The Supreme Court on Friday, 18 September 2026, stayed the operation of a Punjab and Haryana High Court judgment that had declared Section 147A of the Income Tax Act, 1961, unconstitutional and set aside reassessment notices issued by jurisdictional Assessing Officers. The interim stay was granted while the apex court hears the Union government's challenge to the High Court's ruling.

The Supreme Court's Interim Order

A bench of Justices J.B. Pardiwala and K. Vinod Chandran passed the order while hearing a special leave petition (SLP) filed by the Union of India and other Income Tax authorities. The bench ordered that assessment proceedings shall not proceed further until the final disposal of the main matter.

'The impugned judgment and order passed by the High Court shall remain stayed on the condition that the assessment proceedings shall not proceed further till the final disposal of the main matter,' the Justice Pardiwala-led bench ordered. The case has been listed for final hearing on 3 December.

What the High Court Had Ruled

The Punjab and Haryana High Court, in a judgment pronounced on 10 September, had held that the retrospective introduction of Section 147A could not override the existing statutory framework requiring randomised allocation and faceless proceedings. A Division Bench of Justices Deepak Sibal and Rupinderjit Chahal declared the provision unconstitutional and directed that notices issued under Section 148 to the petitioners be set aside, allowing the batch of writ petitions.

The High Court observed that Section 147A, introduced retrospectively with effect from 1 April 2021 through the Finance Bill, 2026, sought to clarify that an Assessing Officer for purposes of Sections 148 and 148A would mean an officer other than the National Faceless Assessment Centre (NFAC) or an assessment unit under Section 144B. The court found that even independently of Section 147A, the notices were not sustainable because they had not been issued through randomised allocation and in a faceless manner, as mandated under Section 151A read with the scheme dated 29 March 2022.

Background and Constitutional Challenge

The proceedings stemmed from a batch of petitions before the Punjab and Haryana High Court challenging the constitutional validity of Section 147A. The petitioners sought a declaration that the provision was ultra vires Articles 14, 19(1)(g) and 265 of the Constitution. They also challenged notices under Section 148, contending these had not been issued through the automated allocation mechanism prescribed under Section 151A.

Notably, the Supreme Court had earlier, in an order dated 10 April, set aside earlier judgments on the limited ground that the legislative position had subsequently been altered, remitting the cases to the respective High Courts for fresh consideration. The apex court had at that stage left open all questions concerning the validity, scope, effect, retrospectivity, and applicability of the amended provision, while granting an interim stay on further assessment or reassessment proceedings.

Who Moved the Supreme Court

Following the Punjab and Haryana High Court's declaration, the Union government, the Central Board of Direct Taxes (CBDT), the Deputy Commissioner of Income Tax, and the National Faceless Assessment Centre (NFAC) collectively approached the Supreme Court, triggering the present SLP proceedings. The apex court's stay restores the status quo pending a full constitutional examination of Section 147A.

With the final hearing scheduled for 3 December, the ruling will have significant implications for reassessment proceedings involving jurisdictional Assessing Officers across the country.