Summary: The constitutional validity of Section 147A, of the Income-tax Act, 1961, retrospectively inserted by the Finance Act, 2026 with effect from 1 April 2021, has triggered controversy over reassessment notices issued by jurisdictional Assessing Officers (JAOs). The amendment seeks to validate JAO-issued notices challenged for non-compliance with the faceless reassessment framework under Section 151A and Notification No. 18/2022. While the Punjab & Haryana and Andhra Pradesh High Courts declared Section 147A unconstitutional, the Supreme Court stayed the Punjab & Haryana judgment and scheduled the matter for final hearing on 3 December 2026. Earlier, several High Courts had held faceless reassessment procedures mandatory, whereas the Delhi and Gujarat High Courts recognised JAO jurisdiction. Section 147A retrospectively clarifies that the Assessing Officer under Sections 148 and 148A excludes the National Faceless Assessment Centre and assessment units under Section 144B(3). However, questions remain regarding automated allocation under the 2022 Scheme and the implications of Section 279(3) of the Income-tax Act, 2025.
1. Introduction
For two years, reassessment files carried a familiar objection. The notice under Section 148 was issued by the jurisdictional Assessing Officer (JAO), not through the faceless set-up that the e-Assessment of Income Escaping Assessment Scheme, 2022 called for. Several High Courts quashed such notices. Others, including the Delhi and Gujarat High Courts, did not. Parliament then inserted Section 147A through the Finance Act, 2026, deemed to be in force from 1 April 2021, to say that the JAO was always the right officer.
That has not ended the debate. In September and October 2026, the Punjab & Haryana and Andhra Pradesh High Courts struck the section down. The Supreme Court has stayed the first ruling, frozen the reassessments covered by it and listed the matter for final hearing on 3 December 2026. Before the
Andhra Pradesh High Court, the Revenue put the income assessed in reassessments for AYs 2016-17 to 2025-26 at over Rs. 21 lakh crore.
For the practitioner, the jurisdictional ground can dispose of a file without a word on merits. A file that rests only on that ground, though, could be lost the day the Supreme Court rules. This article first sets out what has happened, and then the implications: the questions still open and the steps to take at the notice, assessment and appeal stages.
2. How the Dispute Arose
2.1 Section 151A and the 2022 Scheme. Section 151A, in force from 1 November 2020 and widened by the Finance Act, 2021 to cover the Section 148A stage, allows the Central Government to notify a scheme for reassessment and for notices and orders under Sections 148 and 148A. The e-Assessment of Income Escaping Assessment Scheme, 2022 (Notification No. 18/2022 dated 29.03.2022) provides in Clause 3 that assessment, reassessment or re-computation under Section 147 and issuance of notice under Section 148 “shall be through automated allocation, in accordance with risk management strategy formulated by the Board” and in a faceless manner, to the extent provided in Section 144B.
2.2 What the Department did. In practice, the JAO handled the Section 148A and 148 stage and the case moved to the National Faceless Assessment Centre (NFAC) only after the Section 148 notice. The Revenue’s defence was that Section 144B is silent on Sections 148 and 148A, that Clause 3 is limited by the words “to the extent provided in Section 144B”, and that the Section 120 notifications vesting jurisdiction in JAOs were never withdrawn.
2.3 The split among High Courts. The High Courts were divided on this.
- For the Assessee: Kankanala Ravindra Reddy v. ITO [2023] 156 taxmann.com 178 (Telangana), Hexaware Technologies Ltd. v. ACIT [2024] 162 taxmann.com 225 / 464 ITR 430 (Bom.), Jasjit Singh v. Union of India [2024] 165 taxmann.com 114 / 467 ITR 52 (P&H) and Ram Narayan Sah v. Union of India [2024] 163 taxmann.com 478 (Gau.), later followed in Rajasthan, Madras, Karnataka and Andhra Pradesh. Clause 3(b) names Section 148 expressly, and “shall” leaves the JAO no choice.
- For the Revenue: T.K.S. Builders (P.) Ltd. v. ITO [2024] 167 taxmann.com 759 / 469 ITR 657 (Delhi) held that the JAO and the faceless officer have concurrent jurisdiction. Closer home, the Gujarat High Court in Snehdham Trust v. ACIT, SCA No. 9909 of 2022, judgment dated 17.09.2025 (Guj.) declined to follow Hexaware and upheld JAO notices.
2.4 Under the Income-tax Act, 2025. Sections 147, 148, 148A, 151A and 144B correspond to Sections 279, 280, 281, 532 and 273. Section 536(2)(u) keeps any interface-elimination scheme under the 1961 Act alive as if made under the 2025 Act.
3. Section 147A and Its Counterpart in the 2025 Act
3.1 The text. Section 9 of the Finance Act, 2026 (Act No. 4 of 2026) inserted Section 147A with effect from 1 April 2021. Overriding any judgment, order or decree of any court, Section 151A and any scheme under it, it clarifies 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.”
