Jharkhand High Court Upholds Reassessment Proceedings After Finance Act 2026 Inserts Section 147A Retrospectively

Case Overview

Case: Shyam Sundar Saw Vs Union of India
Court: Jharkhand High Court
Subject Matter: Constitutional validity of reassessment proceedings under Section 148 and Section 148A of the Income Tax Act, 1961, in light of the faceless assessment framework and subsequent legislative intervention through the Finance Act, 2026

Background of the Dispute

The present matter arose from a writ petition filed before the Jharkhand High Court wherein the assessee challenged the legality of reassessment-related proceedings and notices issued under Section 148 and Section 148A of the Income Tax Act, 1961. Specifically, the impugned documents included:

  • A show-cause notice dated 24th March, 2025 (Annexure-1)
  • An order dated 24th June, 2025 (Annexure-5)
  • A notice dated 24th June, 2025 (Annexure-5/1)

The core grievance of the assessee was that after the Central Government introduced the e-Assessment Faceless Scheme under Section 151A of the Income Tax Act, 1961, through a notification dated 29th March, 2022, any reassessment proceedings conducted outside the faceless mechanism would be entirely without jurisdiction. It was the assessee's case that the physical or non-faceless conduct of proceedings under Section 148 and Section 148A stood vitiated on account of this scheme.

Why the Petition Was Kept Pending

This petition did not reach a prompt disposal for a significant reason — multiple High Courts across India had accepted contentions similar to those raised by the assessee, holding that reassessment proceedings initiated through non-faceless channels after the notification under Section 151A were jurisdictionally flawed.

Since the conflict of judicial opinion between different High Courts had escalated the issue to the Hon'ble Supreme Court of India, the Jharkhand High Court found it prudent to keep the petition in abeyance pending the Supreme Court's definitive ruling on the matter. This approach aligned with judicial propriety, ensuring that contradictory directions were not issued at the High Court level while the apex court was seized of the same question.

The Legislative Intervention: Finance Act, 2026 and Section 147A

While the petition was still pending, Parliament stepped in through a decisive legislative measure. Clause 9 of the Finance Act, 2026 introduced a new provision — Section 147A — into the Income Tax Act, 1961, by inserting it after the existing Section 147. Significantly, this insertion was given retrospective effect from 1st April, 2021, thereby covering all reassessment actions taken from that date onwards.

Text of Section 147A as Inserted

The Finance Act, 2026, Clause 9 reads as follows: