Karnataka High Court Remits JAO-Based Reassessment Challenge in Light of Retrospective Section 147A

Background of the Dispute

In DCIT Vs Divyasree Infrastructure Projects Pvt. Ltd. (Karnataka High Court), a Division Bench of the Karnataka High Court examined a writ appeal filed by the Revenue against an order of a learned Single Judge dated 24.09.2025 in W.P. No.11207/2025.

The assessee had earlier approached the High Court by way of a writ petition to contest:

  • notices issued under Section 148 and Section 148A of the Income Tax Act, 1961, and
  • a consequential reassessment order passed under Section 147.

The central controversy before the Single Judge revolved around who was legally competent to initiate reassessment after the introduction of the faceless assessment architecture. Specifically, the question was whether:

  • the Jurisdictional Assessing Officer (JAO) could still issue reassessment notices, or
  • such notices must necessarily emanate from the faceless assessment mechanism.

Several High Courts across the country had delivered divergent rulings on this exact issue. Some courts had concluded that only the faceless mechanism could validly issue such notices, while others accepted the competence of the JAO.

In this matter, the learned Single Judge held that the JAO lacked authority to issue the notices under Section 148 / Section 148A, and on that basis, the reassessment proceedings were quashed.

While the Revenue’s writ appeal against that order was pending before the Division Bench, Parliament enacted Act No.4 of 2026, inserting Section 147A into the Income Tax Act with retrospective effect from 01.04.2021. This provision directly addressed the interpretational conflict by clarifying who would qualify as “Assessing Officer” for the purposes of reassessment. The retrospective nature of the amendment altered the legal landscape on which the Single Judge’s decision had been founded.

Core Issue Before the Division Bench

The Division Bench was required to decide:

  • whether the Single Judge’s order, which had quashed the reassessment on the ground of JAO’s incompetence, could survive after the retrospective insertion of Section 147A, and
  • how to deal with the broader questions of the validity, scope, and retrospective operation of Section 147A, particularly in view of directions recently issued by the Supreme Court.

Thus, the Bench’s task was not to finally adjudicate on the legality of the reassessment in this case, but to determine the appropriate procedural course in light of the new legislation and the Supreme Court’s guidance.

Statutory Change: Retrospective Section 147A

During the pendency of the appeal, Parliament inserted Section 147A into the Income Tax Act by Act No.4 of 2026 and gave it retrospective effect from 01.04.2021.

As recorded in the Supreme Court’s order dated 10.04.2026 in Civil Appeal No.4716/2026 reported in [2026] 185 Taxmann.com 1007 (SC), the newly inserted provision states:

“147A. Notwithstanding anything contained in any judgement, order or decree of any court or in section 151A or in any scheme framed thereunder, for the removal of doubts, it is hereby clarified that the Assessing Officer for the purposes of sections 148 and 148A shall mean and shall always be deemed to have meant to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in sub-section (3) of section 144B.”

This language expressly:

  • overrides any contrary judicial view or scheme under Section 151A,
  • declares itself to be “for the removal of doubts”, and
  • clarifies, with deemed retrospective operation from 01.04.2021, that the “Assessing Officer” for Section 148 and Section 148A is an officer other than the National Faceless Assessment Centre or an assessment unit under Section 144B(3).

In addition, the Supreme Court noted a related amendment to Section 279 of the Income-tax Act, 1961, by which a new sub-section (3) was inserted to align the meaning of “Assessing Officer” for Sections 280 and 281 with the approach adopted in Section 147A.

The retrospective clarification effectively removed the interpretational foundation on which several High Courts, including the Single Judge in this case, had earlier invalidated reassessment notices issued by JAOs.

Revenue’s Stand Before the Division Bench

The Revenue submitted that the Supreme Court’s order dated 10.04.2026 in Civil Appeal No.4716/2026 governed the present controversy. Its broad line of argument, in line with what was presented before the Supreme Court, was: