---
title: "Section 147A held unconstitutional by the Hon\'ble High Court of Punjab & Haryana | BNPS and Associates LLP"
url: "https://bnpsca.com/insight/section-147a-held-unconstitutional-by-the-hon-ble-high-court-of-punjab-haryana"
description: "Unconstitutional enactment struck down and reassessment notices quashed"
---

# Section 147A held unconstitutional by the Hon'ble High Court of Punjab & Haryana

Written by: **[CA Divyang J Shah](https://bnpsca.com/partner/ca-divyang-j-shah)** \| Topic: **Income Tax**

 ![Section 147A held unconstitutional by the Hon'ble High Court of Punjab & Haryana](https://imageproxy.inlancer.in/pr:sharp/f:webp/rs:fit:1200:0/g:sm/plain/https://bnpsca.com/public/assets/upload/images/original/6aa7acbee781b-Income-tax.jpeg)14-09-2026

Unconstitutional enactment struck down and reassessment notices quashed

 **Part 1: Background & How the Case Reached the Court**

- Petitions sought a declaration that **Section 147A** is *ultra vires* Articles 14, 19(1)(g) and 265 of the Constitution, and consequential quashing of Section 148 reassessment notices.
- Lead case: Jyoti Sareen (an Advocate/Income-Tax assessee) received a Section 148 notice (AY 2020-21) from her **jurisdictional AO**, based on a search under Section 132 conducted on a third party. She had earlier won before a Division Bench of the same High Court (19.07.2024), which quashed the notice for violating **Section 151A** (faceless reassessment scheme dated 29.03.2022) — following Telangana HC (*Kankanala Ravindra Reddy*), Bombay HC (*Hexaware*), and Gauhati HC (*Ram Narayan Sah*).
- Revenue appealed to the **Supreme Court**. While the SLPs were pending, **Finance Bill/Act, 2026** inserted **Section 147A retrospectively w.e.f. 01.04.2021**, deeming that the "Assessing Officer" for Sections 148/148A purposes is the **jurisdictional AO**, not the National Faceless Assessment Centre (NFAC)/any assessment unit — "notwithstanding" any judgment or Section 151A/scheme.
- The **Supreme Court (10.04.2026)** set aside the High Court judgments *solely* on the ground that their foundation (JAO lacking competence) stood altered by the new law, and **remitted all matters to jurisdictional High Courts**, granting liberty to amend petitions to challenge Section 147A, granting interim stay of reassessment, and expressly leaving all questions (validity, retrospectivity, scope) open for the High Courts, to be decided preferably by 30.09.2026.
- Pursuant to this liberty, petitioners amended their writ petitions to challenge Section 147A itself.

---

**Part 2: Petitioners' Arguments**

1. Prior rulings (Bombay, Telangana, Gauhati, and this Court's own earlier judgments) held that under **Section 151A + the 29.03.2022 scheme**, Section 148 notices could **only** be issued by a faceless AO via random/automated allocation.
2. Without **amending Section 151A** (or Section 130) or the schemes framed thereunder, the legislature cannot retrospectively nullify binding judicial rulings merely by enacting Section 147A — that is **legislative overreach** violating **separation of powers**.
3. A mere **non-obstante clause** cannot override substantive statutory provisions (Section 151A/Section 130) that still exist unamended in the same Act.
4. Section 147A conflicts with Section 130 (faceless jurisdiction scheme) and the overall faceless regime under Section 144B.
5. The Bill's stated objects — "certainty, clarity, avoiding litigation" — were **defeated in practice**: it triggered mass litigation across High Courts instead of resolving the issue.
6. Timing was improper: Section 147A was enacted **while cross-SLPs were pending before the Supreme Court**, effectively pre-empting an authoritative SC ruling that could have finally settled the split among High Courts.
7. Partial/selective application of the faceless regime (faceless for assessment, but jurisdictional AO for pre-assessment/148A-148) defeats the very purpose of the faceless scheme and artificially bifurcates an integrated statutory process.
8. **Alternative argument:** Even if Section 147A is upheld, the impugned notices are independently bad because AOs were **not selected via random automated allocation** as required under Section 151A's scheme.
9. Relied on: *NHPC Ltd.*, *Janapada Sabha Chhindwara*, *State of T.N. v. State of Kerala*, *S.R. Bhagwat*, *Vatika Township*, *Tata Motors*, *Karnataka Pawn Brokers Association*, *Central Provinces Manganese Ore*, *Hiralal Rattanlal*, etc.

---

**Part 3: Revenue's Arguments (ASG N. Venkataraman)**

1. A **harmonious reading** of Sections 130, 135A, 144B, 147, 148, 148A, 151A shows jurisdictional AOs retain power to do pre-assessment work and issue Section 148 notices.
2. Section 147A was necessitated because the **old Act stood repealed from 01.04.2026** (replaced by Income-tax Act, 2025) — so no further amendment to the old Act could be made after that date, requiring urgent clarificatory action before repeal.
3. **Practical/fiscal impact**: >95% of assessees had already submitted to jurisdictional-AO notices; ~**₹17 lakh crore** was at stake — an adverse ruling would have serious national/public interest consequences.
4. Since the Act is central legislation, **uniformity** across the country was necessary given divergent HC rulings.
5. Faceless mandate under Section 144B applies fully to **assessment/reassessment**; the dispute is only about the **pre-assessment stage** (148A/148), which need not be faceless.
6. Three schemes serve different purposes: Section 130 (faceless), Section 135A (non-faceless), Section 151A (**hybrid** — faceless and non-faceless).
7. Choice of AO is **not a fundamental/constitutional right** of the assessee; the plea is "hyper-technical" since there is no personal interface either way (both jurisdictional and faceless AOs act electronically).
8. The **Risk Management Strategy** (automated case selection) and NFAC operate on separate technological tracks from the **pre-assessment stage** under Section 148A, which doesn't require faceless treatment.
9. The **non-obstante clause** in Section 147A specifically nullifies the *basis* of the contrary judicial rulings — satisfying the "twin requirements of validation" (altering ratio + curing defect), since Parliament, being sovereign, may retrospectively validate and even extinguish vested rights, and the *manner* of validation is Parliament's prerogative.
10. **Alternative argument:** Notifications dated 31.03.2021 and 10.06.2022 (under Section 120) conferred **concurrent jurisdiction** on jurisdictional and faceless AOs; Section 144B(1) itself excludes 148A/148 from its scope, and Section 151A's scheme makes no mention of Section 148A — so only the jurisdictional AO could ever conduct 148A proceedings.
11. Relied on: *NHPC Ltd.*, *Hari Singh*, *Prithvi Cotton Mills*, *J.S. Yadav*, *Virender Singh Hooda*, *State Bank's Staff Union*, *Rohtas Project Ltd.*

---

**Part 4: Statutory Scheme Explained by the Court**

1. **Section 148A**: Pre-notice procedure — AO issues show-cause notice with information; assessee replies; AO passes a reasoned order (with approval of "specified authority") on whether it's fit for Section 148 notice.
2. **Section 148**: Notice for reassessment, issued along with the 148A(3) order, calling for a return.
3. **Section 147**: Substantive power to assess/reassess escaped income.
4. **Historical context**: Pre-2018, assessments were manual/physical, leading to "undesirable practices" and revenue leakage. The Finance Minister's Parliamentary speeches (2019, 2020, 2021) repeatedly emphasized moving to a **faceless, no-human-interface** regime with **random, automated allocation** — quoted at length by the Court as evidence of legislative intent.
5. **Section 130** (faceless jurisdiction scheme, in force 01.11.2020) + **Scheme dated 28.03.2022 ("Faceless Jurisdiction of Income-tax Authorities Scheme, 2022")**.
6. **Section 135A** (faceless information-collection scheme).
7. **Section 144B** (Faceless Assessment, in force 01.04.2021) — detailed multi-step electronic procedure via NFAC, assessment/verification/technical/review units, with automated allocation defined as "an algorithm for randomised allocation of cases... including AI/ML."
8. **Section 151A** (faceless reassessment scheme for Sections 147/148/148A/151, in force 01.11.2020) + **Scheme dated 29.03.2022 ("e-Assessment of Income Escaping Assessment Scheme, 2022")** — Clause 3(b) explicitly covers issuance of Section 148 notices, mandating randomized automated allocation.
9. A **10.06.2022 notification under Section 120** purportedly gave concurrent powers to jurisdictional and faceless AOs.

---

**Part 5: Survey of Conflicting High Court Precedent (pre-147A)**

**In favour of assessees (JAO lacks jurisdiction — only faceless AO can issue s.148 notice):**

- Telangana HC — *Kankanala Ravindra Reddy* (14.09.2023) — leading judgment; held reassessment under ss.147/148/148A must be conducted faceless once the 2022 schemes came into force.
- Bombay HC — *Hexaware Technologies*, *Kairos Properties*
- P&H HC (this Court) — *Jatinder Singh Bhangu*, *Jasjit Singh*
- Rajasthan HC — *Shree Cement Ltd.*, *Sharda Devi Chhajer*
- Madras HC — *TVS Credit Services*
- Karnataka HC — *Ramachandra Reddy Ravi Kumar*
- Andhra Pradesh HC — *Prameela Pasumarthi*
- Gauhati HC — *Ram Narayan Sah*

**In favour of Revenue (JAO retains concurrent jurisdiction):**

- Calcutta HC — *Triton Overseas Pvt. Ltd.* (relied on a CBDT office memorandum dated 20.02.2023 asserting concurrent JAO/NFAC jurisdiction)
- Delhi HC — *T.K.S. Builders (P) Ltd.*
- Gujarat HC — *Snehdham Trust*

The Court expressly **respectfully differs** from the Calcutta, Delhi and Gujarat views and concurs with the assessee-favouring line of authority.

---

**Part 6: The Finance Bill 2026 Memorandum & Text of Section 147A**

- **Memorandum's stated rationale**: Legislature intended a clean split — Section 148A/148 (pre-assessment, JAO-driven) vs. Section 147 assessment proper (faceless via NFAC under s.144B); divergent HC views + pendency before SC + the incoming **Income-tax Act, 2025** (effective 01.04.2026) created urgency to "clarify," achieve certainty, avoid litigation.
- **Text of Section 147A**: *"Notwithstanding anything contained in any judgment, 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."*
- Effective retrospectively from **01.04.2021**.

---

**Part 7: Constitutional Law on Legislative Overruling of Judgments**

The Court extensively reviewed Supreme Court precedent on **validating/curative legislation vs. impermissible legislative overruling**:

1. **Janapada Sabha Chhindwara (1970)** — legislature can amend retrospectively but cannot declare a court's judgment ineffective or dictate a different interpretation than the Court gave.
2. **Prithvi Cotton Mills (1970)** — to validate something a court struck down, the legislature **must remove the very defect/cause of invalidity**; merely declaring the judgment non-binding is impermissible reversal of a judicial decision.
3. **Indian Aluminium Co. (1996)** — 9-point summary: legislature can render a judgment ineffective only by curing the defect via valid retrospective law; cannot directly overrule by mere declaration.
4. **State of T.N. v. Arooran Sugars (1997)** — curative retrospective amendment ≠ overruling, provided it doesn't merely declare the decision erroneous.
5. **S.R. Bhagwat (1995)** — struck down a provision that tried to bypass a *final* judgment against the State without curing its basis.
6. **Delhi Cloth & General Mills (1996)** — struck down a validating Act that deemed a legal consequence without curing the underlying factual/procedural defect.
7. **State of T.N. v. State of Kerala (2014)** (5-judge bench) — laid down the **three-question test**: (i) does the law interfere with judicial functions; (ii) is it targeted at a decided case; (iii) what is the nature/finality of the judgment — if (i) & (ii) are answered affirmatively, the law can be declared unconstitutional.
8. **NHPC Ltd. (2023)** — crystallized 5 principles, most notably: *"Abrogation is not a device to circumvent an unfavourable judicial decision. If enacted solely with the intention to defy a judicial pronouncement, \[it\] may be declared ultra vires."*

**Court's synthesis:** Separation of powers is implicit in the Constitution; the legislature may amend/validate retrospectively **only if it removes the actual defect** the courts identified. It cannot merely declare that judgments shall not apply. If the same case were heard again today, applying the *unamended* underlying provision, the court would necessarily reach the same result — meaning the "clarification" hasn't cured anything.

