Supreme Court Intervenes in High Court Verdict
The Supreme Court of India has temporarily halted a recent judgement by the Punjab and Haryana High Court that declared Section 147A of the Income Tax Act, 1961 unconstitutional. This stay was issued in response to an appeal by the Central government challenging the High Court’s decision in the case of Union of India and Others v. Bharat Industrial Enterprises Private Limited.
Supreme Court’s Temporary Stay Order
A Bench comprising Justices JB Pardiwala and K Vinod Chandran issued the stay order, emphasizing that while the High Court’s ruling is on hold, no further assessment or reassessment actions should proceed until the Supreme Court reaches a final decision on the matter. The next hearing is scheduled for December 3.
Contentious Issue of Reassessment Notices
The controversy centers on the issuance of notices for reopening income tax assessments. The question is whether these notices should be issued by the local Jurisdictional Assessing Officer (JAO) or through the Faceless Assessing Officer or National Faceless Assessment Centre (NFAC). This debate stems from Section 151A of the Income Tax Act and the e-Assessment of Income Escaping Assessment Scheme introduced on March 29, 2022. The scheme mandates that notices under Section 148 for reopening assessments are to be issued through an automated, faceless process.
Parliamentary Intervention and High Court Ruling
In an attempt to clarify the matter, Parliament enacted Section 147A via the Finance Act, 2026, with retroactive application from April 1, 2021. This section includes a non-obstante clause indicating that, despite any court ruling, the assessing officer for such procedures would not be the NFAC or its units. However, on September 10, the Punjab and Haryana High Court nullified Section 147A, arguing that Parliament cannot overrule judicial decisions without addressing the legal basis of those decisions.
Legal Challenge and Future Proceedings
The High Court maintained that both Section 151A and the 2022 scheme still require reassessment notices to be issued via random, automated allocation. It concluded that merely adding Section 147A with a non-obstante clause did not resolve the inherent legal conflict. In response, the Union government sought intervention from the Supreme Court, resulting in the current stay.
Additional Solicitor General N Venkataraman represented the Central government during the proceedings.
