DEPUTY COMMISSIONER OF INCOME TAX vs. MR. RAJEEV KAUL

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WA/503/2026HC KarnatakaKAHC01009173202625 June 2026Author: S.G.PANDIT,RAJESH RAI K9 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, in its writ appeal, set aside the order of the learned Single Judge. The Court did not delve into the merits of the case, opting instead to follow the directions of the Hon'ble Apex Court. The Apex Court, in its order dated 10.04.2026, had set aside impugned judgments in favor of assessees on the limited ground that the foundation of the view that JAOs lacked competence was altered by the amending legislation. The matters were remitted to the respective High Courts for fresh consideration. The High Court granted liberty to the respondent-assessee to challenge Section 147A of the Act and any connected provisions within four weeks. The Revenue was granted three weeks thereafter to file submissions. The interim order from the Apex Court was to enure to the benefit of the parties. The High Court explicitly stated it had not expressed any opinion on the merits of the controversy, including the validity, scope, effect, retrospectivity, or applicability of the amended provisions, leaving all such questions open for decision by the High Courts.

What were the facts?

The appellants, the Deputy Commissioner of Income Tax and others (Revenue), are challenging an order of the learned Single Judge of the Karnataka High Court dated 24.09.2025 in W.P.No.10083/2025. The Single Judge had allowed the writ petition, quashing an unsigned order dated 09.03.2024 and a notice dated 29.03.2024. The appeal arises from this decision. The parties brought to the High Court's notice an order of the Hon'ble Apex Court in Civil Appeal No.4716/2026 dated 10.04.2026, which dealt with similar facts and the insertion of Section 147A into the Income Tax Act. The Apex Court's order also referenced another order dated 04.05.2026 in SLP(C).No.8682/2024.

What were the issues?

1. Whether the amendment inserting Section 147A into the Income Tax Act, with retrospective effect from 01.04.2021, is clarificatory or an attempt to fasten penal liability retrospectively, and thus impermissible. 2. Whether the notices issued by the Joint Assessing Officer (JAO) lacked competence, a ground on which the High Court had previously quashed reassessment notices. Assessee's Arguments: The assessee contended that the amendment inserting Section 147A is not clarificatory but an abortive attempt to fasten penal liability retrospectively, which is impermissible. They argued that amending laws with civil consequences should be construed strictly. Revenue's Arguments: The Revenue asserted that the insertion of Section 147A clarified that the Assessing Officer for sections 148 and 148A means an officer other than the National Faceless Assessment Centre (NFAC) or any assessment unit. They argued that Parliament intended this from the outset and that the amendment, with retrospective effect from 01.04.2021, removed any anomalous situation. They also cited the well-settled power to enact retrospective amendments and stated that fresh notices would be issued.

Which sections of the Income-tax Act were involved?

Section 147A,Section 148,Section 148A,Section 151A,Section 273(3),Section 279,Section 280,Section 281

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF JUNE, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE RAJESH RAI K WRIT APPEAL NO. 503 OF 2026 (T-IT) BETWEEN: 1. DEPUTY COMMISSIONER OF INCOME TAX BMTC BUILDING, 80 FEET ROAD 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA BENGALURU - 560 095 2. NATIONAL FACELESS ASSESSMENT CENTRE, MINISTRY OF FINANCE, ROOM NO. 401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI 110 003 3. PRINCIPAL COMMISSIONER OF INCOME TAX - 1, CR BUILDING, QUEENS ROAD, BANGALORE 560 001 …APPELLANTS (BY SRI. RAVI RAJ Y.V, ADVOCATE ALONG WITH SRI. DILIP.M, ADVOCATE ) AND:

MR. RAJEEV KAUL S/O PRAN NATH KAUL AGED ABOUT 53 YEARS, , NO. A.203, VASWANI TRANQUIL, 46, MUNNEKOLAL, Digitally signed by PANKAJA S Location: HIGH COURT OF KARNATAKA

KUNDALAHALLI, BANGALORE-560037. …RESPONDENT (BY SRI. RAVISHANKAR, S.V, ADVOCATE)

THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP NO.10083/2025 DATED 24/09/2025.

THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE RAJESH RAI K ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE S.G.PANDIT) The above writ appeal is filed questioning the learned Single Judge’s order dated 24.09.2025 in W.P.No.10083/2025, whereunder the writ petition is allowed, quashing the unsigned order dated 09.03.2024 and notice dated 29.03.2024. 2. Learned counsel appearing for the parties bring to the notice of this Court the order passed by the Hon'ble Apex Court in Civil Appeal No.4716/2026 dated 10.04.2026 reported in [2026] 185 Taxmann.com 1007 (SC), whereunder the Hon'ble Apex Court in identical fact situation, taking note of the

amendment by way of insertion of Section 147A into the Income Tax Act, passed the following order: “15. It is stated by the Learned Assistant Solicitor General that by inserting Section 147A into the IT Act, the term ‘Assessing Officer’ has been expressly clarified to mean an officer other than the faceless units and the same is deemed to have come into effect retrospectively from 01.04.2021. The said provision reads as follows: Insertion of new section 147A. 9. After section 147 of the Income-tax Act, the following section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2021, namely:–– “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.”. 16. It is also asserted that the amendment to Section 279 of the Income Tax Act, 2025 is to bring it in consonance with the newly inserted Section 147A of the IT Act, thereby implying that the “Assessing Officer” for the purposes of Sections 280 and 281 of the Income Tax Act, 2025 shall

mean to be an Assessing Officer other than the NFAC or any assessment unit referred to in Section 273(3). The amended Section 279 reads as follows: 71. In section 279 of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted, namely: –– ‘(3) The “Assessing Officer” for the purposes of sections 280 and 281 shall mean to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in section 273(3).’ 17. In this backdrop, where an interpretative issue concerning the older provisions is already under consideration, it is contended on behalf of Appellant-Revenue that Parliament, from the outset, intended that while notices could be issued by either the JAO or the Faceless Assessing Officer (FAO), the subsequent quasi-judicial adjudication of such notices was to be undertaken by the FAOs. 18. It is urged that, in light of the divergent views taken by the High Courts owing to perceived ambiguity in the existing law, Parliament has now made clarificatory amendment with retrospective effect from 01.04.2021, the date on which the original provisions came into force, and that the alleged anomalous situation, if any, has been removed. It was additionally submitted that the power to enact retrospective amendments is well settled in law, and that fresh notices will now be issued to assessees in accordance with the clarified position, so that pending reassessment proceedings may be concluded in accordance with law.

19.

Conversely, it has been vehemently urged on behalf of the assessees that the new Amendment is not ‘clarificatory’ in nature but is rather an abortive attempt to fasten penal liability retrospectively, which is impermissible under law. It is their contention that the amending laws having antedated civil consequences ought to be construed strictly. 20. In all fairness, we may add that several other contentions have also been raised by both sides, which we do not consider it necessary to advert to at this stage in light of the order we propose to pass. In the facts of the present batch, we are of the considered view that it is not necessary for this Court to examine the merits of the rival submissions concerning the correctness of the impugned judgments or the scope of the competing precedents at this juncture. 21. It appears to us that the assessees would be entitled to challenge the amending provisions as elaborated upon heretofore, for which it would only be appropriate to relegate them to the jurisdictional High Courts. All contentions raised before us, as well as any other grounds available to them to question the impugned notices, may be urged before the High Courts instead. 22. Since the High Courts have primarily quashed the reassessment notices on the ground that the JAOs lacked competence to initiate such proceedings, and the very foundation of that view now stands altered by the amending legislation, the impugned judgments in favor of the assessees are set aside on this limited ground. The matters are accordingly remitted to the respective High Courts for fresh consideration. Ordered accordingly. 23. The assessees are granted liberty to amend their writ petitions, if so advised, within a

period of four (4) weeks from the date of uploading of this order, so as to enable them to lay challenge to Section 147A of the IT Act, as introduced by Act No. 4 of 2026, or to any other connected or consequential provision. 24. Similarly, the Appellant-Revenue shall be at liberty to file their written submissions and affidavits before the jurisdictional High Courts within a period of three (3) weeks thereafter. 25. No additional time shall be granted to the parties beyond what has been granted above. 26. We make it clear that we have not expressed any opinion on the merits of the controversy, including the validity, scope, effect, retrospectivity or applicability of the amended provisions, and all such questions are left open to be decided by the High Courts. 27. Finally, during the pendency of the writ petitions before the High Courts, there shall be an interim stay of further assessment/reassessment proceedings pursuant to the impugned notices, subject to such terms and conditions as may be imposed by the High Courts. 28. The High Courts are requested to decide the matters preferably by 30.09.2026. Learned counsel for the parties undertake to extend full cooperation to the High Courts in this regard. No adjournments may be granted by the High Courts on mere asking of the parties.” 3. Learned counsel appearing for the parties seek disposal of the above writ appeal in terms of the order passed by the Hon'ble Apex Court, referred to above. Further, learned

counsel appearing for the respondent/assessee seeks liberty to lay challenge to Section 147A of the Act in terms of the liberty granted by the Hon'ble Apex Court. 4. Learned counsel appearing for the parties also bring to the notice of this Court, order dated 04.05.2026 in SLP(C).No.8682/2024 passed by the Hon'ble Apex Court taking note of order dated 10.04.2026 in Civil Appeal.No.4716/2026, which reads as follows: “7. Consequently, keeping in mind the reasons set out in order dated 10.04.2026, the impugned judgment in each appeal is set aside and the instant appeals are disposed of by remitting the matters to the jurisdictional High Courts for redetermination of the issues. As observed above, the High Courts shall firstly determine whether the matters pertain to Assessment Year 2015-16. If it is found to be so, no further adjudicatory exercise shall be required to be undertaken by the High Court, except to declare the notices as being time- barred in light of Rajeev Bansal (supra). However, if it is found that the case does not pertain to Assessment Year 2015-16, then all the issues shall be resolved in terms of the order dated 10.04.2026 passed in Civil Appeal No.4716 of 2026.” 5. Taking note of the submissions of the learned counsel appearing for the parties as well as taking note of the above referred orders of the Hon'ble Apex Court, we do not

deem it fit to go into the merits of the case. We deem it appropriate to set aside the order passed by the learned Single Judge and remit the matter to the learned Single Judge with liberty to the respondent/assessee to lay challenge to Section 147A of the Act, keeping open all the contentions of the parties, including the observations made by the Hon'ble Apex Court in order dated 04.05.2026 in SLP(C).No.8456/2025 and Connected Appeals. 6. Hence, the following: ORDER

a) Writ appeal is allowed. b) Order passed by the learned Single Judge dated 24.09.2025 in W.P.No.10083/2025 is set-aside. c) Liberty is granted to the respondent/assessee to lay challenge to Section 147A of the Act as introduced by Act No.4 of 2026 or to any other connected or consequential provisions, within four weeks from today. d) The appellant/Revenue is granted three weeks thereafter to file additional affidavit or submission.

e) Learned Single Judge is requested to take note of the timeline laid down by the Hon'ble Apex Court as extracted above. f) The interim order as granted by the Hon'ble Apex Court would enure to the benefit of the parties herein. Pending I.As., if any, stand disposed of. SD/- (S.G.PANDIT) JUDGE SD/- (RAJESH RAI K) JUDGE HKV List No.: 1 Sl No.: 12

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