Income tax reassessment notice: High court strikes down Section 147A of I-T Act – what it means for taxpayers
In a significant ruling, the Punjab & Haryana High Court has struck down the newly introduced Section 147A of the Income Tax Act, 1961, which sought to retrospectively clarify the role of the Jurisdictional Assessing Officer (JAO) in reassessment proceedings.
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 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 decision could have broader implications as several reassessment cases involving the jurisdictional-AO versus faceless-AO issue are already pending before various courts.
What is the case?
The case involved a batch of petitions challenging the constitutional validity of Section 147A of the Income Tax Act, 1961, as well as reassessment notices issued under Section 148 by jurisdictional Assessing Officers.
The dispute arose after JAOs issued reassessment notices for earlier assessment years. The taxpayers challenged the validity of these notices, arguing that Section 151A and the scheme framed under it required reassessment notices to be issued through the faceless mechanism, with the Assessing Officers concerned selected through an automated allocation process.
The controversy intensified following the retrospective introduction of Section 147A from April 1, 2021. The provision sought to clarify that an Assessing Officer issuing notices under Sections 148 and 148A would refer to an officer other than the National Faceless Assessment Centre or its assessment units.
Taxpayers challenge retrospective amendment
The taxpayers argued that the retrospective amendment could not override the existing provisions of Section 151A and the faceless assessment scheme.
According to their contention, the statutory framework required automated and faceless allocation of officers for reassessment proceedings. The amendment, they argued, effectively attempted to nullify earlier judicial decisions without removing or altering the underlying provisions that mandated the faceless reassessment process.
The high court’s ruling on this issue could therefore become important for taxpayers facing reassessment notices issued by jurisdictional AOs, particularly where the prescribed automated allocation and faceless procedure were not followed.
“After holding Section 147A of the Act to be unconstitutional and directing it to be struck down, we further order setting aside of the notices issued to the petitioner(s) under Section 148 of the Act 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 court said in the order.