The Punjab & Haryana High Court has struck down Section 147A of the Income-tax Act, 1961 (“Act”), which was inserted retrospectively by the Finance Act, 2026 from 01.04.2021, to validate notices issued under Section 148 of the Act by Jurisdictional Assessing Officers (“JAO”). The Court held that while the legislature may retrospectively amend the law to remove the basis of a judicial decision, it cannot simply override judgments without curing the defect and addressing the legal basis identified by the courts. Since Section 151A of the Act and the faceless scheme framed thereunder remained unamended, the basis of the earlier judgments remained intact. The Court also held that notices under Section 148 of the Act must be issued through randomised automated allocation and in a faceless manner. Accordingly, Section 147A of the Act was struck down, declared unconstitutional and the impugned notices were set aside.
Facts
- The Petitioner received a notice under Section 148 from the JAO, which was challenged before the Punjab & Haryana High Court.
- The High Court had earlier allowed the challenge, holding that under Section 151A read with the scheme dated 29.03.2022, such notice could only be issued by a Faceless Assessing Officer.
- During the pendency of the Revenue’s Special Leave Petition before the Supreme Court, Section 147A was retrospectively inserted with effect from 01.04.2021 to validate notices issued by JAOs, notwithstanding Section 151A, the scheme framed thereunder and judgments of courts.
- The Supreme Court subsequently remitted the matters to the High Court and permitted the assessees to challenge the validity of Section 147A.
Issues before the High Court
- Whether Section 147A is constitutionally valid when Section 151A and the scheme framed thereunder remained unamended?
- Whether notices issued under Section 148 by JAOs without randomised automated allocation and in a faceless manner are valid?
Discussion & Ruling
The Punjab & Haryana High Court struck down Section 147A and set aside the impugned notices on the following grounds:
- A retrospective amendment may remove the basis of a judicial decision, but the legislature cannot simply nullify or override a judgment without curing the underlying defect.
- Section 147A left Section 151A and the scheme framed thereunder unamended and, therefore, did not remove the primary basis of the earlier judgments.
- The Court held that the legislature had “trenched upon judicial power” by seeking to circumvent unfavourable judicial decisions without curing the defect identified by the courts.
- Notices under Section 148 are required to be issued through randomised automated allocation and in a faceless manner. It is settled principle that where a statute prescribes a specific manner for doing an act, it must be done in that manner alone. The impugned notices did not satisfy these requirements.
- Accordingly, Section 147A was declared unconstitutional and struck down, and the impugned notices under Section 148 were set aside.
Status update
- The Union Government has filed a Special Leave Petition before the Supreme Court against the judgement given by the Punjab & Haryana High Court.
- Similar petitions challenging the validity of Section 147A have been moved before Karnataka, Delhi, Bombay and other High Courts.