---

**Part 8: Core Holding — Section 147A is Unconstitutional**

1. Section 147A's non-obstante clause overrides "any judgment" and "Section 151A or any scheme framed thereunder" — but **conspicuously omits Section 130** (and its 28.03.2022 scheme), which the Telangana HC had also relied on.
2. Crucially, **Section 151A and its 29.03.2022 scheme remain unamended and still on the statute book.** Section 147A did not touch or cure them.
3. Since the basis of the earlier judgments (random/automated, faceless allocation mandated by s.151A's scheme) was **never removed**, Section 147A amounts to the legislature **directly substituting its own interpretation over the courts' findings** — precisely what *Janapada Sabha*, *Prithvi Cotton Mills*, and *NHPC* prohibit.
4. Even today, applying unamended Section 151A and its scheme, a court would reach the **same conclusion** as before — proving the defect was never cured.
5. The **31.03.2022 cut-off** under Section 151A(2)'s proviso meant the government could only have excluded Section 148 from the faceless scheme via notification **before that date** — it never did so, and this window cannot be reopened via Section 147A.
6. The Bill's stated objectives (certainty, avoiding litigation) were **self-defeating in practice**: conflict between Section 147A and unamended Section 151A created *more* confusion, and triggered mass litigation across at least 8 High Courts rather than resolving it.
7. **Better alternative available and not taken**: Since cross-SLPs were already pending before the Supreme Court when Section 147A was introduced, the Revenue could have sought an authoritative SC ruling instead of resorting to retrospective legislative override.
8. **Conclusion**: Section 147A is declared **unconstitutional and struck down**.

---

**Part 9: Alternative/Independent Ground — Section 148 Notices Bad Regardless**

Even setting Section 147A aside entirely, the Court held (paras 64–78):

1. Clause 3(b) of the Section 151A scheme (29.03.2022) **explicitly covers issuance of Section 148 notices**, requiring randomized automated allocation and faceless issuance — a plain, harmonious reading admits no other conclusion.
2. Applied the settled principle that **"where a statute prescribes a thing to be done in a particular manner, it must be done in that manner and no other"** (*Chandra Kishore Jha*, *Cherukuri Mani*, *Municipal Corp. of Greater Mumbai v. Abhilash Lal*, *OPTO Circuit India*).
3. **Rejected Revenue's textual argument** that the phrase "to the extent provided in section 144B" limits the scheme's application only to reassessment (Section 147) and not Section 148 notices — accepting this would render the entire 151A scheme a "dead letter" for no purpose, which courts must avoid (*Hardeep Singh*, *State of W.B. v. Kesoram Industries*).
4. **Rejected the argument** that the scheme doesn't cover Section 148A (since it's not expressly mentioned) — same reasoning; the scheme's Clause 3(b) squarely covers Section 148 issuance.
5. **Rejected reliance on 2014/2021/2022 Section 120 notifications** conferring "concurrent jurisdiction" — a statutory scheme approved by Parliament prevails over administrative notifications/CBDT circulars in case of conflict (*Ratan Melting & Wire Industries*: circulars contrary to statutory provisions "have really no existence in law").
6. Fully **endorsed** the reasoning of Bombay HC (*Hexaware*, *Kairos Properties*), its own earlier decisions (*Jatinder Singh Bhangu*, *Jasjit Singh*), and the Rajasthan, Madras, Karnataka, Andhra Pradesh, and Gauhati High Courts.
7. Therefore, **independently of the vires challenge**, the impugned Section 148 notices are illegal because they were issued by jurisdictional AOs, **not through random automated allocation** as mandated.

---

**Part 10: Final Order**

1. Section 147A of the Income-tax Act is declared unconstitutional and struck down.
2. **All impugned Section 148 notices are set aside** — independently, for non-compliance with the randomized/automated, faceless allocation mandate under Section 151A and its 29.03.2022 scheme.
3. All connected writ petitions **allowed** in these terms.

With Revenue citing roughly ₹17 lakh crore riding on this issue, this is almost certainly headed to the Supreme Court next. But for now, it's a strong reminder — a legislature cannot rewrite the outcome of a case simply by saying so; it has to fix what was actually found wrong.

Read the order - <https://drive.google.com/file/d/1EmGO-Kgn8A0WFNxjktV3rQCFZMdIvUI2/view?usp=sharing>

---

*Disclaimer: This article is intended for general informational and knowledge-sharing purposes only and does not constitute legal or tax advice. Readers are advised to refer to the full text of the order and consult a qualified professional before relying on it for any specific matter.*

- Tags:
- [\#incometax #jao #fao #litigation #section147A #constitutionalvalidity](#)

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 Income tax Assessment & Appeals Public trust, Private Trust

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