Petitioner contests retrospective insertion of Section 147A by Finance Act, 2026; Supreme Court stay on further reassessment proceedings upheld
The Orissa High Court has admitted a significant writ petition challenging the constitutional validity of Section 147A of the Income Tax Act, 1961, as inserted by the Finance Act, 2026. The petitioner, Ashok Kumar Sahu, assailed reassessment notices issued for the Assessment Year 2017-18 on grounds that the notices were issued by the Jurisdictional Assessing Officer instead of following the faceless assessment mechanism mandated under Section 151A and the 2022 e-Assessment Scheme.
The controversy arises from the retrospective insertion of Section 147A, effective from April 1, 2021, which clarifies that for purposes of Sections 148 and 148A of the Income Tax Act, the Assessing Officer shall be deemed to be one other than the National Faceless Assessment Centre or any assessment unit under Section 144B. The petitioner contended that this provision arbitrarily excludes the faceless assessment mechanism, thereby violating principles of natural justice and constitutional mandates under Articles 14, 19(1)(g), and 265 of the Constitution of India.
The petitioner's counsel highlighted that the Ministry of Finance's Notification No.18 of 2022, which frames the "e-Assessment of Income Escaping Assessment Scheme, 2022," does not confer retrospective operation and mandates random automated allocation of cases to faceless officers. The issuance of notices by the Jurisdictional Assessing Officer without this mechanism was argued to be violative of law. The petition also relies on judgments from other High Courts, notably the Punjab and Haryana High Court's decision in Jyoti Sareen v. Union of India, which declared Section 147A unconstitutional.
The Orissa High Court noted that the issue is presently sub judice before the Supreme Court of India in the appeal titled Union of India and others v. Bharat Industrial Enterprises Pvt Ltd. The Supreme Court has granted stay on the operation of the impugned High Court judgment declaring Section 147A unconstitutional, and has stayed further assessment or reassessment proceedings pursuant to notices under Section 148.
The Court observed that since the Supreme Court has already stayed further proceedings in similar matters, no further interim order was necessary in the present case. The respondents have been given an opportunity to file counter affidavits, and the matter has been posted for further hearing along with connected petitions.
The judgment underscores a pivotal legal debate on the procedural fairness and legality of faceless assessments versus jurisdictional assessments in the income tax reassessment regime. It also brings into focus the legislative intent and constitutional scrutiny of retrospective amendments introduced by the Finance Act, 2026.
This case will have far-reaching implications for taxpayers and the income tax department, as it questions the procedural modalities of reassessment and the extent of administrative powers under the IT Act.
Bottom Line:
Income Tax - Reassessment - Challenge to constitutional validity of Section 147A of the Income Tax Act, 1961 as inserted by Finance Act, 2026 with retrospective effect from 01.04.2021 - Petitioner assailed notices under Sections 148 and 147/144/144B on ground that they were issued by Jurisdictional Assessing Officer and not through faceless mechanism under Section 151A and the 2022 Scheme - High Court issued notice and, in view of Supreme Court interim orders staying further assessment/reassessment proceedings in similar matters, held that no further interim order was required.
Statutory provision(s):
Income Tax Act, 1961 Sections 147, 147A, 148, 148A, 151A, 144B; Finance Act, 2026 Section 9; Constitution of India Articles 14, 19(1)(g), 226, 227, 265
Ashok Kumar Sahu v. Central Board of Direct Taxes (CBDT), (Orissa)(DB) : Law Finder Doc Id # 3001083
