Orissa HC issues notice on S. 147A constitutional challenge

Orissa HC on S. 147A: Validity Challenge Referred

The Orissa High Court has issued notice to the Central Board of Direct Taxes (CBDT) on a writ petition challenging the constitutional validity of Section 147A of the Income Tax Act, 1961. The provision mandates prior approval from an Approval Panel before the reopening of assessments under Section 147, introducing procedural safeguards against arbitrary reopening.

The petitioner contends that Section 147A creates unwarranted delays and introduces a parallel authority mechanism, undermining administrative independence and violating Article 14. It also argues that the requirement for panel approval contradicts the delegated powers under Section 120 of the Act.

Conversely, the CBDT defends the provision as a necessary check against misuse of reopening powers under Section 147, citing rampant reassessment notices issued without credible basis in recent years. The Supreme Court has stayed all reassessment proceedings under Section 147 pending final decisions in similar matters, creating a de facto freeze on new proceedings.

This case may clarify the constitutional boundaries of administrative oversight in tax reassessments. A decision striking down or modifying S. 147A could impact the reopening of thousands of assessments. Practitioners should monitor the matter closely, particularly for cases pending in the approval pipeline.