Summary: The Punjab & Haryana High Court has delivered an important ruling on reassessment law by striking down Section 147A of the Income-tax Act, 1961, inserted retrospectively by Finance Act, 2026 with effect from 1-4-2021. The provision was introduced principally to protect reassessment notices issued by Jurisdictional Assessing Officers (JAOs) after introduction of the faceless reassessment regime. The controversy arose after introduction of the new reassessment regime from 1-4-2021 and notification of the e-Assessment of Income Escaping Assessment Scheme, 2022 under Section 151A, with assessees contending that reassessment proceedings could not independently be initiated by JAOs once faceless and automated allocation mechanisms became operational. The Supreme Court, in Income Tax Officer v. Tej Partap Singh, remitted the matters to the respective High Courts after Parliament retrospectively inserted Section 147A, expressly leaving its validity, scope, effect, retrospectivity and applicability open. The Punjab & Haryana High Court has now answered the constitutional question against the Revenue, holding Section 147A unconstitutional, with the detailed judgment indicating that the retrospective provision did not cure the underlying defect identified in relation to Section 151A and the faceless reassessment scheme. The ruling has significant implications for pending reassessment proceedings involving JAO-issued notices, although the consequences for individual cases depend upon the stage of proceedings, issuing authority, applicable scheme, limitation, pendency of challenge and finality of earlier orders. The controversy is likely to proceed to the Supreme Court.
Retrospective Validation of JAO Reassessment Notices Struck Down – Section 147A Faces Constitutional Setback
Punjab & Haryana High Court has delivered an important ruling on reassessment law by striking down section 147A of Income-tax Act, 1961, inserted retrospectively by Finance Act, 2026 with effect from 1-4-2021. Provision was introduced principally to protect reassessment notices issued by Jurisdictional Assessing Officers (JAOs) after introduction of faceless reassessment regime. Decision has reopened a controversy which Parliament had attempted to settle retrospectively and may have substantial consequences for reassessment proceedings pending across country.
Controversy originated after introduction of new reassessment regime from 1-4-2021 and subsequent notification of e-Assessment of Income Escaping Assessment Scheme, 2022 under section 151A. Assessees contended that once faceless and automated allocation mechanism became operational, reassessment proceedings could not independently be initiated by JAO. Several High Courts accepted this contention and quashed notices issued through conventional jurisdictional route. Revenue, however, maintained that JAO and faceless authorities possessed concurrent jurisdiction.
Retrospective Legislative Intervention
Parliament intervened through Finance Act, 2026 by inserting section 147A retrospectively from 1-4-2021. Amendment sought to alter statutory basis of earlier decisions and validate jurisdiction of JAOs notwithstanding section 151A, scheme framed thereunder and contrary judicial pronouncements. Consequently, controversy shifted from interpretation of faceless reassessment provisions to a more fundamental constitutional question—whether Parliament could retrospectively validate jurisdiction which courts had held did not vest in officer when reassessment was initiated.
Supreme Court considered impact of this legislative intervention in Income Tax Officer v. Tej Partap Singh and connected matters in April 2026. Instead of deciding constitutional validity of section 147A itself, Supreme Court set aside earlier High Court decisions on limited ground that statutory foundation on which they had proceeded had subsequently changed. Matters were remitted to respective High Courts and assessees were expressly permitted to amend writ petitions and challenge validity and retrospective operation of newly inserted section 147A. Thus, Supreme Court neither upheld section 147A nor finally validated disputed JAO notices; constitutional question was consciously left open for adjudication by High Courts.
Punjab & Haryana High Court Ruling
Punjab & Haryana High Court has now answered this question against Revenue. On 10-9-2026, Division Bench comprising Justice Deepak Sibal and Justice Rupinderjit Chahal pronounced section 147A unconstitutional. Detailed judgment is awaited and, therefore, precise constitutional reasoning of Court should not yet be assumed. Nevertheless, pronouncement represents first major judicial setback to retrospective validation mechanism introduced by Finance Act, 2026.
Constitutional Question on Retrospective Validation
Issue goes beyond reassessment procedure. Legislature undoubtedly possesses power to enact retrospective tax legislation and may cure a defect identified by courts by retrospectively changing underlying law. Constitutional limitation, however, is equally settled: legislature cannot merely declare a judicial decision ineffective without removing legal defect forming basis of that decision. Section 147A therefore raises a delicate question whether amendment genuinely cured defect in statutory allocation of jurisdiction or merely attempted retrospectively to confer legitimacy upon notices which were jurisdictionally defective when issued.
This distinction assumes greater importance because faceless reassessment was not merely an administrative arrangement. Section 151A and notified scheme were designed to introduce technology-driven allocation, eliminate direct interface and provide functional specialisation. If automated allocation formed part of statutory jurisdictional architecture, direct initiation by JAO could arguably involve more than a curable procedural irregularity. It would concern source and existence of jurisdiction itself.
Impact on Pending Reassessment Proceedings
Immediate impact of Punjab & Haryana High Court ruling will be particularly significant for pending reassessment proceedings in which notices under sections 148A or 148 were issued by JAOs and their validity depends upon retrospective protection of section 147A. However, judgment should not presently be read as automatically reopening every completed reassessment or invalidating every reassessment notice issued after 1-4-2021. Stage of proceeding, issuing authority, applicable scheme, limitation, pendency of challenge and finality of earlier orders will remain relevant.
Further Judicial Developments
Controversy is also unlikely to end at High Court level. Similar constitutional challenges are pending elsewhere and, considering number of reassessment proceedings and revenue implications involved, Supreme Court is likely ultimately to decide validity of section 147A. Until then, conflicting High Court views may further develop.
Punjab & Haryana decision nevertheless marks an important turning point. What began as a dispute between JAO and Faceless Assessing Officer has evolved into a larger constitutional question concerning limits of retrospective validating legislation. Parliament may retrospectively amend tax law and remove basis of a judicial decision; much more difficult question is whether it can retrospectively recreate jurisdiction in an officer whom law, as judicially interpreted when action was taken, did not authorise to initiate proceeding.
For present, section 147A has failed its first major constitutional test. Final word, however, is likely to come from Supreme Court.