3.2 What it does not do. The section says who the officer is. It says nothing on how the case is picked, so the automated allocation requirement in Clause 3(b) is untouched. Its non obstante clause also leaves out Section 130 and the scheme of 28.03.2022, on which the Telangana High Court had relied.
3.3 Section 279(3) and the commencement problem. For the 2025 Act, Section 71 of the Finance Act inserted Section 279(3), which says the same thing for Sections 280 and 281, but prospectively and without any non obstante clause. The Finance Act received assent on 30.03.2026, yet Section 2(a) brings Sections 2 to 129, including Section 9, into force on 1 April 2026, the day the 1961 Act stood repealed.
4. The Judicial Position after the Amendment
4.1 Supreme Court remand. In ITO v. Tej Partap Singh [2026] 185 taxmann.com 1007 (SC), order dated 10.04.2026, the Supreme Court set aside the High Court judgments that had quashed JAO notices, only because their foundation was altered by the amendment. It remitted the matters with liberty to challenge Section 147A, stayed further assessment, and expressed no opinion on the “validity, scope, effect, retrospectivity or applicability” of the amendment. It is not an endorsement of Section 147A.
4.2 Punjab & Haryana High Court. In Jyoti Sareen v. Union of India [2026] 190 taxmann.com 384 (P&H), judgment dated 10.09.2026, the Division Bench applied Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality (1969) 2 SCC 283. A legislature may remove the basis of a judgment, but it cannot just declare that the judgment shall not bind. Section 151A and Clause 3(b),
the basis of the earlier rulings, remain unamended. Section 147A was declared unconstitutional, and JAO notices not issued through automated allocation were held to be without jurisdiction.
4.3 Supreme Court stay. In Union of India v. Bharat Industrial Enterprises (P.) Ltd. [2026] 190 taxmann.com 672 (SC), order dated 18.09.2026, leave was granted and Jyoti Sareen stayed, on condition that the reassessments shall not proceed until final disposal. Final hearing is listed on 3 December 2026.
4.4 Andhra Pradesh High Court. In Bala Sreenivas Rao Somisetty v. ITO [2026] 191 taxmann.com 325 (AP), judgment dated 12.10.2026, the Division Bench struck down Section 147A on the same reasoning and on a second ground: the amendment took effect on 1 April 2026, when the 1961 Act was already repealed. Two findings will be useful elsewhere. The Revenue conceded that no automated identification of cases existed at the Section 148A/148 stage, and cases were moved from the JAO to the NFAC without any order under Section 127.
4.5 The Revenue’s case, and the answer. The Revenue argues that only the pre-assessment stage is in dispute, that the assessment itself was faceless, and that an assessee has no right to a particular officer. It also points to over 95% of assessees having responded to JAO notices without objection. The answer is to keep two questions apart. Even if Section 147A is valid, nothing in it dispenses with automated allocation, and the Revenue’s own concession in Bala Sreenivas Rao shows that this was not done.
5. Implications and Open Issues
5.1 Where things stand. The Punjab & Haryana ruling is stayed, but so are the reassessments. The Andhra Pradesh ruling stands; I have not seen a reported stay. Remitted matters elsewhere remain stayed. In Delhi and Gujarat, the High Courts have upheld JAO competence even without Section 147A, and Tribunals there will follow them. I have not seen any CBDT instruction on pending cases.
5.2 Questions still open. Four stand out:
- Validity of a retrospective “clarification” that leaves Section 151A and the Scheme intact, now before the Supreme Court.
- Whether Section 147A could be inserted into the 1961 Act at all, given the commencement date. The Revenue will rely on Section 536(2)(c) of the 2025 Act.
- Whether Section 279(3), without a non obstante clause, overrides the 2022 Scheme continued under Section 536(2)(u), which will matter for notices under Sections 280 and 281.
- Whether a fresh notice can follow if a JAO notice falls. Under Section 149 as substituted by the
Finance (No. 2) Act, 2024 from 1 September 2024, where escaped income is Rs. 50 lakh or more, a show cause notice under Section 148A(1) cannot issue after five years from the end of the AY, and a notice under Section 148 after five years and three months. For AYs up to 2020-21 that window has closed, subject to the Revenue’s argument on exclusion of stay periods.
5.3 What is at stake. Take AY 2018-19, a JAO notice issued in July 2022 and an addition of Rs. 80 lakh under Section 69A. Tax under Section 115BBE at 60%, with 25% surcharge and 3% education cess (the 4% health and education cess applies only from AY 2019-20), comes to Rs. 61.80 lakh. Interest under Section 234B at 1% a month for about six years to an order in March 2024 adds roughly Rs. 44.50 lakh, and penalty under Section 271AAC at 10% of the Section 115BBE tax another Rs. 4.80 lakh. That is about Rs. 1.11 crore. On merits, the assessee may win part of it. On jurisdiction, all of it falls, and for that year the time for a fresh show cause notice ran out on 31 March 2024.
