JAO vs. NFAC- Constitutional Validity of Section 147A and the Future of Faceless Reassessment in India

Introduction

The transition towards faceless tax administration has been one of the most significant reforms in India's direct taxation framework. The objective has been to reduce personal interaction between taxpayers and tax authorities, improve transparency, eliminate territorial bias and promote consistency through technology-driven assessment mechanisms.

However, the allocation of jurisdiction between Jurisdictional Assessing Officers (JAOs) and the National Faceless Assessment Centre (NFAC) has generated substantial litigation, particularly in proceedings relating to income escaping assessment under Sections 147, 148 and 148A of the Income-tax Act, 1961.

The controversy has acquired constitutional significance following the insertion of Section 147A through the Finance Act, 2026, with retrospective effect from 1 April 2021. The provision seeks to clarify the authority competent to conduct preliminary inquiries, issue show-cause notices and initiate reassessment proceedings.

A batch of writ petitions before the High Court of Andhra Pradesh has brought the issue into sharp focus. The central question is whether Parliament can retrospectively validate the exercise of jurisdiction by JAOs after courts have invalidated such proceedings, and, if so, whether the legislative intervention satisfies the constitutional requirements governing retrospective validating legislation.

The dispute raises fundamental questions concerning the separation of powers, legislative competence, retrospective amendments, statutory interpretation and the legal limits of faceless tax administration.

1. Background: The Evolution of Faceless Assessment

The legislative framework for faceless assessment developed progressively through amendments to the Income-tax Act and the introduction of technology-driven administrative schemes.

The Finance Act, 2018 introduced the statutory foundation for electronic assessment through Section 143(3A), followed by the e-Assessment Scheme, 2019.

Subsequently, the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 introduced important provisions, including Sections 130, 135A, 144B and 151A, to facilitate faceless jurisdiction, electronic verification, assessment and reassessment.

Section 144B established the statutory framework for faceless assessment, while Section 151A empowered the Central Government to notify a scheme for conducting reassessment proceedings electronically and through automated allocation.

In this context, CBDT Notification No. 18/2022 dated 29 March 2022 introduced the e-Assessment of Income Escaping Assessment Scheme, 2022.

The principal interpretational difficulty arose from the language of the scheme, which provided for automated allocation and faceless conduct of reassessment proceedings to the extent contemplated under Section 144B.

Two competing interpretations emerged:

• Taxpayers' interpretation: The statutory scheme required proceedings under Sections 148 and 148A, including preliminary inquiries and the issuance of notices, to be conducted through the prescribed faceless mechanism.
• Revenue's interpretation: The preliminary stage of reassessment remained within the jurisdiction of territorial JAOs, while the subsequent assessment stage was governed by the faceless framework under Section 144B.

This disagreement resulted in litigation concerning the jurisdictional validity of reassessment notices issued by JAOs.

2. The Andhra Pradesh High Court Litigation

The controversy came before the High Court of Andhra Pradesh in a batch of writ petitions, including Bala Sreenivas Rao Somisetty v. Income Tax Officer, Ward 1, Eluru & Ors., W.P. No. 28520 of 2023.

As set out in the case brief, a Co-ordinate Bench of the High Court, by judgment dated 28 October 2025, quashed the impugned proceedings initiated by JAOs on the ground that the applicable statutory framework required reassessment proceedings to be conducted through the faceless mechanism.

The Revenue challenged the decision before the Supreme Court of India by filing Special Leave Petitions.

During the pendency of the proceedings, Parliament enacted the Finance Act, 2026, introducing Section 147A with retrospective effect from 1 April 2021.

Thereafter, according to the supplied case brief, the Supreme Court, by an order dated 10 April 2026, set aside the earlier High Court judgments in view of the statutory amendment and remitted the matters for fresh consideration. The Court did not express an opinion on the constitutional validity or merits of Section 147A.

Following the remand, the petitioners amended their writ petitions to challenge the constitutional validity of the newly inserted provision.

The important distinction is that the constitutional challenge to Section 147A must be considered separately from the earlier jurisdictional controversy. The legislative amendment changes the statutory framework against which the legality of the impugned proceedings must be examined.

3. Section 147A: The Legislative Intervention

Section 147A was inserted into the Income-tax Act, 1961, by Section 9 of the Finance Act, 2026, with retrospective effect from 1 April 2021.

As reproduced in the supplied case brief, the provision reads:

"147A. Notwithstanding anything contained in any judgment, 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."

The provision contains three important elements.

A. Non-obstante clause

The opening words give the provision overriding effect notwithstanding any judgment, order or decree of a court, Section 151A or any scheme framed under that section.

The provision therefore seeks to establish the meaning of "Assessing Officer" for proceedings under Sections 148 and 148A notwithstanding the earlier judicial interpretation of the faceless reassessment framework.

B. Retrospective deeming fiction

The expression "shall mean and shall always be deemed to have meant" seeks to apply the prescribed meaning retrospectively.

The provision is intended to govern the relevant proceedings from 1 April 2021, rather than merely changing the position for future reassessment notices.

C. Clarification of the competent authority

For the purposes of Sections 148 and 148A, the provision excludes NFAC and the Assessment Units referred to in Section 144B(3) from the meaning of Assessing Officer.

The practical consequence is that the statutory definition supports the exercise of preliminary reassessment functions by officers outside those specified faceless assessment structures.

The constitutional question is whether this provision validly changes the legal foundation of the earlier judicial decisions or impermissibly attempts to nullify their effect.

4. The Petitioners' Constitutional Challenge

The petitioners challenge Section 147A on several constitutional and statutory grounds.

4.1 Legislative validation versus judicial overruling

The principal contention is that the legislature cannot simply declare a judicial decision ineffective without curing the legal defect identified by the court.

The petitioners rely on the distinction between a valid validating enactment and an impermissible legislative attempt to exercise judicial power.

The relevant principle emerges from Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality (1969) 2 SCC 283.

The decision recognises the legislature's power to remove the basis of a judicial determination through a valid legislative change. However, the legislature cannot merely declare that a court's judgment shall not operate while leaving the underlying legal defect untouched.

According to the petitioners, Section 147A does not adequately reconcile the earlier statutory framework under Section 151A and the applicable CBDT scheme. Instead, its non-obstante clause retrospectively displaces the judicial interpretation that had resulted in the invalidation of JAO notices.

The central issue is therefore whether the amendment changes the governing law sufficiently to satisfy the requirements of legislative validation.

4.2 Separation of powers and the rule of law

The petitioners also contend that Section 147A interferes with judicial power by seeking to override judgments of constitutional courts.

The doctrine of separation of powers requires the legislature, executive and judiciary to operate within their respective constitutional limits.

Although Parliament possesses extensive authority to amend tax legislation, that authority does not extend to exercising judicial power or directing that final judicial orders be disregarded.

The petitioners rely on authorities including S.R. Bhagwat v. State of Mysore (1995) 6 SCC 16 to support their contention that binding judicial determinations cannot simply be nullified through legislative command.

The constitutional analysis must nevertheless distinguish between setting aside a judgment by legislative fiat and retrospectively changing the legal rule on which the judgment was founded. The former raises a serious separation-of-powers concern; the latter may be permissible if the legislative conditions for valid retrospective amendment are satisfied.

4.3 Retrospectivity and accrued procedural rights

Another major issue concerns the retrospective operation of Section 147A from 1 April 2021.

The petitioners argue that taxpayers were entitled to the procedural protections arising from the faceless reassessment framework and that retrospectively reallocating jurisdiction changes the legal consequences of proceedings already initiated.

They rely on CIT v. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 (SC), which discusses the presumption against retrospective operation and the importance of fairness when legislation imposes new burdens.

The relevant question is not merely whether Parliament has expressed an intention to legislate retrospectively. It is whether the retrospective amendment is constitutionally permissible in its context and whether it imposes an impermissible burden or otherwise violates constitutional protections.

A further distinction is necessary: a taxpayer's entitlement to a particular procedural framework does not automatically establish an immutable vested right. The nature of the provision, its effect on pending proceedings and the constitutional limits on retrospective legislation must be examined.

4.4 Clarificatory amendment or substantive change?

The petitioners challenge the description of Section 147A as a provision enacted "for the removal of doubts."

They contend that the earlier statutory framework already prescribed the manner in which reassessment proceedings were to be conducted and that the new provision substantively changes the allocation of authority rather than merely explaining an existing ambiguity.

The argument draws upon Sedco Forex International Drill. Inc. v. CIT (2005) 12 SCC 717 and the principles concerning the retrospective operation of amendments described as clarificatory.

The substance of the amendment, rather than its label, is critical. A provision cannot acquire retrospective validity merely because it uses expressions such as "for the removal of doubts" or "shall always be deemed."

The court must examine whether the amendment explains the original law, resolves a genuine ambiguity or changes the legal position.

4.5 Repeal of the Income-tax Act, 1961

The petitioners additionally raise an issue concerning the transition from the Income-tax Act, 1961, to the Income-tax Act, 2025, which came into force on 1 April 2026.

Their argument is that the retrospective amendment to the 1961 Act raises questions of legislative competence following its repeal.

The Revenue counters this submission by relying on the enactment date of the Finance Act, 2026 and the savings provisions contained in Section 536 of the Income-tax Act, 2025.

This issue requires careful examination of the enactment and commencement dates, the precise scope of the savings provisions and the legal effect of the repeal. The fact that an enactment has been repealed does not, by itself, determine whether amendments affecting saved proceedings are legally ineffective.

5. The Revenue's Defence of Section 147A

The Revenue advances a different interpretation of the statutory framework.

5.1 Presumption of constitutionality

The Revenue argues that legislation enacted by Parliament carries a presumption of constitutionality and that fiscal legislation permits considerable legislative discretion in designing tax administration and assessment procedures.

The constitutional challenge, according to this position, must be assessed against Parliament's power to define jurisdiction and prescribe the legal consequences of past transactions.

5.2 Two-stage model of reassessment

The Revenue distinguishes between the preliminary stage and the final assessment stage.

Stage I: Initiation and preliminary inquiry

This stage includes inquiries concerning information suggesting escapement of income, show-cause notices under Section 148A, consideration of the taxpayer's reply and the issue of a notice under Section 148.

The Revenue maintains that these functions require the exercise of jurisdiction by the territorial JAO.

Stage II: Assessment or reassessment

After the reassessment notice has been issued, the subsequent assessment proceedings are governed by the applicable statutory framework, including Section 144B wherever prescribed.

According to the Revenue, the existence of a faceless assessment mechanism for the second stage does not necessarily mean that the preliminary stage must also be undertaken exclusively by NFAC.

This distinction is central to the Revenue's interpretation of Section 151A and the 2022 Scheme.

5.3 Concurrent jurisdiction under CBDT notifications

The Revenue also relies on CBDT Notification No. 23 of 2021 dated 31 March 2021 and Notification No. 61 of 2022 dated 10 June 2022.

Its submission is that these notifications support the continued exercise of statutory powers by JAOs alongside faceless authorities.

The legal question is whether the relevant notifications, read with the governing provisions of the Act and the reassessment scheme, confer the authority asserted by the Revenue for the specific proceedings in dispute.

5.4 The twin test for legislative validation

The Revenue relies on the doctrine explained in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality .

Its case is that Section 147A satisfies the requirements for valid legislative validation because it changes the legal position concerning the meaning of "Assessing Officer" and applies that change retrospectively.

The Revenue further argues that the amendment addresses uncertainty arising from differing judicial interpretations and seeks to restore uniformity in reassessment administration.

The ultimate question is whether the amendment sufficiently removes the basis of the earlier judicial invalidation, rather than merely attempting to override its result.

6. The Twin Test: The Core of the Constitutional Dispute

The doctrine of legislative validation is central to resolving the dispute.

In Shri Prithvi Cotton Mills Ltd. , the Supreme Court recognised that a legislature may remove the defect identified by a court and validate past actions by changing the legal conditions on which their validity depends.

The doctrine does not give the legislature unrestricted authority to overturn judgments retrospectively. The legislative action must be supported by constitutional competence and must genuinely address the basis of the judicial decision.

The controversy concerning Section 147A can be analysed through the following framework:

The court's task is to determine whether the statutory change satisfies the constitutional requirements for retrospective validation and whether the impugned proceedings are sustainable under the amended law.

The use of a non-obstante clause, by itself, cannot settle that question. Equally, the fact that a provision affects earlier proceedings does not automatically render it unconstitutional.

7. Practical Implications for Taxpayers and Tax Practitioners

The controversy has important implications for taxpayers who have received reassessment notices or are involved in pending reassessment litigation.

A. Review the precise stage of reassessment

Tax practitioners should identify whether the disputed action concerns an information-verification inquiry, a show-cause notice under Section 148A, an order under Section 148A or a notice under Section 148.

The statutory provision, the date of the proceeding and the authority that issued the notice should be documented carefully.

B. Examine the applicable law on the relevant date

A jurisdictional challenge should not be framed solely by referring to the original statutory scheme.

The analysis must account for the relevant provisions of the Income-tax Act, 1961, the applicable CBDT notifications, the commencement of Section 147A and the legal effect of the Income-tax Act, 2025's repeal-and-savings framework.

C. Distinguish jurisdictional objections from merits-based objections

The competence of the officer issuing a notice is distinct from the substantive question of whether income has escaped assessment.

Even where the jurisdictional issue is contested, the taxpayer should separately evaluate the underlying information, limitation, procedural compliance, statutory approvals and the merits of the proposed reassessment.

Each issue should be preserved and addressed on its own legal basis.

D. Reassess pending litigation

Where a writ petition or appeal relies on the earlier judicial interpretation of Section 151A and the faceless reassessment scheme, the effect of Section 147A must be considered.

However, practitioners should not assume that every reassessment notice issued by a JAO automatically becomes valid merely because Section 147A has been introduced. The provision's constitutional validity, scope, applicability and effect on the specific proceeding remain relevant questions.

E. Avoid overlooking limitation and procedural safeguards

The jurisdictional controversy does not eliminate the need to examine limitation periods, statutory approvals, compliance with notice requirements and the taxpayer's opportunity to respond.

These matters may require separate consideration even where the meaning or validity of Section 147A is disputed.

8. The Way Forward: Legislative Authority and Judicial Review

The dispute illustrates the continuing tension between Parliament's authority to amend fiscal legislation and the judiciary's responsibility to enforce constitutional limitations.

A workable tax administration requires clarity regarding the officers competent to initiate reassessment proceedings. Uncertainty in jurisdiction can generate avoidable litigation, delay tax administration and increase compliance costs for taxpayers.

At the same time, administrative convenience and the objective of uniformity cannot substitute for compliance with the Constitution.

The legislative-validation doctrine attempts to reconcile these competing considerations. It permits the legislature to correct defects in the law and, where constitutionally permissible, to validate past actions retrospectively. It does not permit the legislature to exercise judicial power by simply declaring an adverse judgment ineffective.

Section 147A must therefore be evaluated on the substance of the change it introduces, the legal defect it seeks to address and its retrospective consequences.

The court must also consider the interaction between Sections 147A, 151A and 144B, the applicable CBDT scheme, the relevant notifications and the savings provisions under the Income-tax Act, 2025.

Conclusion

The constitutional challenge concerning Section 147A is significant because it goes beyond the identity of the officer authorised to issue a reassessment notice. It raises a fundamental question about the permissible limits of retrospective fiscal legislation and the relationship between legislative power and judicial review.

The petitioners argue that Section 147A impermissibly overrides judicial decisions and retrospectively alters the procedural position of taxpayers. The Revenue maintains that Parliament has validly clarified the competent authority and removed the statutory basis of the earlier jurisdictional objections.

The outcome depends on the application of established constitutional principles, particularly the doctrine of legislative validation, the limits of retrospective amendments and the distinction between changing the law and overruling a judgment.

For tax professionals, the immediate lesson is clear: reassessment litigation requires a date-specific and provision-specific analysis. The statutory scheme applicable when a notice was issued, subsequent legislative amendments, jurisdictional competence and independent procedural safeguards must all be examined before arriving at a conclusion.

Ultimately, the validity of Section 147A will turn not merely on Parliament's intention to clarify the law, but on whether the provision withstands constitutional scrutiny and satisfies the legal requirements for retrospective legislative validation.

 Editorial note: This article analyses the legal issues and competing submissions described in the supplied case brief. The final adjudicatory outcome of the constitutional challenge has not been assumed. Case citations, the text and commencement of Section 147A, the Supreme Court's remand order and the relevant statutory notifications should be independently verified against primary legal sources before publication.

The author can also be reached at jayvadher05@gmail.com