Case Law Details
ITO Vs ATC Exports (Karnataka High Court)
The Revenue filed a writ appeal challenging the order of the learned Single Judge, which had allowed the writ petition by quashing the show cause notice and the consequential reassessment orders dated 06.08.2024, 26.08.2024 and 29.08.2024. During the hearing, both parties brought to the notice of the Karnataka High Court the decision of the Supreme Court in Civil Appeal No. 4716 of 2026 dated 10.04.2026, dealing with an identical issue arising after the insertion of Section 147A into the Income-tax Act.
The Supreme Court had noted that Section 147A, inserted by Act No. 4 of 2026 with retrospective effect from 01.04.2021, clarifies that the “Assessing Officer” for the purposes of Sections 148 and 148A means an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in Section 144B. The Supreme Court observed that the High Courts had primarily quashed reassessment notices on the ground that the Jurisdictional Assessing Officers lacked competence, whereas the retrospective amendment had altered the foundation of those decisions. The Supreme Court therefore set aside such judgments on that limited ground, remitted the matters to the respective High Courts for fresh consideration, granted liberty to assessees to amend their writ petitions and challenge Section 147A or connected provisions, and left all questions relating to the validity, scope, retrospectivity and applicability of the amendment open. It also directed that interim stay of reassessment proceedings would continue during the pendency of the writ petitions, subject to the terms imposed by the High Courts.
The parties also referred to the Supreme Court’s order dated 04.05.2026 directing that, where the matter related to AY 2015-16, the High Court should first determine whether the reassessment notice was time-barred. In other cases, the issues were to be decided in accordance with the Supreme Court’s order dated 10.04.2026.
Taking note of the submissions of both parties and the Supreme Court’s directions, the Karnataka High Court declined to examine the merits of the dispute. It allowed the writ appeal, set aside the order of the learned Single Judge, and remanded the matter for fresh consideration. The Court granted liberty to the assessee to challenge Section 147A, as introduced by Act No. 4 of 2026, or any connected or consequential provisions within four weeks, and granted the Revenue three weeks thereafter to file additional affidavits or written submissions. The learned Single Judge was requested to follow the timelines prescribed by the Supreme Court, and the interim protection granted by the Supreme Court was directed to continue for the benefit of the parties.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The above writ appeal is filed questioning the learned Single Judge’s order dated 23.10.2025 in W.P.No.31480/2025, whereunder the writ petition is allowed, quashing the impugned show cause notice and consequential orders at Annexures-A, D and C dated 06.08.2024, 26.08.2024 and 29.08.2024 respectively.
2. Learned counsel appearing for the parties bring to the notice of this Court the order passed by the Hon’ble Apex Court in Civil Appeal No.4716/2026 dated 10.04.2026 reported in [2026] 185 Taxmann.com 1007 (SC), whereunder the Hon’ble Apex Court in identical fact situation, taking note of the amendment by way of insertion of Section 147A into the Income Tax Act, passed the following order:
“15. It is stated by the Learned Assistant Solicitor General that by inserting Section 147A into the IT Act, the term ‘Assessing Officer’ has been expressly clarified to mean an officer other than the faceless units and the same is deemed to have come into effect retrospectively from 01.04.2021. The said provision reads as follows:
Insertion of new section 147A.
9. After section 147 of the Income-tax Act, the following section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2021, namely:––
“147A. Notwithstanding anything contained in any judgement, order or decree of any court or in section 151A or in any scheme framed thereunder, for the removal of doubts, it is hereby clarified that the Assessing Officer for the purposes of sections 148 and 148A shall mean and shall always be deemed to have meant to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in sub-section (3) of section 144B.”.
16. It is also asserted that the amendment to Section 279 of the Income Tax Act, 2025 is to bring it in consonance with the newly inserted Section 147A of the IT Act, thereby implying that the “Assessing Officer” for the purposes of Sections 280 and 281 of the Income Tax Act, 2025 shall mean to be an Assessing Officer other than the NFAC or any assessment unit referred to in Section 273(3). The amended Section 279 reads as follows:
71. In section 279 of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted, namely: –– ‘(3) The “Assessing Officer” for the purposes of sections 280 and 281 shall mean to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in section 273(3).’
17. In this backdrop, where an interpretative issue concerning the older provisions is already under consideration, it is contended on behalf of the Appellant-Revenue that the Parliament, from the outset, intended that while notices could be issued by either the JAO or the Faceless Assessing Officer (FAO), the subsequent quasi-judicial adjudication of such notices was to be undertaken by the FAOs.
18. It is urged that, in light of the divergent views taken by the High Courts owing to perceived ambiguity in the existing law, Parliament has now made the clarificatory amendment with retrospective effect from 01.04.2021, the date on which the original provisions came into force, and that the alleged anomalous situation, if any, has been removed. It was additionally submitted that the power to enact retrospective amendments is well settled in law, and that fresh notices will now be issued to assessees in accordance with the clarified position, so that pending reassessment proceedings may be concluded in accordance with law.
