Gurugram: It started with a text message. In March 2024, Chandigarh advocate Jyoti Sareen received an SMS telling her that income tax proceedings had been initiated against her. She had no idea why.
Now, her two-and-a-half year long fight against the notice has ended with the Punjab and Haryana High Court striking down a provision of the Income Tax Act and quashing tax notices sent to nearly 700 assessees across Punjab, Haryana and Chandigarh, in what is among the biggest tax litigation clusters this court has decided.
A division bench of Justice Deepak Sibal and Justice Rupinderjit Chahal, in a 10 September judgement, declared Section 147A of the Income Tax Act, 1961 unconstitutional. Section 147A said that under Sections 148 and 148A of the Act, an “Assessing Officer”, meaning a jurisdictional officer, would be the right authority to issue reassessment notices, instead of the faceless assessment system.
The bench quashed the reassessment notices to Sareen and other petitioners under Section 148 of the Act, holding that these notices had bypassed the faceless, randomised system the tax department itself had put in place.
How it began
Sareen filed her tax return for the assessment year 2020-21 in September 2020. In March 2024, she found a notice on the Income Tax Business Application Portal asking her to file the return afresh. The notice said it followed a search conducted under Section 132 of the Act on premises linked to her. But she was never told where the search was conducted or why she was being reassessed. The notice also claimed prior approval had been taken from the Principal Commissioner of Income Tax, Chandigarh-I, but Sareen said no such approval was ever shown to her.
She went on to challenge the notice, and in July 2024, a different division bench of the Punjab and Haryana High Court quashed it. The reason: her notice had been issued by her jurisdictional Assessing Officer, and not through the faceless, randomised allocation system the tax department had notified in March 2022 under Section 151A of the I-T Act.
The shift of tax assessment and reassessment to a “faceless” model was notified in 2019, under which cases are allocated randomly by a central cell, with no direct contact between an officer and a taxpayer, to cut down on discretion and possible misuse.
What Section 147A of I-T Act says
Section 147A is a short provision, but it carries a sweeping non-obstante clause, a legal phrase that means “despite anything said elsewhere”, despite any court judgement. It states that for the purposes of Sections 148 and 148A of the Act, the “Assessing Officer” has always meant an officer other than the faceless National Assessment Centre.
In effect, it says, retrospectively from 1 April, 2021, that jurisdictional officers—not the faceless system—were always the right authority to issue reassessment notices. It was inserted through the Finance Bill 2026, with the government’s stated aim of avoiding confusion as the new Income Tax Act, 2025, was about to come into force on 1 April this year.
Petitioners argued this was not a genuine clarification, but an attempt to wipe out a string of High Court judgements that had gone against the Income Tax Department without touching the actual law—Section 151A and the faceless assessment scheme—that those judgements were based on.
Section 151A of I-T Act empowers the Central Government to notify a faceless scheme for assessment and reassessment purposes. The Faceless Jurisdiction of Income-Tax Authorities Scheme came into force in March 2022.
The precedents
The court’s reasoning in Thursday’s ruling leaned heavily on how other high courts had already read the same issue.
It agreed with Bombay High Court’s view in Hexaware Technologies Ltd and Kairos Properties Pvt. Ltd, with its own previous decisions in Jatinder Singh Bhangu and Jasjit Singh, and with the Rajasthan, Madras, Karnataka, Andhra Pradesh and Gauhati High Courts—all of which had held that Section 148 notices could only be issued through the faceless, randomised system.
The division bench said it respectfully disagreed with the Delhi, Gujarat and Calcutta High Courts, which had taken the opposite view.
On the core constitutional question, the bench relied on a line of Supreme Court judgements on separation of powers, including State of Tamil Nadu vs State of Kerala (2014) and NHPC Ltd vs State of Himachal Pradesh (2023), which said that Parliament can validate a law a court has struck down only by curing the actual defect the court identified, not by simply declaring the court wrong.
Legislation that sets aside a final judgement without fixing the underlying law, the Supreme Court had held, amounts to Parliament stepping into the judiciary’s shoes, and can be struck down on that ground alone.
Govt’s defence, and why it failed in court
Additional Solicitor General N. Venkataraman, appearing for the Union of India, argued that Section 147A was needed to bring certainty and end litigation, and that two notifications from 2014 had, in any case, given jurisdictional officers the power to handle such notices—a power he said was never withdrawn.
But the bench rejected both points. It held that Section 147A did not cure any defect in Section 151A or the 2022 scheme, but simply overrode the court verdicts built on them, which is not something the legislature is permitted to do. It also noted that cross-appeals on this very question were already pending before the Supreme Court when Parliament brought in Section 147A, a timing the court found telling.
The bench added that even if Section 147A were held valid, the notices would still have to fall, because they were admittedly issued by jurisdictional officers, and not through the randomised, faceless allocation the 2022 scheme requires.
Senior advocate Dr Sanjay Bansal appeared for Sareen and the petitioners in the case and connected matters.
With the ruling, assessees across the roughly 695 connected petitions—filed over 2023, 2024, 2025 and 2026—get their Section 148 notices set aside. The tax department is not barred from reassessing these cases, but will now have to do so, if at all, through the faceless system Section 151A requires.
(Edited by Mannat Chugh)
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