Punjab and Haryana high court strikes down Section 147A of Income Tax Act

Court quashes Section 148 notices, says retrospective provision cannot override constitutional court rulings

The Punjab and Haryana high court has declared Section 147-A of the Income Tax Act, 1961, unconstitutional, holding that the legislature could not, through a retrospective “clarification”, circumvent findings of constitutional courts without removing the legal basis of those judgments.

While disposing of a clutch of 700 petitions, the division bench of justice Deepak Sibal and Justice Rupinderjit Chahal quashed the Section 148 notices issued to the petitioners by their jurisdictional assessing officers. (Getty Images/Purestock)

While disposing of a clutch of 700 petitions, the division bench of justice Deepak Sibal and Justice Rupinderjit Chahal quashed the Section 148 notices issued to the petitioners by their jurisdictional assessing officers (AOs), holding that such notices are required to be issued through randomised automated allocation and in a faceless manner under Section 151A of the Act, according to a scheme notified on March 29, 2022.

Under Section 148 of the IT Act, a taxpayer gets a notice for reassessment of his income in a reasoned order after an officer has assessed the income in the case in hand and finds that it is a fit case for issuing notice. The petitioners had argued that the officers issuing the notices had not been selected randomly through automated allocation, in violation of Section 151A as notified in the March 29, 2022 scheme.

Randomised allocation was not done in view of the instructions of Section 147A through the Finance Bill, 2026, with retrospective effect from April 1, 2021. It provided that, notwithstanding any judgment, order or decree of any court or anything contained in Section 151A or the scheme framed thereunder, an AO for the purposes of Sections 148 and 148A would mean an AO other than the National Faceless Assessment Centre or an assessment unit.

“There is no legal impediment to enacting a law to validate a legislation which has been held by a court to be invalid, provided such a law removes the basis of the judgment of the court, by curing the defects of the legislation,” the court observed, adding that the legislature could not directly annul a constitutional court judgment or overrule it merely through a declaration.

“The primary basis on which the constitutional courts had held that notices issued under Section 148 of the Act could not have been issued by the assessee’s jurisdictional AOs has not been removed through the retrospective enactment of Section 147A,” the court said.

The court said that the provision has become the “breeding ground of litigation”, with thousands of petitions pending in at least eight high courts.

“…introduction of Section 147A of the Act did not bring any clarity or certainty. It only added to the confusion,” it remarked.

The court also examined whether the Section 148 notices could survive even without Section 147A and held that the March 29, 2022, scheme mandated randomised automated allocation and faceless issuance of Section 148 notices and quashed these notices.