Section 148 Reassessment Upheld After Section 147A Amendment: Madras HC

Nate Nandha Vs ACIT (Madras High Court)

The writ petitions challenged proceedings under Sections 148A, 148 and/or 147 of the Income Tax Act, 1961, as applicable between 01.04.2021 and 01.04.2024. In some petitions, penalties imposed under Chapter XXI of the Act were also challenged. The petitioners had obtained interim orders primarily on the ground that the Jurisdictional Assessing Officer lacked jurisdiction under Section 148A, relying mainly on the Bombay High Court decision in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax. Before these petitions were heard, the Revenue had challenged that decision before the Supreme Court. During the pendency of those proceedings, Section 147A was inserted by the Finance Act, 2026 with retrospective effect from 01.04.2021.

The Court noted that it had earlier independently considered the issue in Ontivillu Gopidoss Jothilakshmi vs The Income Tax Officer and Another and held that the Jurisdictional Assessing Officer had jurisdiction, despite a similar challenge based on the Hexaware Technologies decision.

The Court further referred to the Supreme Court’s order in Income Tax Officer and Others vs Tej Partap Singh dated 10.04.2026. The Supreme Court set aside High Court judgments that had quashed reassessment notices on the ground that Jurisdictional Assessing Officers lacked competence, observing that the legislative amendment had altered the foundation of those decisions. The matters were remitted to the respective High Courts for fresh consideration. The Supreme Court granted assessees liberty to amend their writ petitions to challenge Section 147A, as introduced by the Finance Act, 2026, or any connected or consequential provision, and permitted the Revenue to file written submissions and affidavits. It clarified that it had expressed no opinion on the validity, scope, effect, retrospectivity or applicability of the amended provisions, leaving those questions open for the High Courts. It also directed that interim stay of further assessment or reassessment proceedings would continue during the pendency of the writ petitions, subject to conditions imposed by the High Courts.

The Madras High Court observed that the judgments favouring assessees had been set aside and the matters remitted for fresh consideration. It further noted that any challenge to the vires of Section 147A, inserted retrospectively from 01.04.2021, had to be considered by a Division Bench under Rule 17(1)(iii) of the Madras High Court Writ Rules, 2021.

On merits, the Court held that the issue stood covered against the petitioners by its earlier decision in Ontivillu Gopidoss Jothilakshmi and that the position had been clarified by Parliament through the retrospective insertion of Section 147A. Accordingly, the writ petitions were dismissed. However, recovery proceedings were directed to remain in abeyance for 30 days from receipt of the order to enable the petitioners to seek appropriate relief from the Division Bench, either against the present order or by challenging the operation of Section 147A, as contemplated by the Supreme Court. No costs were awarded, and the connected miscellaneous petitions were closed.

Cases Discussed:

• Income Tax Officer and Others vs Tej Partap Singh, Diary No.2196/2026, dated 10.04.2026.
• Ontivillu Gopidoss Jothilakshmi vs The Income Tax Officer and Another, W.P.(MD).No.13626 of 2024, dated 24.01.2025.
• Hexaware Technologies Limited v. Assistant Commissioner of Income Tax, (2024) 464 ITR 430.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

In all these writ petitions, the respective petitioners have challenged the proceedings either under Section 148A, 148 and / or Section 147 of the Income Tax Act, 1961, as the case may be, as it stood between 01.04.2021 and 01.04.2024.

2. In some of these writ petitions, the imposition of penalty under Chapter XXI of the Income Tax Act, 1961, has also been challenged together with the above challenges.

3. The challenge to the impugned notices and orders in these writ petitions is tabulated as follows:-

4. In all these cases, the respective petitioners have secured an interim order only on the ground that the Jurisdictional Assessing Officer has no jurisdiction under Section 148A of the Income Tax Act, 1961. The challenges are primarily based on the decision of the Division Bench of the Bombay High Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax [(2024) 464 ITR 430].

5. mWhen these writ petitions were taken up for hearing, the decision of the Bombay High Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax [(2024) 464 ITR 430], had been challenged before the Hon’ble Supreme Court at the behest of the Income Tax Department. During the interregnum, Section 147A was inserted by the Finance Act, 2026, which came into force on 01.04.2026 with retrospective effect from 01.04.2021.

6. This Court has already examined the issue independently and had come to the conclusion in Ontivillu Gopidoss Jothilakshmi vs The Income Tax Officer and Another [W.P.(MD).No.13626 of 2024, dated 24.01.2025] holding that the Jurisdictional Assessing Officer had jurisdiction. There also, the challenge to the proceedings was made based on the decision of the Bombay High Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax [(2024) 464 ITR 430].

7. After Section 147A was inserted by the Finance Act, 2026, with retrospective effect from 01.04.2021, the Hon’ble Supreme Court has rendered a decision in Income Tax Officer and Others vs Tej Partap Singh [Diary No.2196/2026, dated 10.04.2026]. On the date when the Hon’ble Supreme Court passed this order, the printed copy of this order was not available. Subsequently, the order of the Hon’ble Supreme Court was made available. Relevant portions of the said order are extracted below:

“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.

29. The Registry shall forthwith transmit a copy of this order to the Registrars General of the concerned High Courts.

30. The appeals are, accordingly, disposed of.

31. All pending applications, including intervention application(s), shall also stand disposed of.”

8. It is evident that the Judgments of the High Courts, which were in favour of the assessees, were set aside, and cases were remitted back for fresh consideration.

9. Since the assessees have a right to challenge the vires of the insertion of Section 147A of the Income Tax Act, 1961, vide the Finance Act, 2026, dated 01.04.2026, with retrospective effect from 01.04.2021, the Hon’ble Supreme Court has given liberty to the assessee to challenge the amendments.

10. As far as the system that is followed by this Court, insofar as the challenge to the vires of the provisions are concerned, Rule 17(1)(iii) of the Madras High Court Writ Rules,2021, governs it. As per the said Rule, a challenge can be made, in these circumstances, only before the Division Bench.

11. On merits, the issue is squarely covered against the petitioner in Ontivillu Gopidoss Jothilakshmi vs The Income Tax Officer and Another [W.P.(MD).No.13626 of 2024, dated 24.01.2025], which position also now stands clarified by the Parliament with the insertion of Section 147A, with retrospective effect from 01.04.2021. I am therefore inclined to dismiss these writ petitions. However, the recovery proceedings shall be kept in abeyance for a period of 30 days from the date of receipt of a copy of this order, for the respective petitioners to seek appropriate relief from the Division Bench either against the orders passed herein or to stay the operation of Section 147A, by challenging the same, as ordered by the Hon’ble Supreme Court in Income Tax Officer and Others vs Tej Partap Singh [Diary No.2196/2026, dated 10.04.2026].

12. With the above observations, these writ petitions are dismissed. No costs. Connected miscellaneous petitions are closed.