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The Punjab and Haryana High Court has struck down Section 147A of the Income Tax Act, 1961 as unconstitutional, holding that the legislature's retrospective "clarification", that the Assessing Officer for reassessment purposes means an officer other than the National Faceless Assessment Centre, amounted to an impermissible attempt to overrule binding judicial pronouncements without curing the actual statutory defect those judgments had identified.

Justice Deepak Sibal and Justice Rupinderjit Chahal ruled, "it can safely be concluded that even though the doctrine of separation of powers is not an express part of the Indian Constitution but this doctrine is clearly visible from the scheme of our Constitution. The Indian Constitution makes a clear demarcation between the judiciary, executive and the legislature and seeks to maintain separation of powers between the three organs of the State. Such division is fundamental to the rule of law. A breach by either also negates equality enshrined under Article 14 of the Indian Constitution."

It further pointed that, Under Articles 245, 246 and other companion Articles, read with the respective lists in the seventh schedule of the Indian Constitution, the legislature has the right to “make” laws which includes the power to amend the law but the legislature cannot “declare” what the law laid down by the constitutional courts was meant to be. The legislature also cannot directly annul a judgment of a constitutional court or through a mere declaration overrule a judicial decision. To permit so would allow the legislature to legislatively superimpose judgments which would have attained finality between the parties and that would result in chaos.

 Abrogation is not to be used as a device by the legislature to bye-pass an unfavourable judicial 

The Court added that, however, granted the legislative competence, the legislature can, even retrospectively, enact a law validating a statute which has been held by a Court to be illegal provided that through such validating law the legislature removes the basis or foundation of the judgment of the Court by curing the defect(s) pointed out by the courts in the statute as it existed before the promulgation of the validation law.

"The effect of the validating legislation should be such that the judgment of the Court pointing out the defect would have not been passed if the validating law existed before the Court at the time of delivering its judgment and that after taking into effect the validating law it should not be possible for the Court to arrive at the same decision. Through enacting the validating law, the legislature must bring the law in line with the decision of the Court. Setting at naught a decision of a Court without removing the defect pointed out through the decision of the Court is opposed to the rule of law and also breaches the doctrine of separation of powers recognized by the Indian Constitution," it further said.

The bench highlighted that, "Abrogation is not to be used as a device by the legislature to bye-pass an unfavourable judicial decision and that if the validating legislation is enacted solely with the intention to defy a judicial pronouncement, such legislation would be an example of legislature overreach and therefore, unconstitutional."

The petitioner, an Advocate and income tax assessee, had earlier succeeded before this very High Court in a 2024 judgment quashing a reassessment notice issued to her by her Jurisdictional Assessing Officer (JAO) under Section 148, on the ground that such notices could only be issued by a Faceless Assessing Officer under Section 151A read with the "e-Assessment of Income Escaping Assessment Scheme, 2022" notified on 29.03.2022.

This view was shared by several High Courts (Telangana, Bombay, Rajasthan, Madras, Karnataka, Andhra Pradesh, Gauhati, and this Court itself), while a minority of High Courts (Calcutta, Delhi, Gujarat) took the contrary view that JAOs retained concurrent jurisdiction.

While cross-Special Leave Petitions on this divergence were pending before the Supreme Court, Parliament enacted Section 147A through the Finance Act, 2026, with retrospective effect from 01.04.2021, providing — notwithstanding any judgment, order or decree of any court, or Section 151A, or any scheme framed thereunder — that the Assessing Officer for the purposes of Sections 148 and 148A "shall mean and shall always be deemed to have meant" an officer other than the National Faceless Assessment Centre.

The Supreme Court, by order dated 10.04.2026, set aside the impugned High Court judgments on this limited ground, remitted all matters to the respective jurisdictional High Courts, and granted assessees liberty to amend their petitions to challenge Section 147A, while directing High Courts to decide the matters preferably by 30.09.2026 and granting interim stay of reassessment proceedings in the meanwhile.

Senior Advocates Dr. Sanjay Bansal, Radhika Suri, Munisha Gandhi, Pankaj Jain, Sandeep Goyal, Salil Dev Singh Bali, and other counsel for the petitioners argued that without amending Section 151A or the scheme framed thereunder, Parliament could not nullify binding judicial pronouncements merely through a retrospective non-obstante clause; that this constituted legislative overreach in breach of the separation of powers; that Section 147A conflicted directly with Section 151A and the still-existing 2022 scheme within the same statute; and that the timing of the amendment, while cross-SLPs were pending before the Supreme Court, effectively stalled a definitive judicial resolution the Revenue itself should have sought.

