High Court Upholds Jurisdiction of Assessing Officers Post Retrospective Amendment in Finance Act, 2026
In a significant development, the Madras High Court, presided over by Justice C. Saravanan, has dismissed a series of writ petitions filed by multiple assessees challenging the reassessment proceedings initiated under Sections 147, 148, and 148A of the Income Tax Act, 1961. The petitions were primarily filed on the grounds of lack of jurisdiction by the Jurisdictional Assessing Officer (JAO) to issue reassessment notices.
The controversy stemmed from the retrospective amendment introduced by the Finance Act, 2026, which inserted Section 147A into the Income Tax Act, allowing JAOs to reassess income for the past financial years starting from April 1, 2021. The petitioners had initially relied on a favorable ruling from the Bombay High Court in the Hexaware Technologies Limited case, which questioned the jurisdiction of JAOs. However, the Supreme Court later set aside these decisions, directing High Courts to reconsider the matter in light of the new legislative amendments.
Justice Saravanan noted that the Supreme Court had granted liberty to the assessees to challenge the constitutional validity of Section 147A. However, he highlighted that the assessees must approach a Division Bench for such challenges as per Rule 17(1)(iii) of the Madras High Court Writ Rules, 2021.
The court observed that the retrospective amendment significantly altered the legal landscape, thus requiring a fresh evaluation of the cases. As a result, the Madras High Court dismissed the petitions but provided a 30-day window for the assessees to seek relief from the Division Bench or challenge the amended provisions.
The Supreme Court's directive to maintain an interim stay on further reassessment proceedings during the pendency of writ petitions was also acknowledged. The decision reflects the court's adherence to the legislative changes and the Supreme Court's guidance, emphasizing the need for judicial review of retrospective taxation laws.
Bottom line:-
Income Tax Act, 1961 Section 147A introduced by Finance Act, 2026, with retrospective effect from 01.04.2021 - High Court decisions favoring assessees set aside by Supreme Court - Assessees given liberty to challenge the vires of Section 147A before jurisdictional High Courts.
Statutory provision(s):
Income Tax Act, 1961 Sections 147, 147A, 148, 148A; Finance Act, 2026
Nate Nandha v. Assistant Commissioner of Income Tax, (Madras) : Law Finder Doc id # 2936505
