What is Section 147A of the Income Tax Act? Supreme Court stay P&H HC judgement to strike it down

The Supreme Court has temporarily halted a recent Punjab and Haryana High Court decision that deemed Section 147A of the Income Tax Act unconstitutional. The stay was granted on the condition that assessment proceedings do not advance until the court's final ruling. Section 147A, introduced by Parliament through the Finance Act 2026, applies with retrospective effect from April 1, 2021.

It defines the "Assessing Officer" for Sections 148 and 148A as an officer other than the National Faceless Assessment Centre or its units, effectively granting local JAOs the authority to issue reassessment notices. This amendment was made without an exception to existing court judgments, Section 151A, or any schemes framed under them.

The controversy surrounding Section 147A revolves around the authority dispute between local tax officers (JAOs) and the National Faceless Assessment Centre (NFAC). With the shift to a faceless tax regime, a critical legal question arose: could local officers still issue tax reassessment notices independently under Section 148 and pass orders under Section 148A, or did all this have to be processed through the new automated system?

This ambiguity resulted in conflicting rulings from various High Courts, with some invalidating reassessment notices issued by local officers and others maintaining their authority. The P&H High Court ruled that the legislature cannot retroactively declare a legal position valid when constitutional courts have already deemed the procedure legally defective, stating that the amendment impermissibly sought to bypass previous constitutional court findings.

Parliament introduced Section 147A through the Finance Act 2026, applying it retrospectively from April 1, 2021.