Additional Solicitor General N. Venkataraman, for the Revenue, argued that a harmonious reading of Sections 130, 135A, 144B, 147, 148, 148A and 151A showed JAOs retained authority to issue Section 148 notices; that introduction of Section 147A was necessitated by the impending repeal of the 1961 Act from 01.04.2026; that over 95% of assessees nationally had already submitted to JAO-issued notices, with the financial impact of an adverse ruling estimated at around ₹17 lakh crore; and that as a sovereign legislature, Parliament could validly enact retrospective laws altering the basis of judicial decisions, which Section 147A had achieved by directly modifying what "Assessing Officer" meant under Sections 148 and 148A.

On the constitutionality of Section 147A: The Court undertook an extensive analysis of Supreme Court precedent on legislative validation of judicially-invalidated laws, from Janapada Sabha Chhindwara (1970) and Shri Prithvi Cotton Mills (1970) through Indian Aluminium Co. (1996), State of T.N. v. Arooran Sugars (1997), S.R. Bhagwat (1995), Delhi Cloth & General Mills (1996), State of T.N. v. State of Kerala (2014), and NHPC Ltd. v. State of H.P. (2023),  distilling the settled principle that while the legislature may retrospectively validate a law struck down by courts, it must remove the actual basis/defect identified in the judgment; a bare declaration that the court's decision "shall not bind" is an impermissible attempt to reverse a judicial decision through legislative fiat.

Applying the above test, the Court found the non-obstante clause in Section 147A conspicuously omitted any reference to Section 130 of the Act (and its scheme dated 28.03.2022), which the Telangana High Court had also relied upon in holding only faceless AOs could issue notices — and, more critically, left Section 151A and the "e-Assessment of Income Escaping Assessment Scheme, 2022" completely unamended and intact on the statute book:

"Without amending Section 151A of the Act or the scheme framed thereunder, the 'clarification' made by the legislature through the retrospective enactment of Section 147A that Assessing Officers for the purpose of issuance of notices under Section 148 of the Act mean and shall always deemed to have meant to be Assessing Officers other than the faceless AOs is in defiance of and in conflict with the law laid down by the constitutional courts... the legislature visibly seeks to substitute its opinion over and above the findings returned by the constitutional courts which is legally impermissible."

The Court noted that under the first proviso to Section 151A(2), the Central Government could have excluded Section 148 from the faceless scheme's ambit only by notification issued before 31.03.2022 — a window Parliament had already let lapse — and held that what was thus statutorily foreclosed could not be achieved through the retrospective enactment of Section 147A.

The Court also rejected the stated legislative objective of achieving "certainty" and avoiding litigation, holding the amendment had the opposite effect:

"The other purpose behind enactment of Section 147A of the Act was to avoid litigation but such enactment became the breeding ground of litigation as thousands of petitions on the issue in question are pending in at least in eight different High Courts across the length and breadth of this country."

The Court observed that had the Revenue instead sought an early, binding opinion from the Supreme Court on the pending cross-SLPs, the entire controversy could have been conclusively resolved, rather than through a retrospective legislative device.

On the alternate/independent challenge to the Section 148 notices: The Court found that, even assuming Section 147A survived scrutiny, the Court separately held the impugned notices were liable to be quashed because they were not issued through randomized automated allocation as mandated by Clause 3(b) of the scheme dated 29.03.2022 framed under Section 151A.

Rejecting the Revenue's argument that the scheme's phrase "to the extent provided in Section 144B" excluded Section 148 notices from the faceless requirement, the Court held such an interpretation would render the scheme "a dead letter," relying on the Constitution Bench ruling in Hardeep Singh v. State of Punjab, (2014) 3 SCC 92, that no statutory provision should be interpreted so as to become surplusage.

The Court also rejected reliance on internal CBDT notifications issued under Section 120 of the Act, holding these could not override the statutory scheme framed under Section 151A and approved by both Houses of Parliament, citing Commissioner of Central Excise, Bolpur v. Ratan Melting & Wire Industries, (2008).

The Bench expressly agreed with the majority line of High Court rulings (Telangana, Bombay's Hexaware and Kairos Properties, this Court's own Jatinder Singh Bhangu and Jasjit Singh, Rajasthan, Madras, Karnataka, Andhra Pradesh, and Gauhati) and respectfully disagreed with the minority view taken by the Delhi High Court in T.K.S. Builders, the Gujarat High Court in Snehdham Trust, and the Calcutta High Court in Triton Overseas.

Allowing the entire bunch of writ petitions, the Court, declared Section 147A of the Income Tax Act, 1961 to be unconstitutional and struck it down; and

It Independently set aside all the impugned notices issued to the petitioners under Section 148 of the Act, on the ground that they were not issued through randomized automated allocation and in a faceless manner as mandated by Section 151A read with the scheme dated 29.03.2022.

Case Title: Jyoti Sareen v. Union of India and others

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