6. The Practitioner’s Approach
6.1 Order of attack. Procedural and jurisdictional defects first, then evidentiary gaps, then burden of proof. Never run the jurisdictional point alone.
6.2 At the reply stage. On receipt of the show cause notice under Section 148A(1) (Section 148A(b) for notices issued before 1 September 2024) or the notice under Section 148:
- Check the issuing authority, DIN and portal trail, and ask in writing how the case was selected.
- Object to jurisdiction in the first reply, citing Section 151A, Clause 3(b), Jyoti Sareen and Bala Sreenivas Rao, and file the return under protest.
- Meet the information on merits in the reply under Section 148A(2). Then test the order under Section 148A(3) (Section 148A(d) in older cases) and the approval of the specified authority under Section 151.
6.3 At the assessment stage. Look for a Section 127 transfer order and object if there is none. Keep the evidence complete on identity, creditworthiness and genuineness, and ask for third-party material and cross-examination where the addition rests on it.
6.4 In appeal and writ. Once an order is passed:
- Take the ground specifically before the CIT(A)/NFAC and the Tribunal; if missed earlier, raise it as an additional legal ground under National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC).
- In Delhi and Gujarat, ask that the ground be kept open subject to the Supreme Court’s decision, and argue merits fully.
- An order passed in breach of the Supreme Court’s stay calls for a writ, not an appeal on merits.
7. Conclusion
Section 147A was drafted to answer one question: who issues the notice. It left the other untouched: how the case is picked. Two High Courts have held that Parliament cannot overturn their rulings while leaving their basis on the statute book, and one has added that the 1961 Act was already gone when the amendment took effect. The Revenue has points of its own. The assessment itself was faceless, the Delhi and Gujarat High Courts read Clause 3 its way, and the Supreme Court chose to stay the Punjab & Haryana ruling rather than let it operate.
The Supreme Court takes up the question on 3 December 2026, and its ruling will bind every pending file. Until then, the practitioner’s job is to make sure the file survives either outcome. Object early, on record and in writing. Keep the merits as strong as they would be if the jurisdictional ground did not exist. Do not let a client pay or settle on the assumption that the JAO point is already won. If the Supreme Court rules for the assessees, the objection will dispose of the reassessment, and for older years a fresh notice will usually be time-barred. If it rules for the Revenue, the merits will have to carry the case.
Cases Discussed & References
- Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality — (1969) 2 SCC 283 (SC). Principle governing the constitutional validity of legislation enacted to remove the basis of judicial decisions.
- National Thermal Power Co. Ltd. v. CIT — (1998) 229 ITR 383 (SC). Admission of additional legal grounds before the Income Tax Appellate Tribunal.
- Kankanala Ravindra Reddy v. ITO — [2023] 156 taxmann.com 178 (Telangana HC). Jurisdiction of officers issuing reassessment notices under the faceless framework.
- Hexaware Technologies Ltd. v. ACIT — [2024] 162 taxmann.com 225; 464 ITR 430 (Bombay HC). Mandatory application of the faceless reassessment scheme.
- Jasjit Singh v. Union of India — [2024] 165 taxmann.com 114; 467 ITR 52 (Punjab & Haryana HC). Validity of reassessment notices issued by JAOs.
- Ram Narayan Sah v. Union of India — [2024] 163 taxmann.com 478 (Gauhati HC). Jurisdictional requirements under the faceless reassessment scheme.
- T.K.S. Builders (P.) Ltd. v. ITO — [2024] 167 taxmann.com 759; 469 ITR 657 (Delhi HC). Concurrent jurisdiction of jurisdictional and faceless assessing authorities.
- Snehdham Trust v. ACIT — SCA No. 9909 of 2022, decided on 17 September 2025 (Gujarat HC). Validity of reassessment notices issued by JAOs.
- ITO v. Tej Partap Singh — [2026] 185 taxmann.com 1007 (SC), order dated 10 April 2026. Remand following the statutory amendment without determining its constitutional validity.
- Jyoti Sareen v. Union of India — [2026] 190 taxmann.com 384 (Punjab & Haryana HC), decided on 10 September 2026. Section 147A declared unconstitutional.
- Union of India v. Bharat Industrial Enterprises (P.) Ltd. — [2026] 190 taxmann.com 672 (SC), order dated 18 September 2026. Stay of the Punjab & Haryana High Court judgment, subject to restrictions on reassessment proceedings.
- Bala Sreenivas Rao Somisetty v. ITO — [2026] 191 taxmann.com 325 (Andhra Pradesh HC), decided on 12 October 2026. Constitutional and commencement-related challenges to Section 147A.
- Income-tax Act, 1961: Sections 144B, 147, 147A, 148, 148A, 149 and 151A; Income-tax Act, 2025: Sections 273, 279 to 281, 532 and 536; Finance Act, 2026 (Act No. 4 of 2026)
- e-Assessment of Income Escaping Assessment Scheme, 2022 (Notification No. 18/2022 dated 29.03.2022)