19. Conversely, it has been vehemently urged on behalf of the assessees that the new Amendment is not ‘clarificatory’ in nature but is rather an abortive attempt to fasten penal liability retrospectively, which is impermissible under law. It is their contention that the amending laws having antedated civil consequences ought to be construed strictly.
20. In all fairness, we may add that several other contentions have also been raised by both sides, which we do not consider it necessary to advert to at this stage in light of the order we propose to pass. In the facts of the present batch, we are of the considered view that it is not necessary for this Court to examine the merits of the rival submissions concerning the correctness of the impugned judgments or the scope of the competing precedents at this juncture.
21. It appears to us that the assessees would be entitled to challenge the amending provisions as elaborated upon heretofore, for which it would only be appropriate to relegate them to the jurisdictional High Courts. All contentions raised before us, as well as any other grounds available to them to question the impugned notices, may be urged before the High Courts instead.
22. Since the High Courts have primarily quashed the reassessment notices on the ground that the JAOs lacked competence to initiate such proceedings, and the very foundation of that view now stands altered by the amending legislation, the impugned judgments in favor of the assessees are set aside on this limited ground. The matters are accordingly remitted to the respective High Courts for fresh consideration. Ordered accordingly.
23. The assessees are granted liberty to amend their writ petitions, if so advised, within a period of four (4) weeks from the date of uploading of this order, so as to enable them to lay challenge to Section 147A of the IT Act, as introduced by Act No. 4 of 2026, or to any other connected or consequential provision.
24. Similarly, the Appellant-Revenue shall be at liberty to file their written submissions and affidavits before the jurisdictional High Courts within a period of three (3) weeks thereafter.
25. No additional time shall be granted to the parties beyond what has been granted above.
26. We make it clear that we have not expressed any opinion on the merits of the controversy, including the validity, scope, effect, retrospectivity or applicability of the amended provisions, and all such questions are left open to be decided by the High Courts.
27. Finally, during the pendency of the writ petitions before the High Courts, there shall be an interim stay of further assessment/reassessment proceedings pursuant to the impugned notices, subject to such terms and conditions as may be imposed by the High Courts.
28. The High Courts are requested to decide the matters preferably by 30.09.2026. Learned counsel for the parties undertake to extend full cooperation to the High Courts in this regard. No adjournments may be granted by the High Courts on mere asking of the parties.”
3. Learned counsel appearing for the parties seek disposal of the above writ appeal in terms of the order passed by the Hon’ble Apex Court, referred to above. Further, learned counsel appearing for the respondent/assessee seeks liberty to lay challenge to Section 147A of the Act in terms of the liberty granted by the Hon’ble Apex Court.
4. Learned counsel appearing for the parties also bring to the notice of this Court, order dated 04.05.2026 in SLP(C).No.8682/2024 passed by the Hon’ble Apex Court taking note of the order dated 10.04.2026 in Civil Appeal.No.4716/2026, which reads as follows:
“7. Consequently, keeping in mind the reasons set out in order dated 10.04.2026, the impugned judgment in each appeal is set aside and the instant appeals are disposed of by remitting the matters to the jurisdictional High Courts for redetermination of the issues. As observed above, the High Courts shall firstly determine whether the matters pertain to Assessment Year 2015-16. If it is found to be so, no further adjudicatory exercise shall be required to be undertaken by the High Court, except to declare the notices as being time-barred in light of Rajeev Bansal (supra). However, if it is found that the case does not pertain to Assessment Year 2015-16, then all the issues shall be resolved in terms of the order dated 10.04.2026 passed in Civil Appeal No.4716 of 2026.”
5. Taking note of the submissions of the learned counsel appearing for the parties as well as taking note of the above referred orders of the Hon’ble Apex Court, we do not deem it fit to go into the merits of the case. We deem it appropriate to set aside the order passed by the learned Single Judge and remit the matter to the learned Single Judge with liberty to the respondent/assessee to lay challenge to Section 147A of the Act, keeping open all the contentions of the parties, including the observations made by the Hon’ble Apex Court in order dated 04.05.2026 in SLP(C).No.8456/2025 and Connected Appeals.
6. Hence, the following:
ORDER
a) Writ appeal is allowed.
b) Order passed by the learned Single Judge dated 23.10.2025 in W.P.No.31480/2025 is set-aside.
c) Liberty is granted to the respondent/assessee to lay challenge to Section 147A of the Act as introduced by Act No.4 of 2026 or to any other connected or consequential provisions, within four weeks from today.
d) The appellant/Revenue is granted three weeks thereafter to file additional affidavit or submission.
e) Learned Single Judge is requested to take note of the timeline laid down by the Hon’ble Apex Court as extracted above.
f) The interim order as granted by the Hon’ble Apex Court would enure to the benefit of the parties herein.
Pending I.As., if any, stand disposed of.
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