The Punjab and Haryana High Court has struck down Section 147A of the Income Tax Act, 1961, as unconstitutional, according to reports from LiveLaw. A Bench of Justice Deepak Sibal and Justice Rupinderjit Chahal delivered the ruling today, with a detailed order yet to be released. The provision was introduced with retrospective effect from April 1, 2021, and had clarified the role of the Jurisdictional Assessing Officer (JAO) in income tax reassessment proceedings under the faceless tax system. Section 147A provides that for the purposes of Sections 148 and 148A, the expression 'Assessing Officer' shall mean an Assessing Officer having jurisdiction over the assessee. The amendment came against the backdrop of the JAO-FAO controversy that arose after the introduction of the faceless assessment framework in 2021.
Section 147A was introduced against the backdrop of a long-running dispute over whether reassessment notices under the faceless assessment system could be issued by Jurisdictional Assessing Officers or had to be issued through the National Faceless Assessment Centre, as reported by LiveLaw. After the post-2021 faceless assessment system came into force, several taxpayers challenged reassessment proceedings initiated by JAOs. Multiple high courts, including the Punjab and Haryana High Court in Income Tax Officer, Ward 2(1), Chandigarh & Ors. vs Tej Partap Singh, had held against the Revenue in such cases, quashing orders passed under Section 148A(d) and subsequent notices under Section 148 on the ground that they were issued by JAOs rather than through the prescribed faceless mechanism. The Punjab and Haryana High Court's latest ruling has now struck down this provision, effectively overturning the legislative clarification. However, some other high courts took a different position and upheld the authority of JAOs to initiate such reassessment proceedings, creating a split in judicial interpretation.
The Revenue challenged the adverse high court rulings before the Supreme Court while these appeals were pending. While these appeals were pending, Parliament inserted Section 147A with retrospective effect to clarify the statutory position and validate reassessment action undertaken by Jurisdictional Assessing Officers. Following the legislative amendment, the Supreme Court remitted the batch of JAO-FAO matters back to the respective High Courts for fresh adjudication in light of the retrospective insertion of Section 147A, directing petitioners to raise the validity of this legislative change before their respective High Courts. The petitioners were also permitted to challenge the constitutional validity of the retrospective amendment before the concerned High Courts. The detailed judgment is awaited from the Punjab and Haryana High Court.
The Punjab and Haryana High Court's ruling provides significant relief to taxpayers who received reassessment notices from jurisdictional AOs without following the prescribed automated, faceless allocation mechanism under Section 151A. As per Mint, the judgment is likely to bring relief to taxpayers who received reassessment notices from jurisdictional AOs without the automated, faceless allocation mechanism mandated under Section 151A. However, the ruling does not invalidate every income tax reassessment proceeding. The crucial question remains whether the notice was issued in accordance with the prescribed statutory procedure and whether the requirements relating to faceless assessment were followed. The court specifically ordered setting aside of notices issued to petitioners under Section 148 because such notices have not been issued through the process of randomised allocation of assessing officers and in a faceless manner as is mandated under Section 151A of the Act read with the scheme framed thereunder dated 29.03.2022. The decision could have broader implications as several reassessment cases involving the jurisdictional-AO versus faceless-AO issue are already pending before various courts.
