
• Independently of Section 147A, whether notices under Section 148 issued by JAOs violate the mandate of Section 151A read with the e-Assessment of Income Escaping Assessment Scheme, 2022?

4. Court’s Reasoning

The main logic used by the Court to arrive at its decision.

On Issue 1 & 2: Validity of Section 147A

• The Court observed that while the Legislature has the power to enact retrospective validating laws, it must remove the basis of the judgment it seeks to nullify. It cannot merely declare a court decision ineffective by fiat.
• Relying on NHPC Ltd. v. State of HP and Shri Prithvi Cotton Mills, the Bench held that Section 147A failed this test because it did not amend Section 151A or the Scheme framed thereunder. Since the statutory foundation (Section 151A + Scheme) requiring faceless allocation remained untouched, the “defect” pointed out by previous courts was not cured.
• The Court noted that Section 147A explicitly omitted reference to Section 130 and its Scheme, despite those being key pillars of the earlier adverse judgments. This selective amendment confirmed the legislative intent was to circumvent unfavorable verdicts rather than correct a legislative oversight, amounting to impermissible legislative overreach.

On Issue 3: Independent Challenge to JAO Notices

• The Court rejected the Revenue’s argument that the phrase “to the extent provided in Section 144B” in the 2022 Scheme limits its application only to final assessment, excluding notice issuance.
• It clarified that Clause 3(b) of the Scheme explicitly covers “issuance of notice under section 148.” Interpreting it otherwise would render the entire Scheme redundant, as Section 144B already governs assessments.
• Applying the principle that “if a statute provides for a thing to be done in a particular manner, it must be done in that manner and no other,” the Court held that JAOs lacked jurisdiction to issue Section 148 notices after the implementation of the Faceless Scheme dated 29.03.2022. Office Memorandums and circulars cannot override statutory mandates.

5. Final Order

What was the actual result?

• Allowed: The writ petitions were allowed.
• Struck Down: Section 147A of the Income-tax Act, 1961 is declared unconstitutional and void.
• Quashed: All impugned notices issued under Section 148 by Jurisdictional Assessing Officers are set aside for want of jurisdiction and non-compliance with the faceless allocation scheme.

6. Key Takeaways for Practitioners

Why does this matter?

• Revenue Cannot Rely on Sec 147A: Assessors and assessees alike should note that the retrospective validation mechanism in Section 147A has been judicially invalidated in P&H. Any reliance on this section to defend past notices is currently unsafe in this jurisdiction.
• Strict Compliance with Faceless Scheme: The judgment reinforces that procedural mandates under the e-Assessment Scheme, 2022 are mandatory, not directory. Notices not generated through automated random allocation are vulnerable to being quashed solely on jurisdictional grounds.
• Circulars vs. Statute: The Court reiterated that CBDT Office Memorandums (like the one dated 20.02.2023 asserting concurrent jurisdiction) have no legal sanctity if they contradict the plain text of the Act and notified Schemes.