Bala Sreenivas Rao Somisetty v. The Income Tax Officer

What happened

The e-Assessment Scheme, 2019 and the Faceless Assessment Scheme were introduced and section 144B, effective from 1 April 2021, put faceless assessment in the Act. Section 151A, inserted with effect from 1 November 2020, authorised a scheme for faceless assessment, reassessment, recomputation under section 147 and for inquiries and notices under section 148A, and the CBDT notified the e-Assessment of Income Escaping Assessment Scheme, 2022 on 29 March 2022. Several High Courts held that notices under section 148 issued by Jurisdictional Assessing Officers instead of in the faceless manner under the scheme were without jurisdiction. The Finance Act, 2026 (Act No. 4 of 2026), which received the President's assent on 30 March 2026, by section 9 inserted section 147A in the Income-tax Act, 1961 with effect from 1 April 2021, with the non obstante clause 'for the removal of doubts' that the Assessing Officer for sections 148 and 148A is and has always been an officer other than the National Faceless Assessment Centre. The Revenue said that this was to achieve certainty, that the Jurisdictional Assessing Officer carries out the pre-assessment enquiry and the proceedings are then faceless, and filed an additional affidavit saying that notices had been issued to 8,82,146 assessees and income of about Rs.21.71 lakh crores assessed, so that public interest required that the proceedings not be disturbed. The Punjab and Haryana High Court had held section 147A unconstitutional on 10 September 2026, but the Supreme Court stayed that decision on 18 September 2026 in SLP (Civil) No. 33196 of 2026.

Questions before the court

• Is section 147A, inserted by the Finance Act, 2026 with retrospective effect from 1 April 2021, constitutionally valid, and are reassessment notices issued by Jurisdictional Assessing Officers valid?

Why the court ruled this way

The Court held that the legislature has power to validate laws retrospectively but only by removing the defect found by the courts (Prithvi Cotton Mills Ltd. v. Broach Borough Municipality), and it cannot ask the instrumentalities of the State to disregard decisions of courts, as the Supreme Court in State of Tamil Nadu v. M. Rayappa Gounder said (paragraphs 93 to 95). Since the earlier decisions found no defect in the Act or the scheme but held that the Jurisdictional Assessing Officers had no jurisdiction because section 148 was included in the scheme under section 151A, and the scheme was left unamended, section 147A, which only clarified who the Assessing Officer is, did not remove the basis of the decisions and over-reached the judgments in conflict with the separation of powers (paragraphs 92 to 97). The Revenue's statistical affidavit and public interest did not matter since the failure of most assessees to challenge the proceedings gave no right to proceed in a non-faceless manner (paragraphs 98 and 99). The Court independently reasoned that, under section 2(a) of the Finance Act, 2026, section 147A was to come into force on 1 April 2026, when the Income-tax Act, 2025 had commenced under its section 1(3), and section 536(2)(c) and (u) of the 2025 Act saved only proceedings of the repealed Act, so that an amendment inserted into the repealed Act was not sustainable, section 5 of the General Clauses Act being inapplicable where the Act itself fixes the date, as Common Cause v. Union of India says (paragraphs 101 to 106).

Controlling point

Section 147A is unconstitutional and is struck down, and so the proceedings initiated by the Jurisdictional Assessing Officers under sections 148A and 148, which had to be undertaken in a faceless manner, are without jurisdiction.

Order and next steps

The writ petitions were allowed, section 147A of the Income-tax Act, 1961 was struck down, the impugned proceedings and orders were set aside, there was no order as to costs, and the pending applications were closed.

Practical implications

A taxpayer who has received a notice under section 148 or an order under section 148A from a Jurisdictional Assessing Officer, instead of through the faceless scheme, can rely on this decision to challenge jurisdiction, but should check the current position in appeals before the Supreme Court.

Limits of this ruling

• Another High Court's decision on the same section is under stay by the Supreme Court, and this decision may also be taken up in appeal; the ruling concerns notices under sections 148 and 148A and the effect of the 2026 amendment, and the Court did not decide the merits of any reassessment.