The Supreme Court on Friday stayed the Punjab and Haryana High Court judgment that had declared Section 147A of the Income Tax Act unconstitutional. At the same time, the apex court directed that the reassessment proceedings affected by the dispute must not move forward until it finally decides the Union Government’s challenge.
A Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran passed the interim order while hearing a special leave petition filed by the Union Government against the High Court ruling.
The Supreme Court ordered that the impugned judgment and order of the High Court would remain stayed, subject to the condition that the assessment proceedings would not proceed further until final disposal of the principal matter.
Buy Now: E-Magazine: Supreme Court Judgments on GST (2017–2026)
The case has been listed for final hearing on December 3, 2026.
Conditional Stay Maintains Status Quo
The order grants interim protection to the Union by suspending the operation of the High Court judgment. However, the accompanying restraint on assessment proceedings prevents the tax authorities from acting on the disputed statutory provision while its constitutional validity remains under examination.
The arrangement effectively preserves the position of both sides. The High Court’s declaration against Section 147A will not operate for the time being, while taxpayers will remain protected from the continuation of the reassessment proceedings concerned until the Supreme Court delivers its final decision.
Union Sought Urgent Hearing
The matter reached the Supreme Court after Additional Solicitor General N. Venkataraman sought urgent listing before the Chief Justice of India two days earlier. Following the mention, the Union’s plea was placed before the Bench on September 18.
The appeal raises an important question concerning Parliament’s power to enact retrospective legislation after constitutional courts have ruled that reassessment actions initiated under a particular administrative procedure were legally invalid.
Dispute Over JAO and Faceless Reassessment Powers
The controversy originated from the division of authority between a Jurisdictional Assessing Officer, commonly referred to as the JAO, and the Faceless Assessing Officer or National Faceless Assessment Centre under the faceless income-tax framework.
The central question was whether a JAO could independently issue a reassessment notice under Section 148 and pass the preliminary order contemplated under Section 148A, or whether these statutory functions were required to be performed only through the prescribed faceless mechanism.
Several High Courts considered challenges to reassessment proceedings initiated by jurisdictional officers. The Punjab and Haryana High Court, in Income Tax Officer, Ward 2(1), Chandigarh v. Tej Partap Singh, held that reassessment proceedings commenced by JAOs contrary to the faceless procedure were invalid. Other High Courts adopted a different interpretation, resulting in conflicting judicial views on the authority competent to undertake the exercise.
Parliament Inserted Section 147A Retrospectively
Against this background, Parliament inserted Section 147A with retrospective effect from April 1, 2021. The provision sought to clarify that the expression “Assessing Officer” appearing in Sections 148 and 148A referred to an assessing officer other than the National Faceless Assessment Centre.
In practical terms, the amendment attempted to confirm that jurisdictional assessing officers possessed the authority to issue reassessment notices and pass orders at the preliminary reassessment stage. Its retrospective operation was intended to cover proceedings undertaken from the date on which the revised reassessment regime came into force.
The amendment therefore had a direct bearing on proceedings that had been questioned, or already invalidated, for failure to follow the faceless procedure.
High Court Found Legislative Exercise Unconstitutional
The Punjab and Haryana High Court struck down Section 147A after concluding that the provision went beyond a permissible validating amendment.
According to the High Court, the legislature could not merely declare with retrospective effect that a legal position had always been valid when constitutional courts had already identified a defect in the procedure adopted by the authorities. It found that the provision sought to bypass or neutralise the judicial findings instead of removing the underlying legal defect on which those findings were based.
The High Court consequently held that the retrospective provision amounted to an impermissible legislative attempt to circumvent decisions rendered by constitutional courts.
Supreme Court to Examine Validity of Retrospective Cure
The Union’s challenge will require the Supreme Court to consider whether Section 147A validly removes the basis of the earlier judgments or whether it simply overturns their effect through a retrospective declaration.
The final decision is also expected to settle the wider jurisdictional controversy concerning reassessment notices issued by JAOs during the relevant period and the interaction between the statutory reassessment provisions and the faceless assessment framework.
Until the matter is finally decided, the High Court judgment will remain stayed, but the assessment proceedings covered by the dispute cannot advance. The Supreme Court will take up the case for final hearing on December 3, 2026.
