New Delhi, Sep 18 (IANS): The Supreme Court on Friday stayed the operation of a Punjab and Haryana High Court judgment which had declared Section 147A of the Income Tax Act, 1961 unconstitutional and set aside reassessment notices issued by jurisdictional Assessing Officers.
A bench of Justices J.B. Pardiwala and K. Vinod Chandran passed the interim order while hearing a special leave petition (SLP) filed by the Union of India and other Income Tax authorities challenging the High Court judgment passed on September 10.
In the interim, the apex court directed that the assessment proceedings shall not proceed further until the final disposal of the main matter and ordered that the case be listed for final hearing on December 3.
“The impugned judgment and order passed by the High Court shall remain stayed on the condition that the assessment proceedings shall not proceed further till the final disposal of the main matter,” the Justice Pardiwala-led Bench ordered.
The proceedings stemmed from a batch of petitions before the Punjab and Haryana High Court challenging the constitutional validity of Section 147A of the Income Tax Act, introduced retrospectively with effect from April 1, 2021, through the Finance Bill, 2026.
The petitioners had sought a declaration that Section 147A was ultra vires Articles 14, 19(1)(g) and 265 of the Constitution. They also challenged notices issued under Section 148 of the Act, contending that the notices had not been issued through the automated allocation mechanism prescribed under Section 151A of the Act and the scheme framed thereunder.
The High Court, in its judgment pronounced on September 10, had held that the retrospective introduction of Section 147A could not override the existing statutory framework requiring randomised allocation and faceless proceedings.
A Division Bench of Justices Deepak Sibal and Rupinderjit Chahal had observed that Section 147A sought to clarify that an Assessing Officer for the purposes of Sections 148 and 148A would mean an officer other than the National Faceless Assessment Centre or an assessment unit referred to under Section 144B. It recorded that the Supreme Court, in an earlier order passed on April 10, had set aside earlier judgments in the matter on the limited ground that the legislative position had subsequently been altered and remitted the cases to the respective High Courts for fresh consideration.
The apex court had then left open all questions concerning the validity, scope, effect, retrospectivity and applicability of the amended provision, while granting an interim stay on further assessment or reassessment proceedings pursuant to the impugned notices.
After examining the challenge afresh, the Punjab and Haryana High Court said it had “no hesitation to declare Section 147A of the Act to be unconstitutional”. It further held that, even independently of Section 147A, the notices issued under Section 148 by the jurisdictional Assessing Officers were not sustainable because they had not been issued through the process of randomised allocation and in a faceless manner as mandated under Section 151A of the Act read with the scheme dated March 29, 2022. It accordingly directed that the notices issued under Section 148 to the petitioners be set aside and allowed the batch of writ petitions.
The Union government, the Central Board of Direct Taxes (CBDT), Deputy Commissioner of Income Tax, and the National Faceless Assessment Centre (NFAC) subsequently approached the Supreme Court against the judgment.
