Section 147A of the Income-tax Act, 1961: Constitutional Challenge, Commencement Anomaly and What Every Practitioner Must Do Now

This article examines Section 147A of the Income-tax Act, 1961, inserted retrospectively by the Finance Act, 2026, which purports to clarify that Jurisdictional Assessing Officers (JAOs) — and not the National Faceless Assessment Centre — are the competent authority for issuing notices under Sections 148 and 148A. It also maps the constitutional challenge to that provision before multiple High Courts and the Supreme Court, traces the surviving automated-allocation defect that Section 147A leaves untouched, and sets out the limitation position under Section 149 if JAO notices ultimately fall.

The article matters to practitioners now because two High Courts have struck down Section 147A as unconstitutional, the Supreme Court has listed the question for final hearing on 3 December 2026, and reassessments covering income assessed at over Rs. 21 lakh crore across assessment years 2016-17 to 2025-26 — as placed on record before the Andhra Pradesh High Court by the Revenue — hang in the balance. A practitioner who waits for the Supreme Court's final word without protecting the record at each stage of the pending reassessment risks losing remedies that cannot be recovered later.

1. The Statutory Framework That Started the Dispute

(i) Section 151A and the 2022 Scheme

Section 151A of the Income-tax Act, 1961, operative from 1 November 2020 and extended by the Finance Act, 2021 to cover the Section 148A stage, empowers the Central Government to notify a scheme for reassessment, for issuance of notices under Section 148, and for orders under Section 148A. Acting under that power, the Central Government issued Notification No. 18/2022 dated 29.03.2022, notifying the e-Assessment of Income Escaping Assessment Scheme, 2022 (the "2022 Scheme").

Clause 3 of the 2022 Scheme is the provision that generated years of litigation. It provides that assessment, reassessment or re-computation under Section 147 and issuance of notice under Section 148

"shall be through automated allocation, in accordance with risk management strategy formulated by the Board"

and in a faceless manner, "to the extent provided in Section 144B." Clause 3(b) names Section 148 expressly, and the word "shall" is not permissive. The Revenue argued in its defence that Section 144B is itself silent on Sections 148 and 148A, that the limiting phrase "to the extent provided in Section 144B" confines Clause 3's reach, and that Notification No. S.O. 3198(E) issued under Section 120 vesting territorial jurisdiction in JAOs was never withdrawn. Assessees responded that the limiting phrase qualifies only the faceless-manner requirement, not the automated-allocation requirement, and that Clause 3(b) unambiguously names Section 148.

(ii) What the Departments Actually Did

In practice, the JAO issued the Section 148A show cause notice and the Section 148 notice; the case then moved to the National Faceless Assessment Centre (NFAC) for the assessment itself. No automated allocation took place at the notice stage. Cases migrated from JAO to NFAC without any order under Section 127, which requires a formal transfer order before jurisdiction shifts between assessing officers. The Revenue itself conceded before the Andhra Pradesh High Court that no automated case-identification mechanism existed at the Section 148A/Section 148 stage, and that the movement of cases from JAO to NFAC occurred without any Section 127 order.

2. The High Court Divide and the Pre-Section 147A Position

Before Parliament intervened, High Courts reached diametrically opposite conclusions. The Telangana High Court in Kankanala Ravindra Reddy v. ITO, [2023] 156 taxmann.com 178, held that the faceless framework governed the jurisdiction of officers issuing reassessment notices. The Bombay High Court in Hexaware Technologies Ltd. v. ACIT, [2024] 162 taxmann.com 225 / 464 ITR 430, held the faceless reassessment scheme mandatory. The Punjab & Haryana High Court in Jasjit Singh v. Union of India, [2024] 165 taxmann.com 114 / 467 ITR 52, invalidated JAO-issued notices. The Gauhati High Court in Ram Narayan Sah v. Union of India, [2024] 163 taxmann.com 478, took the same view and its reasoning was followed in Rajasthan, Madras, Karnataka and Andhra Pradesh.

The Delhi High Court in T.K.S. Builders (P.) Ltd. v. ITO, [2024] 167 taxmann.com 759 / 469 ITR 657, held that the JAO and the faceless officer have concurrent jurisdiction, upholding JAO notices. The Gujarat High Court in Snehdham Trust v. ACIT, SCA No. 9909 of 2022, judgment dated 17.09.2025, declined to follow Hexaware and similarly upheld JAO notices. Tribunals in Delhi and Gujarat follow their respective High Courts; Tribunals elsewhere generally follow the majority High Court view.

The Telangana High Court additionally rested part of its reasoning on Section 130 of the Income-tax Act, 1961 and on the scheme dated 28.03.2022 — a ground that would later prove significant, because Section 147A's non obstante clause does not extend to Section 130 or that scheme.

3. Section 147A: What Parliament Inserted and What It Left Out

(i) The Text and Its Retrospective Reach

Section 9 of the Finance Act, 2026 (Act No. 4 of 2026) inserted Section 147A into the Income-tax Act, 1961 with effect from 1 April 2021. The provision reads:

"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."