Section 147A: Supreme Court Stays Ruling Striking It Down – Reassessment Proceedings Also Frozen
The controversy surrounding Section 147A of the Income-tax Act, 1961 has now reached the Supreme Court, and the interim order has significant implications for pending reassessment proceedings.
On 18 September 2026, a Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran stayed the Punjab & Haryana High Court judgment which had declared Section 147A unconstitutional. The Supreme Court, however, attached an important condition: the assessment and reassessment proceedings covered by the matter shall not proceed further until final disposal of the main matter. The case is Union of India & Ors. v. Bharat Industrial Enterprises Pvt. Ltd., and has been listed for final hearing on 3 December 2026.
What is the controversy?
At the heart of the dispute is a seemingly simple question:
Who has the jurisdiction to issue a reassessment notice under Sections 148 and 148A?
The controversy arose after the introduction of the faceless reassessment framework under Section 151A and the scheme notified pursuant to that provision. Several High Courts had held that, where the statutory faceless mechanism required automated allocation, a reassessment notice issued directly by the Jurisdictional Assessing Officer (JAO) could be without jurisdiction.
Parliament subsequently responded through the Finance Act, 2026, by inserting Section 147A with retrospective effect from 1 April 2021.
The new provision sought to clarify, through a non-obstante provision, that for the purposes of Sections 148 and 148A, the expression “Assessing Officer” would mean an Assessing Officer other than the National Faceless Assessment Centre or an assessment unit referred to in Section 144B(3).
Why did the Punjab & Haryana High Court strike down Section 147A?
The High Court took the view that the insertion of Section 147A did not cure the underlying jurisdictional defect.
In particular, Section 151A and the scheme framed under it had not themselves been amended. According to the High Court’s reasoning, merely retrospectively defining the relevant Assessing Officer could not eliminate the statutory requirements flowing from the faceless assessment framework.
The Court therefore regarded Section 147A as an attempt to retrospectively validate proceedings which had already been found legally defective and declared the provision unconstitutional.
What has the Supreme Court now done?
The Supreme Court has stayed the operation of the High Court judgment.
This is an important distinction.
The Supreme Court has not, at this stage, upheld the constitutional validity of Section 147A. It has also not finally decided whether reassessment notices issued by JAOs were valid notwithstanding the faceless scheme.
The immediate effect is that the Punjab & Haryana High Court’s declaration of invalidity is presently stayed, while the reassessment proceedings covered by the Supreme Court’s interim order have also been directed not to proceed until the main matter is finally decided.
Thus, the stay settles nothing finally. It merely preserves the position pending adjudication by the Supreme Court.
What about the new Income-tax Act, 2025?
This is another important aspect of the controversy.
The Income-tax Act, 2025 repealed the Income-tax Act, 1961 with effect from 1 April 2026. However, Section 536(2)(c) contains an extensive saving provision.
It provides that the provisions of the repealed Act continue to apply to proceedings pending on the commencement of the new Act and to proceedings initiated on or after 1 April 2026 in respect of tax years beginning before 1 April 2026. This expressly includes notices, assessments, reassessments, recomputations, penalties, revisions and appeals.
Therefore, the repeal of the 1961 Act does not automatically eliminate the Section 147A controversy.
The relevant dividing line is essentially the tax year to which the proceeding relates, rather than merely the date on which the reassessment notice happens to be issued.
For example, proceedings relating to a tax year beginning before 1 April 2026 continue to be governed by the repealed 1961 Act under the saving provisions. The Income-tax Department itself has clarified that even proceedings initiated after 1 April 2026 in respect of such earlier tax years continue under the old Act.
Why this matters
The Supreme Court’s eventual decision could affect a substantial body of reassessment litigation involving:
• notices issued under Section 148;
• proceedings under Section 148A;
• notices issued by Jurisdictional Assessing Officers;
• the applicability of the faceless reassessment scheme;
• the scope of Section 151A;
• the retrospective operation of Section 147A; and
• the constitutional limits on retrospective validation of tax proceedings.
For taxpayers with reassessment proceedings relating to pre-1 April 2026 tax years, the Section 147A issue therefore remains very much alive.
The practical takeaway
The present legal position can be summed up in three lines:
Punjab & Haryana High Court: Section 147A was unconstitutional.
Supreme Court — 18 September 2026: The High Court judgment is stayed, and the assessment/reassessment proceedings covered by the matter are not to proceed until final disposal.
Final position: Yet to be decided.
The matter is presently listed for 3 December 2026. Until the Supreme Court finally decides the controversy, taxpayers and tax professionals should examine the specific reassessment notice, the applicable faceless scheme, the jurisdiction of the issuing officer, the relevant tax year and the saving provisions of Section 536 rather than assuming that either the High Court ruling or Section 147A provides a conclusive answer.
One reassessment notice. One jurisdictional question. And now, the Supreme Court has the final word.
The copy of the order is as under:
